<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13, 1998
REGISTRATION NO. 333-_________-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PRODUCTION RESOURCE GROUP, L.L.C.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3999 14-1786937
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (I.R.S. EMPLOYER
OF INCORPORATION OR INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
ORGANIZATION) CODE NUMBERS)
PRG FINANCE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6799 14-1801689
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (I.R.S. EMPLOYER
OF INCORPORATION OR INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
ORGANIZATION) CODE NUMBERS)
SHOWPAY, L.L.C.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 8999 86-0884814
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (I.R.S. EMPLOYER
OF INCORPORATION OR INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
ORGANIZATION) CODE NUMBERS)
PRG PLANNING & DEVELOPMENT, L.L.C.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3999 14-1796155
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (I.R.S. EMPLOYER
OF INCORPORATION OR INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
ORGANIZATION) CODE NUMBERS)
<PAGE>
ECTS, A SCENIC TECHNOLOGY COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3999 16-17996155
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (I.R.S. EMPLOYER
OF INCORPORATION OR INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
ORGANIZATION) CODE NUMBERS)
ATTRACTION MANAGEMENT LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 8999 86-0889506
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (I.R.S. EMPLOYER
OF INCORPORATION OR INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
ORGANIZATION) CODE NUMBERS)
================================================================================
539 TEMPLE HILL ROAD
NEW WINDSOR, NEW YORK 12553
(914) 567-5700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-----------------------
ROBERT A. MANNERS
PRODUCTION RESOURCE GROUP, L.L.C.
539 TEMPLE ROAD
NEW WINDSOR, NEW YORK 12553
(914) 567-5700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
-----------------------
WITH A COPY TO:
JOSEPH W. BARTLETT
MORRISON & FOERSTER LLP
1290 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10104
(212) 468-8000
APPROXIMATE DATE OF COMMENCEMENT OF SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
<PAGE>
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH AMOUNT MAXIMUM AGGREGATE AMOUNT OF
CLASS OF SECURITIES TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 1/2% Senior Subordinated Notes
due 2008........................ $100,000,000 100% $100,000,000 $29,500
Guarantees........................ N/A N/A N/A (2)
==================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(3) No separate fee is payable pursuant to Rule 457(n).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(A), MAY DETERMINE.
================================================================================
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 13, 1998
PRODUCTION RESOURCE GROUP, L.L.C.
PRG FINANCE CORPORATION
OFFER TO EXCHANGE
ALL OUTSTANDING
11 1/2% SENIOR SUBORDINATED NOTES DUE 2008
($100,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR 11 1/2% SENIOR SUBORDINATED NOTES DUE 2008
------------------------------
The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New York
City time, on , 1998 (as such date may be extended, the "Expiration Date").
Production Resource Group, L.L.C., a Delaware limited liability company
(the "Company") and PRG Finance Corporation, a Delaware corporation ("Finance
Corp." together with the Company, the "Issuers", hereby offer (the "Exchange
Offer"), upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal"), to exchange $1,000 in principal amount of its 11 1/2% Senior
Subordinated Notes due 2008 (the "New Notes") for each $1,000 in principal
amount of its outstanding 11 1/2% Senior Subordinated Notes due 2008 (the "Old
Notes") (the Old Notes and the New Notes are collectively referred to herein as
the "Notes"). The Notes are fully and unconditionally guaranteed on a senior
subordinated basis by the Company's existing domestic Restricted Subsidiaries
and all domestic Restricted Subsidiaries created or acquired by the Company in
the future. An aggregate principal amount of $100,000,000 of Old Notes is
outstanding. See "The Exchange Offer." As of September 30, 1997, after giving
effect to the Transactions (as defined) the Company had $1.0 million of
consolidated Senior Debt outstanding.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Notes where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, starting on the Expiration Date (as
defined herein) and ending on the close of business one year after the
Expiration Date, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
(continued on next page)
------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY HOLDERS IN EVALUATING THE EXCHANGE OFFER.
------------------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
The Company will accept for exchange any and all Old Notes that are validly
tendered prior to 5:00 p.m., New York City time, on the Expiration Date. Tenders
of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Offer is not conditioned upon any
minimum principal amount of the Old Notes being tendered for exchange. However,
the Exchange Offer is subject to the terms and provisions of the Registration
Rights Agreement, dated as of December 24, 1997 (the "Registration Rights
Agreement"), between the Company, Bear, Stearns & Co. Inc., BT Alex. Brown
Incorporated, Morgan Stanley & Co. Incorporated and BNY Capital Market, Inc.
(together, the "Initial Purchasers"). The Old Notes may be tendered only in
multiples of $1,000. See "The Exchange Offer."
The Old Notes were issued in a transaction (the "Initial Offering")
pursuant to which the Issuers issued an aggregate of $100,000,000 principal
amount of the Old Notes to the Initial Purchaser on December 24, 1997 (the
"Closing Date") pursuant to a Purchase Agreement, dated December 19, 1997 (the
"Purchase Agreement"), among the Company, Finance Corp., a wholly-owned
subsidiary of the Company, PRG Planning and Development, L.L.C. a Delaware
limited liability company and a 99% owned subsidiary of the Company ("P&D"),
ECTS, Service Technology Company, Inc., a Delaware corporation and wholly-owned
subsidiary of the Company ("ECTS"), Showpay, LLC, a Delaware limited liability
company and wholly-owned subsidiary of the Company ("Showpay") and Attraction
Management LLC, a Delaware limited liability company ("Attraction" and together
with P&D, ECTS and Showpay, the "Guarantors") and the Initial Purchasers. The
Initial Purchasers subsequently resold the Old Notes in reliance on Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act"). The Company
and the Initial Purchasers also entered into the Registration Rights Agreement
pursuant to which the Company granted certain registration rights for the
benefit of the holders of the Old Notes. The Exchange Offer is intended to
satisfy certain of the Company's obligations under the Registration Rights
Agreement with respect to the Old Notes. The New Notes will be obligations of
the Company evidencing the same indebtedness as the old Notes and will be issued
under and entitled to the benefits of the Indenture, dated as of December 24,
1997 (the "Indenture"), between the Company and First Union National Bank as
trustee (in such capacity, the "Trustee"). The form and terms of the New Notes
will be registered under the Securities Act, and therefore such New Notes will
not be subject to certain transfer restrictions, registration rights and related
Special Interest (as defined) provisions applicable to the Old Notes. See "The
Exchange Offer -- Purpose and Effect."
The New Notes will bear interest at the rate of 11 1/2% per annum, payable
semi-annually in arrears on January 15 and July 15 of each year, commencing July
15, 1998, and will mature on January 15, 2008. Holders whose Old Notes are
accepted for exchange will have the right to receive interest accrued thereof
from the date of the original issuance to the date of issuance of the New Notes,
such interest to be payable with the first interest payment on the New Notes.
The Notes will be guaranteed by all of the Company's present and future domestic
Restricted Subsidiaries (as defined). Except as set forth below, the New Notes
will not be redeemable at the option of the Issuers prior to January 15, 2003.
Thereafter, the Notes will be subject to redemption at any time at the option of
the Issuers, in whole or in part, at the redemption prices set forth herein,
plus accrued and unpaid interest and Liquidated Damages (as defined), if any,
thereon to the date fixed for redemption. In addition, at any time prior to
January 15, 2001, the Issuers may redeem up to 35% of the aggregate principal
amount of the New Notes at a redemption price of 110% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date fixed for redemption, with the net cash proceeds of one or
more public offerings of Capital Stock (as defined) of the Company (other than
Disqualified Stock (as defined)), provided that at least 65% of the aggregate
principal amount of the Notes originally issued remains outstanding immediately
after the occurrence of each such redemption. At any time prior to January 15,
2003, the Issuers may redeem the New Notes, in whole or in part, at a redemption
price equal to 100% of the principal amount thereof plus the applicable
Make-Whole Premium (as defined). In the event of a Change of Control (as
defined), the Issuers will be required to make an offer to each holder of Notes
to repurchase all or any part of such holder's Notes at a repurchase price equal
to 101% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date fixed for repurchase. See "Risk
Factors--Change of Control" and "Description of Notes."
The New Notes are general unsecured obligations of the Issuers,
subordinated in right of payment to all existing and future Senior Debt (as
defined) of the Issuers. As of September 30, 1997, after giving effect to the
Transactions (as defined), the Issuers would have had $1.0 million of
consolidated Senior Debt outstanding. In addition, upon consummation of the
Initial Offering, the Company will have $100 million of total commitments under
the Amended Credit Facility (as defined), of which approximately $0.6 million
would have been available as of September 30, 1997, after giving effect to the
Transactions and the terms of the Amended Credit Facility.
<PAGE>
The Company is making the Exchange Offer in reliance on the position of the
staff of the Securities and Exchange Commission (the "Comission") as set forth
in certain interpretive letters issued to third parties in other transactions.
However, the Company has not sought its own interpretive letter, and there can
be no assurance that the Commission would make a similar determination with
respect to the Exchange Offer. Based on the Commission interpretations, the
Company believes that New Notes issued pursuant to the Exchange Offer to any
holder of Old Notes in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by such holder (other than a broker-dealer who
purchased Old Notes directly from the Company for resale pursuant to Rule 144A
under the Securities Act or any other available exemption under the Securities
Act) without further compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such holder is not an affiliate
of the Company, is acquiring the New Notes in the ordinary course of business
and is not participating, and has no arrangement or understanding with any
person to participate, in the distribution of the New Notes. Holders wishing to
accept the Exchange Offer must represent to the Company that such conditions
have been met. In addition, if such holder is not a broker-dealer, it must
represent that it is not engaged in, and does not intend to engage in, a
distribution of the New Notes. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where such Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "The Exchange Offer - Resales of the New
Notes" and "Plan of Distribution." This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making or other
trading activities.
There has previously been only a limited secondary market, and no public
market, for the Old Notes. The Old Notes are eligible for trading in the Private
Offering, Resales and Trading through Automatic Linkages ("PORTAL") market. In
addition, the Initial Purchasers have advised the Company that they currently
intend to make a market in the New Notes; however, the Initial Purchasers are
not obligated to do so and any market making activities may be discontinued by
the Initial Purchasers at any time. Therefore, there can be no assurance that an
active market for the New Notes will develop. If such trading market develops
for the New Notes, future trading prices will depend on many factors, including,
among other things, prevailing interest rates, the Company's results of
operations and the market for similar securities. Depending on such factors, the
New Notes may trade at a discount from their face value. See "Risk Factors -
Lack of Public Market."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
The Old Notes were issued originally in global form (the "Global Old
Note"). The Global Old Note was deposited with, or on behalf of, The Depository
Trust Company ("DTC"), as the initial depository with respect to the Old Notes
(in such capacity, the "Depositary"). The Global Old Note is registered in the
name of Cede & Co. ("Cede"), as nominee of DTC, and beneficial interests in the
Global Old Note are shown on, and transfers thereof are effected only through,
records maintained by the Depositary and its participants, and anyone holding a
beneficial interest in an Old Note registered in the name of such a participant,
to transfer interests in the Old Notes electronically in accordance with the
Depositary's established procedures without the need to transfer a physical
certificate. New Notes issued in exchange for the Global Old Note will also be
issued initially as a note in global form (the "Global New Note," and, together
with the Global Old Note, the "Global Notes:) and deposited with, or on behalf
of, the Depositary. After the initial issuance of the Global New Note, New Notes
in certificated form will be issued in exchange for a holder's proportionate
interest in the Global New Note only as set forth in the Indenture.
The Company will not receive any proceeds from this Exchange Offer.
pursuant to the Registration Rights Agreement, the Company will bear certain
registration expenses.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
<PAGE>
The Old Notes were issued originally in global form (the "Global Old
Note"). The Global Old Note was deposited with, or on behalf of, DTC, as the
initial depository with respect to the Old Notes (in such capacity, the
"Depositary"). The Global Old Note is registered in the name of Cede, as nominee
of DTC, and beneficial interests in the Global Old Note are shown on, and
transfers thereof are effected only through, records maintained by the
Depositary and its participants. The use of the Global Old Note to represent
certain of the Old Notes permits the Depositary's participants, and anyone
holding a beneficial interest in an Old Note registered in the name of such a
participant, to transfer interests in the Old Notes electronically in accordance
with the Depositary's established procedures without the need to transfer a
physical certificate. New Notes issued in exchange for the Global Old Note will
also be issued initially as a note in global form (the "Global New Note," and,
together with the Global Old Note, the "Global Notes") and deposited with, or on
behalf of, the Depositary. After the initial issuance of the Global New Note,
New Notes in certificated form will be issued in exchange for a holder's
proportionate interest in the Global New Note only as set forth in the
Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
Available Information..................................................... i
Incorporation by Reference................................................ ii
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 10
The Exchange Offer........................................................ 17
Use of Proceeds........................................................... 24
Capitalization............................................................ 25
Selected Consolidated Financial Data...................................... 26
Pro Forma Consolidated Financial Data (Unaudited)......................... 28
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 32
Business.................................................................. 41
Management................................................................ 51
Certain Transactions...................................................... 56
Description of Operating Agreement........................................ 59
Description of Other Indebtedness......................................... 62
Description of Notes...................................................... 64
Certain U.S. Federal Income Tax Considerations............................ 91
Plan of Distribution...................................................... 95
Legal Matters............................................................. 96
Experts................................................................... 96
Index to Consolidated Financial Statements................................ F-1
<PAGE>
AVAILABLE INFORMATION
The Company is filing a registration statement on Form S-4 (together with
any amendments thereto, the "Registration Statement") with the Commission under
the Securities Act with respect to the New Notes. This Prospectus, which
constitutes a part of the Registration Statement, omits certain information
contained in the Registration Statement and reference is made to the
Registration Statement and the exhibits and schedules thereto for further
information with respect to the Company and the New Notes offered hereby. This
Prospectus contains summaries of the material terms and provisions of certain
documents and in each instance reference is made to the Registration Statement
and the exhibits and schedules thereto for further information with respect to
the Company and the New Notes offered hereby. This Prospectus contains summaries
of the material terms and provisions of certain documents and in each instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such summary is qualified in its entirety by such
reference.
The Company will be subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following regional offices of the Commission: Chicago Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60061;
and New York Regional Office, 7 World Trade Center, Suite 1300, New York, New
York 10048. In addition, certain of the information regarding the Company will
be available on the World Wide Web by accessing the Securities and Exchange
Commission web site at http://www.sec.gov. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the Commission
at its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company has agreed that, whether or not it is required to do so by the
rules and regulations of the Commission, for so long as any of the Notes remain
outstanding, it will furnish to the holders of the Notes and submit to the
Commission (unless the Commission will not accept such materials) (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's independent
accountants, and (ii) all reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports. In
addition, for so long as any of the Notes remain outstanding, the Company has
agreed to make available to any prospective purchaser of the Notes in connection
with any sale thereof the information required by Rule 144A(d)(4) under the
Securities Act. In addition, upon registration of the guarantees of the New
Notes in connection with the Exchange Offer, each Guarantor will also become
subject to the reporting requirements of the Exchange Act, subject to obtaining
exemptive relief from the Commission or no-action relief from the Commission
staff.
INCORPORATION BY REFERENCE
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Exchange Offer shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in each
instance reference is made to the copy of such contract or other document,
copies of which are available from the Company as described below, each such
statement being qualified in all respects by such reference.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents referred to above which have been or may be
incorporated by reference in this Prospectus (excluding exhibits to the
information that is incorporated
i
<PAGE>
herein by reference unless such exhibits are specifically incorporated by
reference into the information that this Prospectus incorporates). Requests for
such copies should be directed to Robert Manners, Senior Vice President and
General Counsel, Production Resource Group, L.L.C., 539 Temple Hill Road, New
Windsor, New York; telephone number (914) 567-5700. In order to ensure timely
delivery of the documents, any request should be made by [ ] , 1998.
Any statement contained in a document incorporated by reference shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed
incorporated document or in any accompanying prospectus supplement modifies or
supersedes such statement (but not to the extent that any statement and any such
other filed document is only summarized herein or in any other subsequently
filed document). Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS UNDER "SUMMARY,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" AND "BUSINESS," IN ADDITION TO CERTAIN STATEMENTS CONTAINED
ELSEWHERE IN THIS PROSPECTUS, ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND ARE THUS
PROSPECTIVE. SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES
AND OTHER FACTORS WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
FUTURE RESULTS EXPRESSED OR IMPLIED BY SUCH FORWARD- LOOKING STATEMENTS. THE
MOST SIGNIFICANT OF SUCH RISKS, UNCERTAINTIES AND OTHER FACTORS ARE DISCUSSED
UNDER THE HEADING "RISK FACTORS," BEGINNING ON PAGE 8 OF THIS PROSPECTUS, AND
PROSPECTIVE INVESTORS ARE URGED TO CAREFULLY CONSIDER SUCH FACTORS.
As used herein, "Chrysler(R)" means Chrysler Corporation, "Disney(R)" means
The Walt Disney Company, "General Motors" means General Motors Corporation,
"Glaxo Wellcome(TM)" means Glaxo Wellcome plc, "IBM(R)" means International
Business Machines Corporation, "Iomega(R)" means Iomega Corporation, "Mercedes
Benz(R)" means Mercedes Benz AG, "Nike" means Nike, Inc. and
"Toyota(R)/Lexus(R)" means Toyota Motor Corporation and its Lexus car division.
All registered trademarks used herein are the property of their respective
owners.
IN CONNECTION WITH THIS EXCHANGE OFFER, THE INITIAL PURCHASERS MAY ENGAGE
IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
NOTES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS AND
THE IMPOSITION OF PENALTY BIDS. SEE "PLAN OF DISTRIBUTION."
ii
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and historical financial statements, including the notes thereto,
included elsewhere in this Prospectus. Unless the context otherwise requires,
references herein to the "Company" refers to Production Resource Group, L.L.C.,
a Delaware limited liability company, and its subsidiaries and predecessors. The
Company acquired the net assets of Bash Theatrical Lighting, Inc. and four
affiliated entities (collectively, "Bash") and Design Dynamics, Inc. ("Design
Dynamics") in August 1997 and June 1997, respectively, and acquired the net
assets of Pro-Mix, Inc. ("Pro-Mix") on January 2, 1998. See "The Company."
Unless otherwise specified, pro forma financial information contained in this
Prospectus gives effect to (i) the acquisitions of the net assets of Bash and
Design Dynamics and the acquisition of the net assets of Pro-Mix (collectively,
the "Acquisitions") as if such Acquisitions had occurred on January 1, 1996,
(ii) the transfer of certain real estate and the related mortgage debt
obligations to a member of the Company as payment for redemption of such
member's equity interests in the Company, and the subsequent lease of such real
estate back to the Company (the "Real Estate Transaction") and (iii) the Initial
Offering and the application of net proceeds therefrom as described under "Use
of Proceeds." The Acquisitions, the Real Estate Transaction and the Initial
Offering and the application of net proceeds therefrom are referred to
collectively herein as the "Transactions"
The Company
The Company is a leading integrator, fabricator and supplier of a broad
range of products and services for the live entertainment (live theater, concert
touring and special events), corporate events (trade and industrial shows) and
themed entertainment (gaming, theme parks and themed retail) markets. The
Company's products and services include (i) scenery and exhibit fabrication,
(ii) computerized motion and show control systems, including its proprietary
Stage Command System(R), (iii) theatrical lighting systems and related products,
and (iv) project management, which encompasses design engineering, budgeting,
logistical coordination and installation. Depending upon its clients' needs, the
Company's highly-skilled staff can integrate some or all of these products and
services to produce creative, technically sophisticated and visually
"spectacular" productions, events or attractions. The Company's principal
production and distribution facilities are located in six states, including
major entertainment and convention centers such as the New York metropolitan
area, Las Vegas and Orlando. On a pro forma basis, after giving effect to the
Transactions, the Company generated revenues and EBITDA (as defined) of $131.5
million and $23.3 million, respectively, for the twelve months ended September
30, 1997.
The Company initially developed its technical and creative expertise in
live theater and industrial shows and subsequently applied such expertise to a
broader range of corporate events and the themed entertainment market. In the
live entertainment market, the Company's products and services are featured in
18 of the 33 current Broadway shows, including Beauty & the Beast(TM), Les
Miserables(TM), Miss Saigon(TM), The Phantom of the Opera(TM), Ragtime(TM) and
Titanic(TM). In recent years, the Company has applied its technical and creative
expertise in live entertainment to the corporate events and themed entertainment
markets. In the corporate events market, the Company has served as project
manager for trade and industrial shows for a diverse base of large
multi-national corporations such as Chrysler(R), General Motors(R), Glaxo
Wellcome(TM), IBM(R), Mercedes Benz(R), Nike(R) and Toyota(R)/Lexus(R). In the
themed entertainment market, the Company has participated in the fabrication of
several multi-million dollar attractions, including Terminator 2-3D(TM) at
Universal Studios Florida(R), Star Trek, The Experience(SM) at the Las Vegas
Hilton(R) and Nike(R)'s flagship superstore in New York City.
The Company estimates that the live entertainment, corporate events and
themed entertainment markets for sales of its products and services exceeded $11
billion in 1996. The live entertainment market includes live theater, concert
tours and special events such as the Olympics, political conventions and
debates, and televised award ceremonies. The corporate events market includes
industrial shows (primarily single corporation events such as large sales
meetings and new product launches) and trade shows. The themed entertainment
market includes various attractions within gaming, theme park and themed retail
establishments. The markets served by the Company are growing and the Company
believes that such markets will continue to grow as a result of favorable
industry trends. In addition, the Company believes that the demand for its
products and services will continue to grow as corporations increasingly utilize
more sophisticated technology and theatrical techniques to promote their
corporate
1
<PAGE>
or brand identities, differentiate their product offerings and attract new
customers. See "Business--Markets Overview."
Competitive Strengths
The Company believes that it is well-positioned to capitalize on the growth
of the live entertainment, corporate events and themed entertainment markets as
well as to enhance its market position. The following are, in management's view,
the Company's principal strengths:
Leading Provider. The Company has established itself as a leading provider
of technical and creative products and services in the markets that it serves.
The Company believes that its (i) ability to offer clients fully-integrated
solutions, (ii) staff of highly-skilled project managers, engineers and
craftsmen, (iii) high standards for service and reliability, (iv) ability to
handle multiple large projects simultaneously through its strategically located
facilities and (v) access to capital will allow it to increase its market share
in each of the markets that it serves.
Proprietary Products and Expertise. The Company's proprietary Stage Command
System(R), a state-of-the-art computerized system for moving scenery and other
props, has set the industry standard for motion control systems. Stage Command
System(R) has been used in over 55 theatrical productions and themed attractions
since it was developed by the Company in 1988. The Company also offers
technologically-advanced show control systems, which synchronize the various
physical elements of a production or attraction, including scenery, sound,
lighting and special effects. The Company's motion and show control systems
allow for the addition of more sophisticated production elements on a
cost-effective basis. In addition, the Company's projects often involve
customized products and services that require significant design engineering and
fabrication expertise.
Diverse Client Base. The Company has expanded its revenue base and market
opportunities by applying its expertise in live entertainment to the corporate
events and themed entertainment markets. The Company currently serves a diverse
base of approximately 2,500 clients, ranging from large multi-national
corporations to small local businesses and organizations. The Company's
corporate clients are engaged in a number of different industries, including
automotive, computers, consumer products, entertainment, gaming and
pharmaceuticals.
Strong Client Relationships. The Company has developed strong,
long-standing relationships with many of its clients. For example, in the live
entertainment market, the Company has fabricated scenery and supplied its Stage
Command System(R) for such long-running shows as The Phantom of the Opera(TM)
and Les Miserables(TM). In the corporate events market, the Company has served
as project manager for the annual dealer meetings for Chrysler(R) and Toyota(R)
in each of the past ten years. In the themed entertainment market, the Company's
work on Universal Studios Florida(R)'s Terminator 2-3D(TM) attraction and
Nike(R)'s flagship superstore has led to additional projects for each of these
clients.
Experienced Management Team. Jeremiah J. Harris, the Company's Chairman and
Chief Executive Officer, comes from a family with four generations of experience
in live theater and has over 25 years of experience in providing products and
services for the live entertainment and corporate events markets. Mr. Harris is
supported by a team of ten senior executives with, on average, 14 years of
experience in the business.
Business Strategy
The Company's objective is to become the leading provider of technical and
creative products and services for the live entertainment, corporate events and
themed entertainment markets. The key elements of the Company's business
strategy are as follows:
Leverage Technical and Creative Expertise. The Company intends to leverage
its technical and creative expertise to further penetrate the corporate events
and themed entertainment markets. For example, the Company was awarded the
project management contract for the theater structure at IBM(R)'s Fall COMDEX
exhibit based on its ability to provide a fully-integrated solution. The Company
was required to integrate sophisticated scenery, lighting and audio/visual
equipment; fabricate a 24-foot high, 75-foot long structure containing 90 video
monitors that served as the focal point of IBM(R)'s exhibit; and collaborate
with IBM(R)'s advertising agency to ensure that the
2
<PAGE>
exhibit communicated IBM(R)'s new business(R) marketing program in a manner
consistent with IBM(R)'s overall marketing strategy.
Expand Product and Service Offering. The Company plans to enhance its
"one-stop shopping" product and service offering by adding complementary
products and services through internal development and acquisitions. For
example, through the acquisition of three lighting providers since 1996, the
Company has become a leading supplier of theatrical lighting systems and related
products in the United States. The Company's acquisition of the net assets of
Pro-Mix, which provides sound equipment and acoustical and sound design
consulting services primarily to the live theater market segment, represents the
most recent example of the Company's strategy to identify and acquire
complementary products and services. See "The Company."
Intensify Cross-Selling Efforts. The Company intends to intensify its
cross-selling efforts. Many of the companies acquired by the Company typically
provided a limited number of products and services to a single market segment.
The Company intends to leverage its existing relationships in order to sell
additional products and services to clients across each of the markets that it
serves. The Company is also creating a management information system that will
track the use of its products and services by client in order to support its
cross-selling efforts.
Develop and Implement Focused Marketing Effort. To enhance the overall
growth of its business and expansion into new markets, the Company is developing
a nationally focused marketing effort under the direction of its recently
appointed Senior Vice President, Marketing and Sales. In connection with this
effort, the Company plans to target large, multi-national corporations with
significant, recurring events that require fully-integrated solutions.
Pursue Strategic Acquisitions. Strategic acquisitions have been and will
continue to be an important element of the Company's growth strategy. Each of
the markets that the Company serves has many small local or regional competitors
and, consequently, offers significant consolidation opportunities. The Company
will seek attractively priced acquisitions that expand or complement its
existing product and service offering, enhance relationships with existing
clients, provide an entry into new market segments or expand its operations into
domestic and international entertainment centers where it does not currently
have a significant presence.
Recent Acquisitions
Since January 1996, the Company has completed six acquisitions, which have
expanded the Company's product and service offering, diversified its client base
and substantially increased its revenues and EBITDA. On January 2, 1998, the
Company acquired the net assets of Pro-Mix, which provides sound equipment and
acoustical and sound design consulting services primarily to the live theater
market segment through its offices located in the New York metropolitan area and
Orlando. In August 1997, the Company acquired the net assets of Bash, which
supplies theatrical lighting systems and related products through its offices
located in the New York metropolitan area, Las Vegas, Orlando and Baltimore. As
a result of the Bash acquisition, the Company has become a leading supplier of
theatrical lighting systems and related products in the United States. In June
1997, the Company acquired the net assets of Design Dynamics, located in Denver,
which specializes in fabricating trade show exhibits. In March 1997, the Company
acquired the net assets of Thoughtful Designs, located in Las Vegas, which
provides technology design and show control systems. In February 1996, the
Company acquired the net assets of Cinema Services of Las Vegas, Inc.
("Cinema"), which established the Company's theatrical lighting capabilities in
the large gaming and corporate events markets in Las Vegas. In January 1996, the
Company acquired the net assets of Vanco Lighting Services, Inc. ("Vanco"),
located in Orlando, which established the Company's theatrical lighting
capabilities in the large theme park and convention markets in Orlando.
The Initial Offering
The outstanding $100.0 million principal amount of Old Notes were sold by
the Issuers to the Initial Purchasers on the Closing Date pursuant to the
Purchase Agreement among the Company, the Guarantors and the Initial Purchaser.
The Initial Purchasers subsequently resold the Old Notes in reliance on Rule
144A under the Securities Act. The Issuers and the Initial Purchaser also
entered into the Registration Rights Agreement pursuant to which the Company and
the Guarantors granted certain registration rights for the benefit of the
holders of the Old Notes. The Exchange Offer is intended to satisfy certain of
the Company's obligations under the Registration
3
<PAGE>
Rights Agreement with respect to the Old Notes. See "The Exchange Offer" and
"The Exchange Offer -- Purpose and Effect."
The Exchange Offer
Securities Offered ....................... Up to $100.0 million principal
amount of 11.50% Senior
Subordinated Notes Due 2008, which
have been registered under the
securities act. The form and term
of the New Notes are substantially
identical to the Old Notes in all
material respects, except that the
New Notes will be registered under
the Securities Act, and therefore
will not be subject to certain
transfer restrictions, registration
rights and related Special Interest
provisions applicable to the Old
Notes.
The Exchange Offer ....................... The New Notes are being offered in
exchange for up to $100.0 million
principal amount of Old Notes. The
issuance of the New Notes is
intended to satisfy certain
obligations of the Issuers
contained in the Registration
Agreement. See "The Exchange
Offer -- Terms of the Exchange
Offer."
Expiration Date .......................... The Exchange Offer will expire at
5:00 p.m., New York City time, on
________, 1998, or such later date
and time to which it is extended.
See "The Exchange Offer -- Terms of
the Exchange Offer."
Withdrawal ............................... Tenders of Old Notes pursuant to
the Exchange Offer may be withdrawn
at any time prior to 5:00 p.m. New
York City, time on the Expiration
Date. See "The Exchange Offer --
Expiration Date: Extensions;
Amendments."
Conditions of the Exchange Offer ......... The Exchange Offer is not
conditioned upon any minimum
principal amount of Old Notes being
tendered for exchange. The only
condition to the Exchange Offer is
the declaration by the Commission
of the effectiveness of the
Registration Statement of which
this Prospectus constitutes a part.
See "The Exchange offer --
Conditions of the Exchange Offer.'
Procedures for Tendering Old Notes ....... Each holder of Old Notes desiring
to accept the Exchange Offer must
complete, sign and date the Letter
of Transmittal according to the
instructions contained herein and
therein, and mail or otherwise
deliver the Letter of Transmittal,
together with the Old Notes and any
other required documents, to the
Exchange Agent (as defined herein)
at the address set forth herein
prior to 5:00 p.m., New York City
time, on the Expiration Date. Any
beneficial owner whole Old Notes
are registered in the name of a
broker, dealer, commercial bank,
trust company or other nominee and
who wishes to tender such Old Notes
in the Exchange Offer should
instruct such entity or person to
promptly tender on such beneficial
owner's behalf.
Guaranteed Delivery Procedures ........... Holders of Old Notes who with to
tender their Old Notes and (i)
whose Old Notes are not immediately
available or (ii) who cannot
deliver their Old Notes, the Letter
of Transmittal or any other
documents required by the Letter of
Transmittal to the Exchange Agent
prior to the Expiration Date may
tender their Old Notes according to
the guaranteed delivery procedures
set forth in the Letter of
Transmittal. See "The Exchange --
Guaranteed Delivery Procedures."
Acceptance of Old Notes and Delivery of
New Notes .............................. Upon effectiveness of the
Registration Statement of which
this Prospectus constitutes of part
and consummation of the Exchange
Offer, the Issuers will accept any
and all Old Notes that are properly
tendered in the Exchange Offer
prior to 5:00 p.m., New York City
time, on the Expiration Date. The
New Notes issued pursuant to the
Exchange Offer -- Acceptance of Old
Notes for
4
<PAGE>
Exchange; Delivery of New Notes."
The Exchange Agent ....................... First Union National Bank has
agreed to serve as the exchange
agent (in such capacity, the
"Exchange Agent") in connection
with the Exchange Offer. See "The
Exchange Offer -- The Exchange
Agent."
Certain Federal Income Tax Considerations For a discussion of certain federal
income tax considerations relating
to the Exchange Offer, see "Certain
Federal Income Tax Considerations."
Use of Proceeds .......................... There will be no proceeds to the
Company from the exchange pursuant
to the Exchange Offer. See "Use of
Proceeds."
Fees and Expenses ........................ All expenses incident to the
Issuers' consummation of the
Exchange Offer and compliance with
the Registration Agreement will be
borne by the Issuers. See "The
Exchange Offer -- Fees and
Expenses."
Termination of Certain Rights ............ Pursuant to the Registration
Agreement, holders of Old Notes (i)
have rights to receive Special
Interest and (ii) have certain
rights intended for the holders of
unregistered securities. "Special
Interest" means additional interest
of 0.50% per annum of the principal
amount of the Old Notes during the
first 90 days of a Registration
Default (as defined), increasing by
an additional (.50% per annum for
each additional 90-day period (up
to a maximum of 2.0% per annum of
the principal amount) for any
period during which a Registration
Default is continuing pursuant to
the terms of the Registration
Agreement. Holders of New Notes
will no longer be, and upon
consummation of the Exchange Offer,
holders of Old Notes will no longer
be, entitled to (i) the right to
receive Special Interest of (ii)
certain other rights under the
Registration Agreement intended for
holders of unregistered securities.
See "The Exchange Offer --
Termination of Certain Rights" and
"Procedures for Tendering Old
Notes.:
Accrued Interest ......................... The New Notes will bear interest at
a rate equal to 11.50% per annum
from their date of issuance.
Holders whose Old Notes are
accepted for exchange will have the
right to receive interest accrued
thereon from the date of original
issuance or date of the last
interest payment, as applicable,
to, but not including, the date of
issuance of the New Notes, such
interest to be payable with the
first interest payment date on the
New Notes. Interest on the Old
Notes accepted for exchange will
cease to accrue on the day prior to
the issuance of the New Notes. See
"Description of Notes -- Principal,
Maturity and Interest."
Resales of New Notes ..................... Based on the position of the staff
of the Commission as set forth in
certain interpretive letters issued
to third parties in other
transactions, the Company believes
that the New Notes issued pursuant
to the Exchange Offer to any holder
of Old Notes in exchange for Old
Notes may be offered for resale,
resold and otherwise transferred by
a holder (other than (i) a
broker-dealer who purchased the Old
Notes directly form the Company for
resale pursuant to Rule 144A under
the securities Act or any other
available exemption under the
Securities Act of (ii) a person
that is an affiliate of the Issuers
or the Guarantors within the
meaning of Rule 405 under the
Securities Act), without further
compliance with the registration
and prospectus delivery provisions
of the Securities Act, provided
that such holder is not an
affiliate of the Issuers or the
Guarantors, in acquiring the New
Notes in the ordinary course of
business and is not participating,
and has no arrangement or
understanding with any person to
participate, in a distribution of
the New Notes. Each broker-dealer
that receives New Notes for its
own account in exchange for Old
Notes, where such Old Notes were
acquired by such broker as a
result of marketing-making or
other trading activities, must
acknowledge that it will
5
<PAGE>
deliver a prospectus in connection
with any resale of such New Notes.
See "The Exchange Offer-- Resales
of the New Notes" and "Plan of
Distribution.
Effect of Not Tendering Old Notes for
Exchange ............................... Old Notes that are not tendered or
that are not properly tendered
will, following the expiration of
the Exchange Offer, continue to be
subject to the existing restriction
upon transfer thereof. The Company
will have no further obligations to
provide for the registration under
the Securities Act of such Old
Notes and such Old Notes will,
following the expiration of the
Exchange Offer, bear interest at
the same rate as the New Notes.
Description of New Notes
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that the New Notes will
be registered under the Securities Act, and therefore will not be subject to
certain transfer restrictions, registration rights and related Special Interest
Provisions applicable to the Old Notes. The exchange Offer shall be deemed
consummated upon the occurrence of the delivery by the Company to the Exchange
Agent of New Notes in the same aggregate principal amount as the aggregate
principal amount of Old Notes that are validly tendered by holders thereof
pursuant to the Exchange Offer. See "The Exchange Offer -- Termination of
Certain Rights" and " -- Procedures for Tendering Old Notes" and "Description of
Notes."
Securities Offered ....................... $100 million principal amount of
11.50% Senior Subordinated Notes
Due 2008.
Maturity Date ............................ January 15, 2008.
Interest ................................. Interest on the Notes will be
payable semi-annually on each
January 15 and July 15, commencing
July 15, 1998.
Ranking .................................. The Notes are general unsecured
obligations of the Issuers and are
subordinated in right of payment to
all existing and future Senior Debt
of the Issuers. As of September 30,
1997, after giving effect to the
Transactions, the Issuers would
have had approximately $1.0 million
of consolidated Senior Debt
outstanding. In addition, after
consummation of the Initial
Offering, the Company had $100
million of total commitments under
the Amended Credit Facility, of
which approximately $0.6 million
would have been available as of
September 30, 1997, after giving
effect to the Transactions and the
terms of the Amended Credit
Facility.
Optional Redemption ...................... Except as set forth below, the
Notes are not redeemable at the
option of the Issuers, in whole or
in part, at any time prior to
January 15, 2003. Thereafter, the
Notes are redeemable at any time at
the option of the Issuers, in whole
or in part, at the redemption
prices set forth herein, plus
accrued and unpaid interest and
Liquidated Damages, if any, thereon
to the date fixed for redemption.
In addition, at any time prior to
January 15, 2001, the Issuers may
redeem up to 35% of the aggregate
principal amount of the Notes
originally issued at a redemption
price of 110% of the principal
amount thereof, plus accrued and
unpaid interest and Liquidated
Damages, if any, thereon to the
date fixed for redemption, with the
net cash proceeds of one or more
public offerings of Capital Stock
of the Company (other than
Disqualified Stock), provided that
at least 65% of the aggregate
principal amount of the Notes
originally issued remains
outstanding immediately after the
occurrence of each such redemption.
At any time prior to January 15,
2003, the Issuers may, at their
option, redeem the Notes, in whole
or in part, at a redemption price
equal to 100% of the principal
amount thereof, plus the applicable
Make-Whole Premium.
6
<PAGE>
Change of Control ........................ In the event of a Change of
Control, the Issuers are required
to make an offer to each holder of
the Notes to repurchase all or any
part of such holder's Notes at a
repurchase price equal to 101% of
the principal amount thereof plus
accrued and unpaid interest and
Liquidated Damages, if any, thereon
to the date fixed for repurchase.
Certain Covenants ........................ The indenture pursuant to which the
Notes have been issued (the
"Indenture") contains certain
covenants that, among other things,
will limit the ability of the
Issuers and the Company's
Restricted Subsidiaries to sell
assets; pay dividends, repurchase
Equity Interests (as defined) or
make other Restricted Payments (as
defined); incur additional
Indebtedness (as defined); create
Liens (as defined); enter into
transactions with Affiliates (as
defined); enter into certain
mergers and consolidations; and
enter into sale and leaseback
transactions. See "Description of
Notes--Certain Covenants."
Risk Factors
Prospective purchasers of the Notes should carefully consider the matters
set forth under "Risk Factors" and as well as the other information, historical
financial statements and data and the pro forma financial data included in this
Prospectus prior to making the Exchange Offer.
7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth (i) summary historical consolidated
financial data of the Company for each of the three years in the period ended
December 31, 1996 and for the nine months ended September 30, 1996 and 1997,
(ii) summary pro forma consolidated financial data of the Company for the year
ended December 31, 1996 and the nine and twelve months ended September 30, 1997,
which give effect to the Transactions as if they had occurred on January 1,
1996, and (iii) summary historical balance sheet data of the Company and as
adjusted to give effect to the acquisition of the net assets of Pro-Mix, the
Real Estate Transaction and the Initial Offering and the application of net
proceeds therefrom as if such transactions had occurred on September 30, 1997.
The summary historical consolidated financial data for each of the three years
in the period ended December 31, 1996 were derived from the audited consolidated
financial statements of the Company, which are included elsewhere in this
Prospectus together with the report thereon of Ernst & Young LLP, independent
auditors. The summary historical consolidated financial data for the nine months
ended September 30, 1996 and as of and for the nine months ended September 30,
1997 were derived from unaudited consolidated financial statements of the
Company, which, in the opinion of management, contain all adjustments
(consisting of only normal recurring adjustments) necessary for the fair
presentation of the information set forth therein. The results of operations for
the nine months ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the full year. The pro forma financial data and
the as adjusted balance sheet data are provided for informational purposes only,
are unaudited and are not necessarily indicative of future results or what the
operating results or financial condition of the Company would have been had the
Transactions actually been consummated on the dates assumed. The following table
should be read in conjunction with "Capitalization," "Selected Consolidated
Financial Data," "Pro Forma Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical financial statements and the notes thereto of the Company and
Bash included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Pro Forma
----------------------------------------------- ----------------------------------------
Nine Months Twelve Months
Year Ended Nine Months Ended Year Ended Ended Ended
December 31, September 30, December 31, September 30, September 30,
--------------------------- ------------------ ------------ ------------- -------------
1994 1995 1996(1) 1996(1) 1997(2) 1996 1997 1997
---- ---- ------- ------- ------- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues ................................. $31,040 $39,388 $62,506 $43,445 $69,831 $106,698 $100,374 $131,517
Direct production costs .................. 22,250 24,424 41,230 28,583 50,952 62,008 64,802 80,596
Depreciation expense ..................... 770 3,342 3,920 2,859 4,061 8,245 6,769 9,003
------- ------- ------- ------- ------- -------- -------- --------
Gross profit ............................. 8,020 11,622 17,356 12,003 14,818 36,445 28,803 41,918
Selling general and administrative
expenses ............................. 4,813 5,794 8,676 6,179 10,642 22,114 19,183 27,662
Other depreciation and amortization ...... 461 445 715 459 1,373 1,909 2,015 2,574
Non-recurring compensation expense(3) .... -- -- -- -- 2,000 -- -- --
------- ------- ------- ------- ------- -------- -------- --------
Operating profit ......................... 2,746 5,383 7,965 5,365 803 12,422 7,605 11,682
Loss on impairment of assets(4) .......... -- -- 495 -- -- -- -- --
Interest expense ......................... 279 632 1,292 941 2,322 12,392 9,265 12,361
Interest (income) ........................ (74) (268) (128) (99) (76) (159) (89) (118)
------- ------- ------- ------- ------- -------- -------- --------
Income (loss) before income taxes
and extraordinary item ................. 2,541 5,019 6,306 4,523 (1,443) 189 (1,571) (561)
Provision for income taxes ............... 28 122 206 186 298 311 343 440
------- ------- ------- ------- ------- -------- -------- --------
Income (loss) before extraordinary item .. 2,513 4,897 6,100 4,337 (1,741) (122) (1,914) (1,001)
Extraordinary item(5) .................... -- -- -- -- (614) -- -- --
------- ------- ------- ------- ------- -------- -------- --------
Net income (loss) ........................ $2,513 $4,897 $6,100 $4,337 $(2,355) $(122) $(1,914) $(1,001)
======= ======= ======= ======= ======= ======== ======== ========
Other Financial Data:
EBITDA(6) ................................ $3,977 $9,170 $12,600 $8,683 $8,237 $22,576 $16,389 $23,259
Ratio of earnings to fixed charges(7) .... 7.7x 6.6x 4.7x 4.5x -- -- -- --
Pro forma ratio of EBITDA to interest
expense ............................. 1.8x 1.8x 1.9x
Pro forma ratio of total debt to EBITDA .. 4.5x -- 4.3x
<CAPTION>
As of September 30, 1997
-------------------------
Actual As Adjusted
------ -----------
(Dollars in thousands)
<S> <C> <C>
Balance Sheet Data:
Working capital ............................. $14,829 $ 39,355
Total assets ................................ 88,400 114,456
Total debt .................................. 69,813 101,029
Members' equity ............................. 8,499 4,208
</TABLE>
- ----------
(1) The historical statement of operations data and other financial data for
1996 reflect the results of operations of Vanco and Cinema since they were
acquired by the Company on January 18, 1996 and February 8, 1996, respectively.
8
<PAGE>
(2) The historical statement of operations data and other financial data for the
nine months ended September 30, 1997 reflect the results of operations of
Thoughtful Designs, Design Dynamics and Bash since they were acquired by the
Company on March 7, 1997, June 6, 1997 and August 14, 1997, respectively.
(3) Non-recurring compensation expense for the nine months ended September 30,
1997 reflects bonuses of $2.0 million paid to the two shareholders of Bash upon
their execution of employment agreements with the Company.
(4) Loss on impairment of assets for the year ended December 31, 1996 reflects a
writedown of $495,000 to the carrying value of the Company's former principal
fabrication facility in Cornwall-on-Hudson, NY.
(5) Extraordinary item for the nine months ended September 30, 1997 reflects the
write-off of unamortized deferred financing costs of $614,000 related to the
replacement of the Company's existing revolving credit facility with the Credit
Facility on July 31, 1997. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
(6) EBITDA is defined, in accordance with the definition of Consolidated EBITDA
in the Indenture, as the sum of income before interest expense, income taxes,
depreciation and amortization, certain non-recurring charges and certain
non-cash charges ("EBITDA"). Non-recurring charges consist of $2.0 million of
bonuses paid to the two shareholders of Bash during the nine months ended
September 30, 1997. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to service indebtedness. However,
EBITDA should not be considered an alternative to operating income or cash flows
from operating activities (as determined in accordance with generally accepted
accounting principles) and should not be construed as an indication of a
company's operating performance or as a measure of liquidity.
(7) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes plus fixed charges. Fixed charges consist
of interest expense plus the portion of operating lease expense attributable to
interest expense. Earnings were insufficient to cover fixed charges by
approximately $1.4 million for the nine months ended September 30, 1997. The
supplemental pro forma amounts give effect to the Transactions. Earnings were
insufficient to cover fixed charges by approximately $66,000 for the year ended
December 31, 1996 and $1.6 million and $648,000 for the nine and twelve months
ended September 30, 1997, respectively, on a pro forma basis.
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RISK FACTORS
Notes should carefully consider the following risk factors, as well as the
other information contained in this Prospectus, in evaluating the Exchange
Offer.
Substantial Leverage
Following the Initial Offering, the Company will have consolidated
indebtedness that is substantial in relation to its members' equity. As of
September 30, 1997, after giving effect to the Transactions, the Company would
have had total consolidated indebtedness of approximately $101 million and
members' equity of $2.7 million. In addition, after consummation of the Initial
Offering, the Company had $100 million of total commitments under the Amended
Credit Facility, of which approximately $0.6 million would have been available
as of September 30, 1997, after giving effect to the Transactions and the terms
of the Amended Credit Facility. For the nine months ended September 30, 1997,
after giving effect to the Transactions and the terms of the Amended Credit
Facility, earnings were insufficient to cover fixed charges by approximately
$1.6 million. The Company's leveraged financial position poses substantial
consequences to holders of the New Notes, including the following: (i) a
substantial portion of the Company's cash flow from operations will be dedicated
to the payment of interest on the New Notes, borrowings under the Amended Credit
Facility and other indebtedness, (ii) the Company's leveraged position may
impede its ability to obtain financing in the future for working capital,
capital expenditures and other general corporate purposes, including
acquisitions, and (iii) the Company's leveraged financial position may make it
more vulnerable to economic downturns and may limit its ability to withstand
competitive pressures. If the Company is unable to generate sufficient cash flow
from operations in the future to service its indebtedness and to meet its other
commitments, the Company will be required to adopt one or more alternatives,
such as refinancing or restructuring its indebtedness, selling material assets
or operations, or seeking to raise additional debt or equity capital. There can
be no assurance that any of these actions could be effected on satisfactory
terms, that they would enable the Company to continue to satisfy its capital
requirements or that they would be permitted by the terms of existing or future
debt agreements, including the Indenture and the Amended Credit Facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of Other
Indebtedness--Amended Credit Facility."
Subordination of Notes
The payment of principal of, premium, interest and on, and any other
amounts owing in respect of, the Notes is subordinated to the prior payment in
full of all existing and future Senior Debt of the Issuers, including
obligations under the Amended Credit Facility. As of September 30, 1997, after
giving effect to the Transactions, the Issuers would have had approximately $1.0
million of consolidated Senior Debt outstanding. In addition, after consummation
of the Initial Offering, the Company had $100 million of total commitments under
the Amended Credit Facility, of which approximately $0.6 million would have been
available as of September 30, 1997, after giving effect to the Transactions and
the terms of the Amended Credit Facility. Similarly, the payment of amounts due
under the Subsidiary Guarantees will be subordinated to the prior payment in
full of all existing and future Guarantor Senior Debt (as defined), including
all amounts owing pursuant to the Guarantors' guarantees of amounts outstanding
under the Credit Facility. The Indenture limits, but does not prohibit, the
ability of the Issuers and the Guarantors to incur additional indebtedness that
may constitute Senior Debt or Guarantor Senior Debt. In the event of the
bankruptcy, liquidation, dissolution, reorganization or other winding up of
either of the Issuers or any of the Guarantors, the assets of such Issuer or
such Guarantor will be available to pay obligations under the Notes or the
Subsidiary Guarantee of such Guarantor, as the case may be, only after all
Senior Debt or Guarantor Senior Debt, as applicable, has been paid in full, and
there can be no assurance that there will be sufficient assets to pay the
amounts due on any or all of the Notes or the Subsidiary Guarantees, as the case
may be, then outstanding. In addition, under certain circumstances, the Issuers
may be prohibited by the Indenture from paying amounts due in respect of the
Notes, or from purchasing, redeeming or otherwise acquiring Notes, if a payment
or non-payment default exists with respect to certain Senior Debt. See
"Description of Notes--Subordination" and "--Subsidiary Guarantees" and
"Description of Other Indebtedness--Amended Credit Facility."
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Risks Related to Company's Growth and Acquisitions
The Company's growth, both internally and through acquisitions, and related
changes in the Company's operations place significant demands on the Company's
management, administrative, operational and financial resources. The Company is
in the process of installing an expanded financial reporting system, which the
Company believes will not be fully implemented throughout its operations until
the end of 1998. There can be no assurance that the Company's systems,
procedures, controls or financial resources will be adequate to support the
Company's operations or that management will be able to sustain such growth. In
addition, the Company's continued growth will depend in part upon its ability to
successfully identify and acquire complementary businesses and successfully
integrate them into the Company's operations. No assurance can be given that the
Company will be able to identify complementary businesses that meet its
investment criteria. Any such acquisition will also involve potential risks,
including an increase in the Company's indebtedness, the inability to integrate
the operations of the acquired business or to consolidate systems, facilities
and employees, excessive expenses incurred in connection with the acquisition,
diversion of management's attention from other business concerns and potential
loss of key employees from the acquired business. The Company's failure to
manage growth effectively or successfully integrate acquired businesses would
have a material adverse effect on the Company's business, results of operations
and financial condition.
Risks Associated with Stage Command System(R)
In the live theater market segment, the Company's Stage Command System(R)
generally is rented pursuant to run-of-show contracts. As shows close, the
Company seeks to replace lost rental revenues with new shows. Failure to replace
such revenues, whether resulting from a reduction in the use of motion and show
control systems in live theater or from the Company's loss of market share for
motion and show control systems, could have a material adverse effect on the
Company's business, results of operations and financial condition.
Risks Associated with Large Projects
The Company's largest single source of revenues in each of 1996 and the
nine months ended September 30, 1997 has been a large project for the themed
entertainment market. For the year ended December 31, 1996, Marnell Corrao
Associates, the general contractor for Masquerade in the Sky(TM) at the Rio
Suite Hotel & Casino(R) in Las Vegas, accounted for approximately 10.0% of the
Company's pro forma revenues. For the nine months ended September 30, 1997,
Paramount Pictures, the owner and producer of Star Trek, The Experience(SM),
represented approximately 11.4% of the Company's pro forma revenues. The gross
profit margins associated with themed entertainment projects are generally
significantly lower than those associated with live entertainment and corporate
events projects. In addition, historically, some of these projects have been
unprofitable. Continued involvement in unprofitable projects in the themed
entertainment market could inhibit the Company's ability to increase gross
profit margins and impact its interest in pursuing growth in the themed
entertainment market.
Dependence on Key Personnel
The success of the Company depends in large part upon the abilities and
continued service of its executive officers and other key employees,
particularly, Jeremiah J. Harris, Chairman of the Board and Chief Executive
Officer. In addition, during 1997, the Company hired several senior executives
including a Chief Operating and Financial Officer, a senior vice president
responsible for business affairs and a senior vice president responsible for
sales and marketing. Because the Company's management team has been assembled
recently, there can be no assurance that the team will be able to work together
effectively to manage the Company's operations and to implement the Company's
business strategy. Each of the Company's senior executives has an employment
agreement with the Company. There can be no assurance that the Company will be
able to retain the services of such officers and employees. The failure of the
Company to retain the services of Mr. Harris and other key personnel could have
a material adverse effect on the Company's business, results of operations and
financial condition.
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Controlling Equityholder
Jeremiah J. Harris, the Company's Chairman and Chief Executive Officer, is
the sole manager of the Company pursuant to its Operating Agreement (as defined)
and indirectly controls approximately 96.2% of the voting interests of the
Company. Accordingly, Mr. Harris has the ability to control the business and
affairs of the Company. In addition, the interest of Mr. Harris may be adverse
to the holders of the Notes. See "Principal Unitholders."
Risks of Technological Changes and Competing Products
The Company's past success has depended, in part, on its ability to develop
and enhance technology such as its Stage Command System and to introduce new
products to meet changing client requirements. There can be no assurance that
the Company will continue to develop such new technology or products. In
addition, there can be no assurance that products or technologies developed by
others will not render the Company's products or technologies uncompetitive or
obsolete. A loss of the Company's market share for motion and show control
systems through the introduction of competing products or other factors could
have a material adverse effect on the Company's business, results of operations
and financial condition.
Accounts Receivable
Due to the longer-term and project nature of certain parts of its business,
as well as the Company's business and industry practices, the Company has
periodically had past due accounts receivable. As of September 30, 1997, the
Company had $14.1 million of total accounts receivable of which approximately
$4.1 million was 90 days past due. Approximately one half of the 90 days past
due receivables is related to a project for one of the Company's largest
customers. While the Company believes that its credit and collection policies
and allowances for doubtful accounts receivable are adequate, there can be no
assurance in this regard. The Company reviews its allowances for doubtful
accounts receivable on an ongoing basis and may increase such allowances from
time to time. As of September 30, 1997, the Company's allowance for doubtful
accounts receivable totaled approximately $647,000.
Reliance on Key Suppliers
The Company relies on certain suppliers for important components of its
products, in particular, components of the hardware of its Stage Command
System(R). The Company generally purchases these components pursuant to purchase
orders and has no guaranteed supply contracts. Although the Company believes
that its relationships with its suppliers are good and that there are
alternative sources of supply available, major delivery delays or termination of
the Company's relationship with any supplier of such components could have a
material adverse effect on the Company's business, results of operations and
financial condition.
Product Liability or Personal Injury Claims
The Company faces an inherent business risk of exposure to product
liability or personal injury claims in the event that its products and services
are alleged to have resulted in injury or other adverse effects. The Company
currently maintains insurance coverage but there can be no assurance that the
Company will be able to obtain such insurance on acceptable terms in the future,
if at all, or that any such insurance will provide adequate coverage. Any
successful claims which, individually or in the aggregate, exceed the Company's
insurance coverage could have a material adverse effect on the Company's
business, results of operations and financial condition.
Competition
The markets for the Company's services are highly competitive and
fragmented. The competitors for the Company's products and services include
primarily small local or regional firms and several large national firms, some
of which may have greater financial, management and marketing resources than the
Company. In the corporate events market, the Company also competes with the
in-house communications departments of existing and potential clients. The
primary competitive factors vary by market but include technological capability,
range of products and services, price, reputation, reliability, responsiveness
to client needs and geographic proximity to the
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client. The failure of the Company to compete effectively with respect to any of
these factors could have a material adverse effect on the Company's business,
results of operations and financial condition.
Change of Control
The Indenture will provide that, in the event of a Change of Control, the
Issuers will be required to make an offer to each holder of Notes to repurchase
all or any part of such holder's Notes at a repurchase price equal to 101% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date fixed for repurchase. If a Change of
Control were to occur, there can be no assurance that the Company would have the
financial resources necessary to repurchase all Notes tendered pursuant to such
an offer or would be permitted by the Amended Credit Facility or its other debt
agreements to repurchase the New Notes. In the event that a Change of Control
occurs at a time when the Issuers are prohibited from repurchasing Notes, the
Issuers' failure to make a Change of Control Offer (as defined) would constitute
a default under the Indenture. In such circumstances, the subordination
provisions of the Indenture would also likely restrict payments to the holders
of New Notes. See "Description of Notes--Subordination", "--Repurchase at the
Option of Holders--Change of Control" and "Description of Other Indebtedness--
Amended Credit Facility."
Absence of Public Market; Restrictions on Resale
The New Notes are a new issue of securities for which there is currently no
established market and may not be widely distributed. There can be no assurance
as to (i) the liquidity of any such market that may develop, (ii) the ability of
the holders of New Notes to sell their securities or (iii) the price at which
the holders of New Notes would be able to sell their securities. The Issuers do
not intend to apply for listing of the Notes on any national securities exchange
or on the NASDAQ System; however, it is expected that application will be made
to have the Notes designated for trading in the PORTAL market. The Initial
Purchasers are not obligated, however, to make a market in such securities, and
any such market-making may be discontinued have advised the Issuers that they
currently intend to make a market in the New Notes; however, the Initial
Purchasers at any time at the sole discretion of the Initial Purchasers and
without notice. In addition, such market making activity may be limited during
the Exchange Offer and the pendency of any Shelf Registration. See "Description
of Notes--Registration Rights; Liquidated Damages." Therefore, there can be no
assurance that an active market for New Notes will develop or, if such a market
develops, that it will continue.
See "Description of Notes--Registration Rights; Liquidated Damages."
Restrictions on Exchange Offer
Issuance of New Notes in exchange for Old Notes pursuant to the Exchange
Offer will be made only after timely receipt by the Exchange Agent of a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal. Therefore, holders of Old Notes desiring
to tender such Old Notes in exchange for New Notes should allow sufficient time
to ensure timely delivery. The Exchange Agent and the Company are under no duty
to give notification of defects or irregularities with respect to the tenders of
Old Notes for exchange. Each broker-dealer that receives New Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
Prospectus in connection with any resale of such New Notes. See "The Exchange
Offer -- Resales of the New Notes" and "Plan of Distribution."
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Old Notes under the Securities Act. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Old Notes could be
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adversely affected. Generally, the rights of holders of Old Notes under the
Registration Agreement would also terminate with respect to Old Notes which are
not exchanged for New Notes in the Exchange Offer.
Fraudulent Conveyance
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state and federal fraudulent transfer or conveyance
law, if the Issuers, at the time they issued the Notes, or any Guarantor, at the
time it entered into its Subsidiary Guarantee of the Notes, (a) incurred such
obligation with intent to hinder, delay or defraud creditors or (b) received
less than reasonably equivalent value or fair consideration in connection with
such incurrence and (i) was insolvent at the time of the incurrence, (ii) was
rendered insolvent by reason of such incurrence (and the application of the
proceeds thereof), (iii) was engaged or was about to engage in a business or
transaction for which the assets remaining with the Issuers or such Guarantor
constituted unreasonably small capital to carry on its business or (iv) intended
to incur, or believed that it would incur, debts beyond its ability to pay such
debts as they mature, then, in each such case, a court of competent jurisdiction
could avoid, in whole or in part, the Notes or such Subsidiary Guarantee, as the
case may be, or, in the alternative, subordinate the Notes or such guarantee to
existing and future indebtedness of the Issuers or such Guarantor, as the case
may be. The measure of insolvency for purposes of the foregoing will vary
depending upon the law applied in such case. Generally, however, the Issuers or
a Guarantor would be considered insolvent if the sum of its debts, including
contingent liabilities, was greater than all of its assets at fair valuation or
if the present fair saleable value of its assets was less than the amount that
would be required to pay the probable liability on its existing debts, including
contingent liabilities, as they become absolute and matures.
The Company believes that, for purposes of the United States Bankruptcy
Code and other federal and state fraudulent transfer or conveyance laws, (a) the
Notes and the Subsidiary Guarantees are being issued without the intent to
hinder, delay or defraud creditors and for proper purposes and in good faith,
(b) the Issuers and the Guarantors will receive reasonably equivalent value or
fair consideration and (c) the Issuers and the Guarantors, after the issuance of
the Notes and the application of the proceeds thereof, will be solvent, will
have sufficient capital for carrying on their business and will be able to pay
their debts as they mature. There can be no assurance, however, that a court
passing on such questions would agree with the Company's belief.
Forward Looking Statements
This Prospectus contains certain "forward-looking statements" (as such term
is defined in the Private Securities Litigation Reform Act of 1995), which can
be identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," or "anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by discussions of
strategy that involve risks and uncertainties. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company or the markets
that it serves to be materially different from any future results, performance
or achievements expressed or implied by such forward looking statements. Such
factors include the timing, costs and scope of any acquisition, the revenue and
profitability levels of any entity acquired by the Company, the Company's
ability to integrate the systems, facilities and employees of any acquired
company into the Company's operations, technological advances in the industry
and other matters contained herein in this Prospectus. Certain of these factors
are discussed in more detail elsewhere in this Prospectus including, without
limitation, under "Summary," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business." Given these uncertainties,
prospective investors are cautioned not to place undue reliance on such
forward-looking statements. These forward-looking statements are based on
current expectations, and the Company assumes no obligation to update this
information.
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THE COMPANY
Background
The Company, a Delaware limited liability company formed in August 1995, is
the successor to the theatrical production management, scenery construction and
installation and motion control systems businesses founded by Jeremiah J.
Harris, the Company's Chairman and Chief Executive Officer, in 1984.
The Company has experienced significant growth in revenues and EBITDA in
recent years as it has applied its technical and creative expertise in the live
entertainment market to the corporate events and themed entertainment markets.
In addition, since January 1996, the Company has completed six acquisitions,
which have expanded the Company's product and service offering, diversified its
client base and substantially increased its revenues.
The Company's principal executive offices are located at 539 Temple Hill
Road, New Windsor, New York 12553, and its phone number is (914) 567-5700.
Recent Acquisitions
On January 2, 1998, the Company acquired substantially all of the assets
and assumed certain liabilities of Pro-Mix, which provides sound equipment and
acoustical and sound design consulting services primarily to the live theater
market segment through its offices located in the New York metropolitan area and
Orlando. The assets to be acquired include three distribution and sales offices,
inventory, customer lists and tradenames. The purchase price was approximately
$9.8 million, including a $1.5 million contingent payment based primarily upon
earnings and the issuance of 79,179 of the Company's Preferred Units with an
agreed value of $1.5 million. Two principal shareholders of Pro-Mix entered into
employment agreements with the Company. See "Pro Forma Consolidated Financial
Data."
In August 1997, the Company acquired substantially all of the assets and
assumed certain liabilities of five companies operating under the name of Bash.
Prior to its acquisition by the Company, Bash was one of the largest suppliers
of theatrical lighting systems and related products in the United States through
its offices located in the New York metropolitan area, Las Vegas, Orlando and
Baltimore. The assets acquired included four distribution centers and sales
offices, inventory, customer lists and tradenames. The purchase price for Bash
was $20.0 million, subject to adjustment. In addition, the two shareholders of
Bash were each paid a bonus of $1.0 million upon execution of an employment
agreement with the Company. See "Pro Forma Consolidated Financial Data" and the
audited financial statements of Bash and the notes thereto included elsewhere in
this Prospectus.
In June 1997, the Company acquired substantially all of the assets and
assumed certain liabilities of Design Dynamics, located in Denver, which
specializes in fabricating trade show exhibits. Design Dynamics enabled the
Company to further penetrate the trade show market and cross-sell its products
and services to Design Dynamics" existing clients. The assets acquired included
a fabrication and distribution center, inventory, customer lists and tradenames.
The purchase price was $4.0 million. See "Pro Forma Consolidated Financial
Data."
In March 1997, the Company acquired substantially all of the assets and
assumed certain liabilities of Thoughtful Designs, located in Las Vegas, which
provides technology design and show control systems. The purchase price was
$200,000.
In February 1996, the Company acquired substantially all of the assets,
excluding cash and accounts receivable, and assumed certain liabilities of
Cinema, located in Las Vegas, which established the Company's theatrical
lighting capabilities in the large gaming and corporate events markets in Las
Vegas. The assets acquired included a distribution center, inventory, customer
lists and tradenames. The purchase price was $2.3 million, including a $500,000
contingent, non-interest bearing promissory note.
In January 1996, the Company acquired substantially all of the assets and
assumed certain liabilities of Vanco, located in Orlando, which established the
Company's theatrical lighting capabilities in the large theme park and
convention markets in Orlando. The assets acquired included a distribution
center, inventory, customer lists and tradenames. The purchase price was $1.0
million, including a $700,000, ten-year contingent promissory note bearing
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interest at 9.5%, the principal amount of which was subsequently adjusted to
$468,000 as a result of certain closing adjustments.
16
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THE EXCHANGE OFFER
The summary herein of certain provisions of the Registration Agreement does
not purport to be complete and reference is made to the provisions of the
Registration Agreement, which has been filed as an exhibit to the Registration
Statement and a copy of which is available upon request to the Trustee.
Purpose and Effect
The Old Notes were sold by the Issuers to the Initial Purchasers on
December 24, 1997. The Initial Purchasers subsequently resold the Old Notes in
reliance on Rule 144A under the Securities Act. The Issuer, the Guarantors and
the Initial Purchasers entered into the Registration Agreement, pursuant to
which the Issuers agreed, with respect to the Old Notes and subject to the
Issuers' determination that the Exchange Offer is permitted under applicable
law, to (i) cause to be filed, on or prior to February 22, 1998, a registration
statement with the Commission under the Securities Act concerning the Exchange
Offer, and, (ii) use its best efforts (a) to cause such registration statement
to be declared effective by the Commission on or prior to May 23, 1998, and (b)
to consummate the Exchange Offer on or prior to June 22, 1998. The Company will
keep the Exchange Offer open for a period of not less than 20 days (or longer if
required by applicable law) after the date the notice of the Exchange Offer is
mailed to the holders of the Old Notes. This Exchange Offer is intended to
satisfy the Company's exchange offer obligations under the Registration
Agreement.
Consequences of Failure to Exchange Old Notes
Following the expiration of the Exchange Offer, holders of Old Notes not
tendered, or not properly tendered will not have any further registration rights
and such Old Notes will continue to be subject to the existing restrictions on
transfer thereof. Accordingly, the liquidity of the market for a holder's Old
Notes could be adversely affected upon expiration of the Exchange Offer if such
holder elects not to participate in the Exchange Offer.
Terms of the Exchange Offer
The Issuers and the Guarantors hereby offer, upon the terms and subject to
the conditions set forth herein and in the accompanying Letter of Transmittal,
to exchange $100 million aggregate principal amount of New Notes for up to $100
million aggregate principal amount of the outstanding Old Notes. The Company
will accept for exchange any and all Old Notes that are validly tendered on or
prior to 5:00 p.m., New York City time, on the Expiration Date. Tenders of the
Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time,
on the Expiration Date] The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for exchange. However, the Exchange
Offer is subject to the terms and provisions of the Registration Agreement. See
"The Exchange Offer -- Conditions of the Exchange Offer."
As of the date of this Prospectus, $100 million in aggregate principal
amount of the Old Notes is outstanding, the maximum amount authorized by the
Indenture for all Notes. Only a holder of the Old Notes (or such holder's legal
representative or attorney-in-fact) may participate in the Exchange Offer. There
will be no fixed record date for determining holders the Old Notes entitled to
participate in the Exchange Offer. The Issuers believe that, as of the date of
this Prospectus, no such holder is an affiliate (as defined in Rule 405 under
the Securities Act) of the Issuers or the Guarantors.
The Issuers shall be deemed to have accepted validly tendered Old Notes
when, as and if the Issuers has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Old Notes and for the purposes of receiving the New Notes from the Issuers.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Expiration Date; Extensions; Amendments
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The Expiration Date shall be ________, 1998 at 5:00 p.m., New York City
time, unless the Company, in its sole discretion, extends the Exchange Offer, in
which case the Expiration Date shall be the latest date and time to which the
Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
If the Exchange Offer is amended in a manner determined by the Company to
constitute a material change, the Company will promptly disclose such amendments
by means of a prospectus supplement that will be distributed to the registered
holders of the Old Notes. Modifications of the Exchange Offer, including but not
limited to extension of the period during which the Exchange Offer is open, may
require that at least five business days remain in the Exchange Offer. In order
to extend the Exchange Offer, the Company will notify the Exchange Agent of any
extension by oral or written notice and will make a public announcement thereof,
each prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
Conditions of the Exchange Offer
The Exchange Offer is not conditioned upon any minimum principal amount of
the Old Notes being tendered for exchange. However, the Exchange Offer is
conditioned upon the declaration by the Commission of the effectiveness of the
Registration Statement of which this Prospectus constitutes a part.
Termination of Certain Rights
The Registration Rights Agreement provides that, subject to certain
exceptions, in the event of a Registration Default (as defined below), holders
of Old Notes are entitled to receive Liquidated Damages of 0.5% per annum of the
principal amount of the Old Notes during the first 90 days of a Registration
Default, increasing by an additional 0.5% per annum for each additional 90 day
period of a Registration Default (up to a maximum of 2.0% per annum). A
"Registration Default" with respect to the Exchange Offer shall occur if: (i)
any of the Registration Statements required by the Registration Rights Agreement
is not filed with the Commission on or prior to the date specified for such
filing in the Registration Rights Agreement, (ii) any of such Registration
Statements has not been declared effective by the Commission on or prior to the
date specified for such effectiveness in the Registration Rights Agreement (the
"Effectiveness Target Date"), (iii) the Exchange Offer has not been Consummated
within 30 business days after the Effectiveness Target Date with respect to the
Exchange Offer Registration Statement or (iv) any Registration Statement
required by the Registration Rights Agreement is filed and declared effective
but shall thereafter cease to be effective or fail to be usable for its intended
purpose without being succeeded immediately by a post-effective amendment to
such Registration Statement that cures such failure and that is itself
immediately declared effective. Holders of New Notes will not be and, upon
consummation of the Exchange Offer, holders of Old Notes will no longer be,
entitled to (i) the right to receive the Liquidated Damages or (ii) certain
other rights under the Registration Rights Agreement intended for holders of
Old Notes. The Exchange Offer shall be deemed consummated upon the occurrence
of the delivery by the Company to the Registrar under the Indenture of
New Notes in the same aggregate principal amount as the aggregate principal
amount of Old Notes that are tendered by holders thereof pursuant to the
Exchange Offer.
Accrued Interest
The New Notes will bear interest at a rate equal to 11.50% per annum from
and including their date of issuance. Holders whose Old Notes are accepted for
exchange will have the right to receive interest accrued thereon from the last
date on which interest was paid on the Old Notes, or if no interest had been
paid on such Old Notes, from the date of their original issue, to, but not
including, the date of issuance of the New Notes, such interest to be payable
with the first interest payment on the New Notes. Interest on the Old Notes
accepted for exchange, which interest accrued at the rate of 11.50% per annum,
will cease to accrue on the day prior to the issuance of the New Notes. See
"Description of Notes -- Exchange Offer; Registration Rights."
Procedures For Tendering Old Notes
The tender of a holder's Old Notes as set forth below and the acceptance
thereof by the Company will constitute a binding agreement between the tendering
holder and the Company upon the terms and subject to the
18
<PAGE>
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal. Except as set forth below, a holder who wishes to tender Old Notes
for exchange pursuant to the Exchange Offer must transmit such Old Notes,
together with a properly completed and duly executed Letter of Transmittal,
including all other documents required by such Letter of Transmittal, to the
Exchange Agent at the address set forth on the back cover page of this
Prospectus prior to 5:00 p.m., New York City time, on the Expiration Date. THE
METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SUCH DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT
THE HOLDER USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account in
accordance with DTC's procedures for such transfer. In connection with a
book-entry transfer, a Letter of Transmittal need not be transmitted to the
Exchange Agent, provided that the book-entry transfer procedure is made in
accordance with DTC's ATOP (as defined) procedures for transfer and such
procedures are complied with prior to 5:00 p.m., New York City time, on the
Expiration Date.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the Exchange Offer through
ATOP, participants in DTC must send electronic instructions to DTC through DTC's
communication system, prior to 5:00 p.m., New York City time, on the Expiration
Date, in place of sending a signed, hard copy Letter of Transmittal. DTC is
obligated to communicate those electronic instructions to the Exchange Agent by
an "Agent's Message." To tender Old Notes through ATOP, the electronic
instructions sent to DTC and transmitted by DTC to the Exchange Agent must
contain the participant's acknowledgement of its receipt of and agreement to be
bound by the Letter of Transmittal for such Old Notes.
Each signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant hereto are tendered (i) by a registered holder of the Old Notes who has
not completed either the box entitled "Special Exchange Instructions" or the box
entitled "Special Delivery Instructions" in the Letter of Transmittal, or (ii)
by an Eligible Institution (as defined below). In the event that a signature on
a Letter of Transmittal or a notice of withdrawal, as the case may be, is
required to be guaranteed, such guarantee must be by a firm which is a member of
a registered national securities exchange or the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or otherwise be an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(collectively, "Eligible Institutions"). If the Letter of Transmittal is signed
by a person other than the registered holder of the Old Notes, the Old Notes
surrendered for exchange must either (i) be endorsed by the registered holder,
with the signature thereon guaranteed by an Eligible Institution or (ii) be
accompanied by a bond power, in satisfactory form as determined by the Company
in its sole discretion, duly executed by the registered holder, with the
signature thereon guaranteed by an Eligible Institution. The term "registered
holder" as used herein with respect to the Old Notes means any person in whose
name the Old Notes are registered on the books of the Registrar.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of Old Notes tendered for exchange will be
determined by the Issuers in their sole discretion, which determination shall be
final and binding. The Issuers reserve the absolute right to reject any and all
Old Notes not properly tendered and to reject any Old Notes the Issuers'
acceptance of which might, in the judgment of the Issuers or their counsel, be
unlawful. The Issuers also reserve the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to particular Old Notes
either before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions thereto) by the
Issuers shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes for exchange must be
cured within such period of time as the Issuers shall determine. The Issuers
will use reasonable efforts to give notification of defects or irregularities
with respect to tenders of Old Notes for exchange but shall not incur any
liability for failure to give such
19
<PAGE>
notification. Tenders of the Old Notes will not be deemed to have been made
until such irregularities have been cured or waived.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived by the
Issuers, proper evidence satisfactory to the Company, in its sole discretion, of
such person's authority to so act must be submitted.
Any beneficial owner of the Old Notes (a "Beneficial Owner") whose Old
Notes are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender Old Notes in the Exchange
Offer should contact such registered holder promptly and instruct such
registered holder to tender on such Beneficial Owner's behalf. If such
Beneficial Owner wishes to tender directly, such Beneficial Owner must, prior to
completing and executing the Letter of Transmittal and tendering Old Notes, make
appropriate arrangements to register ownership of the Old Notes in such
Beneficial Owner's name. Beneficial Owners should be aware that the transfer of
registered ownership may take considerable time.
By tendering, each registered holder will represent to the Issuers that,
among other things, (i) the New Notes to be acquired in connection with the
Exchange Offer by the holder and each Beneficial Owner of the Old Notes are
being acquired by the holder and each Beneficial Owner in the ordinary course of
business of the holder and each Beneficial Owner, (ii) the holder and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the New Notes, (iii) the holder and each Beneficial Owner
acknowledge and agree that any person participating in the Exchange Offer for
the purpose of distributing the New Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the New Notes acquired by such person and cannot
rely on the position of the staff of the Commission set forth in no-action
letters that are discussed herein under "Resales of New Notes," (iv) that if the
holder is a broker-dealer that acquired Old Notes as a result of market making
or other trading activities, it will deliver a prospectus in connection with any
resale of New Notes acquired in the Exchange Offer, (v) the holder and each
Beneficial Owner understand that a secondary resale transaction described in
clause (iii) above should be covered by an effective registration statement
containing the selling security holder information required by Item 507 of
Regulation S-K of the Commission, and (vi) neither the holder nor any Beneficial
Owner is an "affiliate," as defined under Rule 405 of the Securities Act, of the
Issuers or Guarantors except as otherwise disclosed to the Company in writing.
In connection with a book-entry transfer, each participant will confirm that it
makes the representations and warranties contained in the Letter of Transmittal.
Guaranteed Delivery Procedures
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes or any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date (or complete the procedure for book-entry transfer on a
timely basis), may tender their Old Notes according to the guaranteed delivery
procedures set forth in the Letter of Transmittal. Pursuant to such procedures:
(i) such tender must be made by or through an Eligible Institution and a Notice
of Guaranteed Delivery (as defined in the Letter of Transmittal) must be signed
by such Holder, (ii) on or prior to the Expiration Date, the Exchange Agent must
have received from the Holder and the Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail
or hand delivery) setting forth the name and address of the Holder, the
certificate number or numbers of the tendered Old Notes, and the principal
amount of tendered Old Notes, stating that the tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after the
date of delivery of the Notice of Guaranteed Delivery, the tendered Old Notes, a
duly executed Letter of Transmittal and any other required documents will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) such
properly completed and executed documents required by the Letter of Transmittal
and the tendered Old Notes in proper form for transfer (or confirmation of a
book-entry transfer of such Old Notes into the Exchange Agent's account at DTC)
must be received by the Exchange Agent within five New York Stock Exchange
trading days after the Expiration Date. Any Holder who wishes to tender Old
Notes pursuant to the guaranteed delivery procedures described above must ensure
that the Exchange Agent receives the Notice of Guaranteed Delivery and Letter of
Transmittal relating to such Old Notes to 5:00 p.m., New York City time, on the
Expiration Date. DTC participants may also submit the Notice of Guaranteed
Delivery through ATOP.
20
<PAGE>
Acceptance of Old Notes for Exchange; Delivery of New Notes
Upon satisfaction or waiver of all the conditions to the Exchange Offer,
the Issuers will accept any and all Old Notes that are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date.
The New Notes issued pursuant to the Exchange Offer will be delivered promptly
after acceptance of the Old Notes. For purposes of the Exchange Offer, the
Issuers shall be deemed to have accepted validly tendered Old Notes, when, as,
and if the Issuers have given oral or written notice thereof to the Exchange
Agent.
In all cases, issuances of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Notes, a properly completed and duly executed
Letter of Transmittal and all other required documents (or of confirmation of a
book-entry transfer of such Old Notes into the Exchange Agent's account at DTC);
provided, however, that the Issuers reserve the absolute right to waive any
defects or irregularities in the tender or conditions of the Exchange Offer. If
any tendered Old Notes are not accepted for any reason, such unaccepted Old
Notes will be returned without expense to the tendering Holder thereof as
promptly as practicable after the expiration or termination of the Exchange
Offer.
Withdrawal Rights
Tenders of the Old Notes may be withdrawn by delivery of a written notice
(or for DTC participants, transmission of a notice through ATOP) to the Exchange
Agent, at its address set forth on the back cover page of this Prospectus, at
any time prior to 5:00 p.m., New York City time, on the Expiration Date. Any
such notice of withdrawal must (i) specify the name of the person having
deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old
Notes to be withdrawn (including the certificate number or numbers and principal
amount of such Old Notes, as applicable), (iii) be signed by the Holder in the
same manner as the original signature on the Letter of Transmittal by which such
Old Notes were tendered (including any required signature guarantees) or be
accompanied by a bond power in the name of the person withdrawing the tender, in
satisfactory form as determined by the Company in its sole discretion, duly
executed by the registered holder, with the signature thereon guaranteed by an
Eligible Institution together with the other documents required upon transfer by
the Indenture, and (iv) specify the name in which such Old Notes are to be
re-registered, if different from the Depositor, pursuant to such documents of
transfer. Any questions as to the validity, form and eligibility (including time
of receipt) of such notices will be determined by the Company, in its sole
discretion. The Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old Notes which
have been tendered for exchange but which are withdrawn will be returned to the
Holder thereof without cost to such Holder as soon as practicable after
withdrawal. Properly withdrawn Old Notes may be retendered by following one of
the procedures described under "The Exchange Offer -- Procedures for Tendering
Old Notes" at any time on or prior to the Expiration Date.
The Exchange Agent; Assistance
First Union National Bank is the Exchange Agent. All tendered Old Notes,
executed Letters of Transmittal and other related documents should be directed
to the Exchange Agent. Questions and requests for assistance and requests for
additional copies of the Prospectus, the letter of Transmittal and other related
documents should be addressed to the Exchange Agent as follows:
By Hand, or Overnight Courier:
First Union National Bank
1525 West W.T. Harris Blvd.
Charlotte, NC 28288
Attn: Corporate Trust Operations
Facsimile Transmissions (Eligible Institutions Only):
(704) 590-7628
To confirm by telephone or for information call:
(704) 590-7408
21
<PAGE>
Fees and Expenses
All expenses incident to the Company's consummation of the Exchange Offer
and compliance with the Registration Agreement will be borne by the Issuers and
the Guarantors, including, without limitation: (i) all registration and filing
fees (including, without limitation, fees and expenses of compliance with state
securities or Blue Sky laws); (ii) printing expenses (including, without
limitation, expenses of printing certificates for the New Notes in a form
eligible for deposit with DTC and of printing Prospectuses); (iii) messenger,
telephone and delivery expenses; (iv) fees and disbursements of counsel for the
Issuers and the Guarantors; (v) fees and disbursements of independent certified
public accountants; and (vi) all application and filing fees in connection with
listing Notes on a national securities exchange or automated quotation system.
Neither the Issuers nor the Guarantors have retained any dealer-manager in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptance of the Exchange Offer. The Issuers,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith.
Accounting Treatment
The New Notes will be recorded at the same carrying value as the Old Notes,
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss will be recognized by the Company for accounting
purposes. The expenses of the Exchange Offer will be amortized over the term of
the New Notes.
Resales of the New Notes
Based on the position of the staff of the Commission as set forth in
certain interpretive letters issued to third parties in other transactions, the
Issuers believe that the New Notes issued pursuant to the Exchange Offer to any
holder of Old Notes in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by such holder (other than (i) a broker-dealer who
purchased Old Notes directly from the Issuers for resale pursuant to Rule 144A
under the Securities Act or any other available exemption under the Securities
Act, or (ii) a person that is an affiliate of the Issuers or the Guarantors
within the meaning of Rule 405 under the Securities Act) without further
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such holder is not an affiliate of the Company,
is acquiring the New Notes in the ordinary course of business and is not
participating, and has no
arrangement or understanding with any person to participate, in the distribution
of the New Notes. However, the Company has not sought its own interpretive
letter and there can be no assurance that the Commission would make a similar
determination with respect to the Exchange Offer. The Company and holders of Old
Notes are not entitled to rely on interpretive letter and there can be no
assurance that the Commission would make a similar determination with respect to
the Exchange Offer. The Company and holders of Old Notes are not entitled to
rely on interpretive advice provided by the staff to other persons, which advice
was based on the facts and conditions represented in such letters. However, the
Exchange Offer is being conducted in a manner intended to be consistent with the
facts and conditions represented in such letters. If any holder acquires New
Notes in the Exchange Offer for the purpose of distributing or participating in
a distribution of the New Notes, such holder cannot rely on the position of the
staff of the Commission enunciated in Morgan Stanley & Co. Incorporated
(available June 5, 1991) and Exxon Capital Holdings Corporation (available May
13, 1989), or interpreted in the Commission's letter to Shearman and Sterling
(available July 2, 1993), or similar no-action or interpretive letters and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction, unless an
exemption from registration is otherwise available. Each broker-dealer that
receives New Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of market making or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution."
22
<PAGE>
It is expected that the New Notes will be freely transferable by the
holders thereof, subject to the limitations described in the immediately
preceding paragraph. Sales of New Notes acquired in the Exchange Offer by
holders who are "affiliates" of the Issuers and the Guarantors within the
meaning of the Securities Act will be subject to certain limitations on resale
under Rule 144 of the Securities Act. Such persons will only be entitled to sell
New Notes in compliance with the volume limitations set forth in Rule 144, and
sales of New Notes by affiliates will be subject to certain Rule 144
requirements as to the manner of use, notice and the availability of current
public information regarding the Issuers and the Guarantors. The foregoing is a
summary only of Rule 144 as it may apply to affiliates of the Company. Any such
persons must consult their own legal counsel for advice as to any restrictions
that might apply to the resale of their Notes.
23
<PAGE>
USE OF PROCEEDS
There will be no cash proceeds payable to the Company from the issuance of
the New Notes pursuant to the Exchange Offer. The Company is conducting the
Exchange Offer to satisfy certain of its obligations under the Registration
Rights Agreement executed in connection with the issuance of the Old Notes. The
proceeds from the issuance of the Old Notes ($96.3 million) were used to (i)
repay indebtedness under the Credit Facility (approximately $68.3 million as of
November 30, 1997) and (ii) fund $8.3 million of the purchase price for the
acquisition of the net assets of Pro-Mix. The balance of approximately $19.7
million is being used to fund working capital requirements and other general
corporate purposes, which may include, subject to satisfaction of certain
conditions, a distribution to the Company's members. See "Description of
Notes--Certain Covenants--Restricted Payments."
The Company regularly reviews the operations of potential acquisition
targets and is currently in various stages of evaluating numerous possible
acquisitions, primarily in the lighting and trade show exhibit businesses
certain of which, if consummated, could be material. See "Risk Factors--Risks
Related to Company's Growth and Acquisitions" and "The Company--Recent and
Proposed Acquisitions."
In connection with the Initial Offering, the Company entered into an
amendment to the outstanding credit agreement (the "Credit Facility"), dated as
of July 31, 1997, with The Bank of New York, as agent, and the lenders referred
to therein (as amended, the "Amended Credit Facility"). At September 30, 1997,
the amounts outstanding under the Credit Facility bore interest at an average
effective rate of 7.6%. The borrowings outstanding under the Credit Facility
were incurred to refinance then existing indebtedness, finance acquisitions,
purchase land for a new facility in Las Vegas and fund working capital
requirements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and "Description of
Other Indebtedness--Amended Credit Facility."
24
<PAGE>
CAPITALIZATION
The following table sets forth the actual cash and cash equivalents and
capitalization of the Company at September 30, 1997 and as adjusted to give
effect to the acquisition of the net assets of Pro-Mix, the Real Estate
Transaction and the Initial Offering and the application of net proceeds
therefrom. This table should be read in conjunction with "Use of Proceeds,"
"Selected Consolidated Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's Consolidated
Financial Statements and the notes thereto included elsewhere in this
Prospectus.
September 30, 1997
------------------------
Actual As Adjusted
(In thousands)
Cash and cash equivalents ........................... $ 5,186 $ 28,329(1)
======= ========
Long-term debt, including current maturities:
Credit Facility .................................... $65,100 $ --(2)
Amended Credit Facility ............................ -- --(3)
11 1/2% Senior Subordinated Notes due 2008 ......... -- 100,000
Other long-term debt(4) ............................ 4,713 1,029
------- --------
Total long-term debt, including current maturities 69,813 101,029
Members' equity ..................................... 8,499 4,208(5)
------- --------
Total capitalization ............................. $78,312 $105,237
======= ========
(1) Subsequent to September 30, 1997, the Company borrowed an additional $3.2
million of indebtedness under the Credit Facility and repaid such indebtedness
with cash generated from the net proceeds of the Initial Offering. See "Pro
Forma Consolidated Financial Data--Pro Forma Consolidated Balance Sheet."
(2) At September 30, 1997, the Company had $65.1 million of indebtedness under
the Credit Facility and subsequently borrowed an additional $3.2 million under
the Credit Facility. The net proceeds from the Initial Offering were used to
repay all outstanding indebtedness.
(3) Upon consummation of the Initial Offering, the Company had $100 million of
total commitments under the Amended Credit Facility, of which approximately $0.6
million would have been available as of September 30, 1997, after giving effect
to the Transactions and the terms of the Amended Credit Facility. See
"Description of the Other Indebtedness--Amended Credit Facility."
(4) Other long-term debt includes $3.9 million of mortgage debt and a $400,000
note payable incurred in connection with the acquisition of the net assets of
Vanco. In connection with the Real Estate Transaction, the Company's mortgage
debt will be reduced by $3.7 million. See "Certain Transactions" and Note 6 to
the Consolidated Financial Statements of the Company included elsewhere in this
Prospectus.
(5) Members' equity as adjusted reflects the Real Estate Transaction (net book
value, net of related mortgages, of $5.8 million) and the issuance of
Preferred Units with an agreed value of $1.5 million in connection with the
Company's acquisition of the net assets of Pro-Mix.
25
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data for the Company as of and for each of the five years in the period ended
December 31, 1996 and as of and for the nine months ended September 30, 1996 and
1997. The selected historical consolidated financial data as of and for each of
the three years in the period ended December 31, 1996 were derived from the
consolidated financial statements of the Company, which have been audited by
Ernst & Young LLP, independent auditors, and are included elsewhere in this
Prospectus. The selected historical consolidated financial data as of and for
the years ended December 31, 1992 and 1993 were derived from audited
consolidated financial statements of the Company that are not included herein.
The selected historical consolidated financial data as of and for the nine
months ended September 30, 1996 and 1997 are unaudited, but have been prepared
on the same basis as the audited consolidated financial statements, which, in
the opinion of management, contain all adjustments (consisting only of normal
recurring adjustments) necessary for the fair presentation of the information
set forth therein. The results of operations for the nine months ended September
30, 1997 are not necessarily indicative of the results that may be expected for
the full year. The following table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements and the notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Year Ended December 31, Nine Months Ended
September 30,
---------------------------------------------------------------------------------
1992 1993 1994 1995 1996(1) 1996(1) 1997(2)
-------- -------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues ....................................... $ 14,897 $ 25,726 $ 31,040 $ 39,388 $ 62,506 $ 43,445 $ 69,831
Direct production costs ........................ 10,003 19,131 22,250 24,424 41,230 28,583 50,952
Depreciation expense ........................... 1,031 1,410 770 3,342 3,920 2,859 4,061
-------- -------- -------- -------- -------- -------- --------
Gross profit ................................... 3,863 5,185 8,020 11,622 17,356 12,003 14,818
Selling, general and administrative expenses ... 3,403 3,018 4,813 5,794 8,676 6,179 10,642
Other depreciation and amortization ............ 358 420 461 445 715 459 1,373
Non-recurring compensation expense(3) .......... -- -- -- -- -- -- 2,000
-------- -------- -------- -------- -------- -------- --------
Operating profit ............................... 102 1,747 2,746 5,383 7,965 5,365 803
Loss on impairment of assets(4) ................ -- -- -- -- 495 -- --
Interest expense ............................... 103 103 279 632 1,292 941 2,322
Interest (income) .............................. (43) (15) (74) (268) (128) (99) (76)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes
and extraordinary item ...................... 42 1,659 2,541 5,019 6,306 4,523 (1,443)
Provision for income taxes ..................... 6 50 28 122 206 186 298
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary item .......................... 36 1,609 2,513 4,897 6,100 4,337 (1,741)
Extraordinary item(5) .......................... -- -- -- -- -- -- (614)
-------- -------- -------- -------- -------- -------- --------
Net income (loss) .............................. $ 36 $ 1,609 $ 2,513 $ 4,897 $ 6,100 $ 4,337 $ (2,355)
======== ======== ======== ======== ======== ======== ========
Cash Flow Data:
Net cash provided by (used in) operating
activities .................................. $ (241) $ 603 $ 3,852 $ 8,974 $ 6,184 $ 5,080 $ (470)
Net cash used in investing activities .......... (665) (308) (5,641) (9,862) (20,302) (16,533) (34,379)
Net cash provided by (used in) financing
activities .................................. 2,454 283 2,692 (651) 15,098 10,444 37,025
Other Financial Data:
EBITDA(6) ...................................... $ 1,491 $ 3,577 $ 3,977 $ 9,170 $ 12,600 $ 8,683 $ 8,237
Capital expenditures ........................... 3,332 2,767 5,467 9,621 17,456 14,059 8,664
Ratio of earnings to fixed charges(7) .......... 1.4x 17.1x 7.7x 6.6x 4.7x 4.5x --
Balance Sheet Data (at period end):
Working capital (deficiency) ................... $ (1,274) $ (260) $ 418 $ (3,164) $ (867) $ 830 $ 14,829
Total assets ................................... 11,130 12,495 20,222 24,876 51,995 45,161 88,400
Total debt ..................................... 2,655 2,938 7,096 7,379 27,001 22,206 69,813
Members' equity ................................ 3,879 5,488 8,146 11,908 14,398 12,635 8,499
</TABLE>
See accompanying notes to Selected Consolidated Financial Data
26
<PAGE>
NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA
(1) The statement of operations data, cash flow data and other financial data
for 1996 reflect the results of operations of Vanco and Cinema since they
were acquired by the Company on January 18, 1996 and February 8, 1996,
respectively.
(2) The statement of operations data, cash flow data and other financial data
for the nine months ended September 30, 1997 reflect the results of
operations of Thoughtful Designs, Design Dynamics and Bash since they were
acquired by the Company on March 7, 1997, June 6, 1997 and August 15, 1997,
respectively.
(3) Non-recurring compensation expense for the nine months ended September 30,
1997 reflects bonuses of $2.0 million paid to the two shareholders of Bash
upon their execution of employment agreements with the Company.
(4) Loss on impairment of assets for the year ended December 31, 1996 reflects
a writedown of $495,000 of the carrying value of the Company's former
principal fabrication facility in Cornwall-on-Hudson, NY.
(5) Extraordinary item for the nine months ended September 30, 1997 reflects
the write-off of unamortized deferred financing costs of $614,000 related
to the replacement of the Company's existing credit facility with the
Credit Facility on July 31, 1997. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
(6) EBITDA is defined, in accordance with the definition of Consolidated EBITDA
in the Indenture, as the sum of income before interest expense, income
taxes, depreciation and amortization, certain non-recurring charges and
certain non-cash charges. Non-recurring charges consist of $2.0 million of
bonuses paid to the two shareholders of Bash. EBITDA is presented because
it is a widely accepted financial indicator of a company's ability to
service indebtedness. However, EBITDA should not be considered an
alternative to operating income or cash flows from operating activities (as
determined in accordance with generally accepted accounting principles) and
should not be construed as an indication of a company's operating
performance or as a measure of liquidity.
(7) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings before income taxes plus fixed charges. Fixed charges
consist of interest and related expenses and an estimated portion of
rentals representing interest costs. Earnings were insufficient to cover
fixed charges by approximately $1.4 million for the nine months ended
September 30, 1997.
27
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL DATA (UNAUDITED)
The following pro forma consolidated financial data have been derived by
the application of pro forma adjustments to the historical consolidated
financial statements of (i) the Company for the year ended December 31, 1996 and
as of September 30, 1997 and for the nine and twelve months then ended, (ii)
Design Dynamics for the year ended December 31, 1996 and for the period from
January 1, 1997 through June 5, 1997, (iii) Bash for the year ended December 31,
1996 and for the period from January 1, 1997 through August 15, 1997 and (iv)
Pro-Mix for the year ended December 31, 1996 and as of September 30, 1997 and
for the nine and twelve months then ended. The pro forma consolidated financial
data presented below give effect to (x) the Transactions, in the case of the Pro
Forma Consolidated Statement of Operations and Other Financial Data as if they
had occurred at the beginning of the respective periods, and (y) the acquisition
of the net assets of Pro-Mix, the Real Estate Transaction and the Initial
Offering and the application of net proceeds therefrom, in the case of the Pro
Forma Consolidated Balance Sheet as if they had occurred at September 30, 1997.
The adjustments relating to the Transactions are described in the accompanying
notes.
The acquisition of the net assets of Design Dynamics has been reflected in
the Pro Forma Consolidated Statements of Operations Data using information
derived from its unaudited historical financial statements for the period prior
to its acquisition on June 6, 1997. The acquisition of the net assets of Bash
has been reflected in the Pro Forma Consolidated Statement of Operations Data
using information derived from its audited and unaudited historical financial
statements for the periods ended December 31, 1996 and June 30, 1997 and
included elsewhere in this Prospectus. All of the Acquisitions, including the
acquisition of the net assets of Pro-Mix have been reflected in the Pro Forma
Consolidated Financial Data using the purchase method of accounting. The total
purchase price for the acquisition of the net assets of Pro-Mix has been
allocated to the assets and liabilities acquired based upon their fair value at
the closing. In the opinion of management, all adjustments necessary to fairly
present this pro forma information have been made.
The pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable. The pro forma consolidated
financial data presented below should not be considered indicative of actual
results that would have been achieved had the Transactions been consummated on
the dates assumed and do not purport to indicate results of operations as of any
future date or for any future period. The pro forma consolidated financial data
presented below should be read in conjunction with "Use of Proceeds,"
"Capitalization," "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical financial statements and the notes thereto of the Company and
Bash included elsewhere in this Prospectus.
28
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
AND OTHER FINANCIAL DATA (UNAUDITED)
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Adjustments
Design for the Company
Company Dynamics Bash Pro-Mix Transactions Pro Forma
--------- --------- --------- --------- ------------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues .......................................... $ 62,506 $ 8,476 $ 25,408 $ 10,308 -- $ 106,698
Direct production costs ........................... 41,230 5,809 10,265 4,704 -- 62,008
Depreciation expense .............................. 3,920 -- 2,670 1,655 -- 8,245
--------- --------- --------- --------- --------- ---------
Gross profit ...................................... 17,356 2,667 12,473 3,949 -- 36,445
Selling, general and administrative expenses ...... 8,676 2,969 10,932 3,118 (3,581)(a) 22,114
Other depreciation and amortization ............... 715 95 147 66 886(b) 1,909
--------- --------- --------- --------- --------- ---------
Operating profit (loss) ........................... 7,965 (397) 1,394 765 2,695 12,422
Loss on impairment of assets ...................... 495 -- -- -- (495)(c) --
Interest expense .................................. 1,292 8 304 156 10,632(d) 12,392
Interest (income) ................................. (128) (5) (9) (17) -- (159)
--------- --------- --------- --------- --------- ---------
Income (loss) before income taxes ................. 6,306 (400) 1,099 626 (7,442) 189
Provision for income taxes ........................ 206 -- 99 6 -- 311
--------- --------- --------- --------- --------- ---------
Net income (loss) ................................. $ 6,100 $ (400) $ 1,000 $ 620 $ (7,442) $ (122)
========= ========= ========= ========= ========= =========
Other Financial Data:
EBITDA(e) ......................................... $ 22,576
Supplemental pro forma ratio of earnings to
fixed charges(f) ............................... --
Ratio of EBITDA to interest expense ............... 1.8x
Ratio of total debt to EBITDA ..................... 4.5x
</TABLE>
See accompanying notes to Pro Forma Consolidated Statement of
Operations and Other Financial Data
29
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
AND OTHER FINANCIAL DATA (UNAUDITED)
For the Nine Months Ended September 30, 1997
<TABLE>
<CAPTION>
Design Adjustments
Dynamics Bash Pro-Mix for the Company
Company 1/1/97-6/5/97 1/1/97-8/14/97 1/1/97-9/30/97 Transactions Pro Forma
--------- ------------- -------------- -------------- ------------ ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues ................................... $ 69,831 $ 3,024 $ 19,997 $ 7,522 -- $ 100,374
Direct production costs .................... 50,952 2,028 8,680 3,142 -- 64,802
Depreciation expense ....................... 4,061 -- 1,296 1,412 -- 6,769
--------- --------- --------- --------- --------- ---------
Gross profit ............................... 14,818 996 10,021 2,968 -- 28,803
Selling, general and administrative
expenses ................................ 10,642 826 5,796 1,938 (19)(g) 19,183
Other depreciation and amortization ........ 1,373 43 138 75 386 (h) 2,015
Non-recurring compensation expense ......... 2,000 -- -- -- (2,000)(i) --
--------- --------- --------- --------- --------- ---------
Operating profit ........................... 803 127 4,087 955 1,633 7,605
Interest expense ........................... 2,322 20 111 168 6,644(j) 9,265
Interest (income) .......................... (76) -- (6) (7) -- (89)
--------- --------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary item ...................... (1,443) 107 3,982 794 (5,011) (1,571)
Provision for income taxes ................. 298 -- 17 28 -- 343
--------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary item .... (1,741) 107 3,965 766 (5,011) (1,914)
Extraordinary item ......................... (614) -- -- -- 614(k) --
--------- --------- --------- --------- --------- ---------
Net income (loss) .......................... $ (2,355) $ 107 $ 3,965 $ 766 (4,397) $ (1,914)
========= ========= ========= ========= ========= =========
Other Financial Data:
EBITDA(e) .................................. $ 16,389
Supplemental pro forma ratio of earnings to
fixed charges(f) ........................ --
Ratio of EBITDA to interest expense ........ 1.8x
</TABLE>
See accompanying notes to Pro Forma Consolidated Statement of
Operations and Other Financial Data
30
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
AND OTHER FINANCIAL DATA (UNAUDITED)
For the Twelve Months Ended September 30, 1997
<TABLE>
<CAPTION>
Design
Dynamics Bash Pro-Mix Adjustments
Historical Historical Historical for the Company
Company 10/1/96-6/5/97 10/196-8/14/97 10/1/96-9/30/97 Transactions Pro Forma
--------- -------------- -------------- --------------- ------------ ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues ................................. $ 88,892 $ 5,900 $ 26,606 $ 10,119 $ -- $ 131,517
Direct production costs .................. 63,599 4,056 8,721 4,220 -- 80,596
Depreciation expense ..................... 5,122 -- 2,001 1,880 -- 9,003
--------- --------- --------- --------- --------- ---------
Gross profit ............................. 20,171 1,844 15,884 4,019 41,918
Selling, general and administrative
expenses .............................. 13,139 1,836 13,584 2,683 (3,580)(l) 27,662
Other depreciation and amortization ...... 1,629 67 177 94 607(m) 2,574
Non-recurring compensation expense ....... 2,000 -- -- -- (2,000)(i) --
--------- --------- --------- --------- --------- ---------
Operating profit (loss) .................. 3,403 (59) 2,123 1,242 4,973 11,682
Loss on impairment of assets ............. 495 -- -- -- (495)(c) --
Interest expense ......................... 2,673 20 198 218 9,252(n) 12,361
Interest (income) ........................ (105) -- (6) (7) -- (118)
--------- --------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary item .................... 340 (79) 1,931 1,031 (3,784) (561)
Provision for income taxes ............... 318 -- 94 28 -- 440
--------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary
item .................................. (22) (79) 1,837 1,003 (3,784) (1,001)
Extraordinary item ....................... 614 -- -- -- 614(k) --
--------- --------- --------- --------- --------- ---------
Net income (loss) ........................ $ (592) $ (79) $ 1,837 $ 1,003 $ (3,170) $ (1,001)
========= ========= ========= ========= ========= =========
Other Financial Data:
EBITDA(e) ................................ $ 23,259
Supplemental pro forma ration of
earnings to fixed charges(f) .......... --
Ratio of EBITDA to interest expense ...... 1.9x
Ratio of total debt to EBITDA ............ 4.3x
</TABLE>
See accompanying notes to Pro Forma Consolidated Statement of
Operations and Other Financial Data
31
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
AND OTHER FINANCIAL DATA
(a) Reflects the (i) reduction in certain executive compensation of $960,000,
$2,853,000 and $418,000 from historical levels to amounts payable under
employment contracts entered into in connection with the acquisition of the
net assets of Design Dynamics, Bash and Pro-Mix, respectively and (ii)
increase in rent expense of $650,000 in connection with the Real Estate
Transaction.
(b) Reflects (i) increased goodwill amortization expense of $985,000 related to
the acquisition of the net assets of Design Dynamics, Bash and Pro-Mix,
which goodwill is amortized over 15 years and (ii) a decrease in
depreciation expense of $99,000 related to the Real Estate Transaction.
(c) Reflects the elimination of the loss on impairment of assets related to
transfer of the Company's Cornwall-on-Hudson, NY facility in connection
with the Real Estate Transaction.
(d) Reflects adjustments to interest expense as follows:
(Dollars
in thousands)
-------------
Interest on the Notes ........................................... $ 11,500
Elimination of interest expense on credit facility indebtedness.. (1,086)
Elimination of interest expense on mortgage debt ................ (152)
Amortization of deferred financing costs related to the
Initial Offering ............................................ 370
--------
Total adjustments ............................................... $ 10,632
========
(e) EBITDA is defined, in accordance with the definition of Consolidated EBITDA
in the Indenture, as the sum of income before interest, income taxes,
depreciation and amortization, certain non-recurring charges and certain
non-cash charges. Non-recurring charges for the nine and twelve months
ended September 30, 1997 consist of $2.0 million of bonuses paid to the two
shareholders of Bash. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to service indebtedness.
However, EBITDA should not be considered an alternative to operating income
or cash flows from operating activities (as determined in accordance with
generally accepted accounting principles) and should not be construed as an
indication of a company's operating performance or as a measure of
liquidity.
(f) The supplemental pro forma amounts give effect to the Transactions.
Earnings were insufficient to cover fixed charges by approximately $66,000
for the year ended December 31, 1996 and $1.6 million and $648,000 for
the nine and twelve months ended September 30,
1997, respectively.
(g) Reflects the (i) reduction in certain executive compensation of $12,000 and
$495,000 from historical levels to amounts payable under employment
contracts entered into in connection with the acquisition of the net assets
of Design Dynamics and Bash, respectively and (ii) increase in rent expense
of $488,000 in connection with the Real Estate Transaction.
(h) Reflects (i) increased goodwill amortization expense of $576,000 related to
the acquisitions of the net assets of Design Dynamics, Bash and Pro-Mix,
which goodwill is amortized over 15 years and (ii) a decrease in
depreciation expense of $190,000 related to the Real Estate Transaction.
(i) Reflects elimination of non-recurring compensation expense paid to the two
shareholders of Bash upon their execution of employment agreements with the
Company.
(j) Reflects adjustment to interest expense as follows:
(Dollars
in thousands)
-------------
Interest on the Notes ....................................... $ 8,625
Elimination of interest expense on credit facility
indebtedness ............................................. (2,018)
Elimination of interest on mortgage debt .................... (241)
Amortization of deferred financing costs related to the
Initial Offering .................................... 278
-------
Total adjustments ........................................... $ 6,644
=======
(k) Reflects elimination of the extraordinary loss on the refinancing of prior
credit facility.
(l) Reflects the (i) reduction in certain executive compensation of $591,000,
$3,221,000 and $418,000 from historical levels to amounts payable under
employment contracts entered into in connection with the acquisition of the
net assets of Design Dynamics, Bash and Pro-Mix, respectively and (ii)
increase in rent expense of $650,000 in connection with the Real Estate
Transaction.
32
<PAGE>
(m) Reflects (i) increased goodwill amortization expenses of $822,000 related
to the acquisitions of the net assets of Design Dynamics, Bash and Pro-Mix,
which goodwill is amortized over 15 years and (ii) a decrease in
depreciation expense of $215,000 related to the Real Estate Transaction.
(n) Reflects adjustments to interest expense as follows:
(Dollars
in thousands)
-------------
Interest on the Notes ......................................... $ 11,500
Elimination of interest expense on credit facility
indebtedness ............................................... (2,290)
Elimination of interest on mortgage debt ...................... (328)
Amortization of deferred financing costs related to the
Initial Offering ........................................... 370
--------
Total adjustments ............................................. $ 9,252
========
33
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
September 30, 1997
<TABLE>
<CAPTION>
Adjustments
for the
Acquisition of
Pro-Mix, the
Real Estate
Transaction
and the Initial Company
Company Pro-Mix Offering Pro Forma
--------- --------- --------------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents ................................ $ 5,186 $ 291 $ 22,852(b) $ 28,329
Accounts receivable, net ................................. 14,064 1,056 -- 15,120
Inventories .............................................. 4,670 86 -- 4,756
Other current assets ..................................... 1,802 202 -- 2,004
--------- --------- --------- ---------
Total current assets ........................................ 25,722 1,635 22,852 50,209
Property and equipment, net ................................. 43,220 6,453 (9,475) (c) 40,198
Goodwill, net ............................................... 14,800 -- 859 (a) 15,659
Other assets ................................................ 4,658 32 5,200(a)(b) 9,890
--------- --------- --------- ---------
Total assets ................................................ $ 88,400 $ 8,120 $ 19,436 $ 115,956
========= ========= ========= =========
Liabilities and Members' Equity
Current liabilities:
Current portion of long-term debt ........................ $ 805 $ 984 $ (984) (a) $ 135
(670) (c)
Accounts payable and accrued expenses .................... 8,735 570 -- 9,305
Payroll and sales taxes payable .......................... 1,014 61 -- 1,075
Deferred revenue ......................................... 339 -- -- 339
--------- --------- --------- ---------
Total current liabilities ................................... 10,893 1,615 (1,654) 10,854
Long-term debt .............................................. 69,008 1,462 (1,462) (a) 100,894
34,900 (b)
(3,014) (c)
Members' equity ............................................. 8,499 5,043 (5,043) (a) 4,208
(5,791) (c)
1,500 (d)
--------- --------- --------- ---------
Total liabilities and members' equity ....................... $ 88,400 $ 8,120 $ 19,436 $ 115,956
========= ========= ========= =========
</TABLE>
See accompanying notes to Pro Forma Consolidated Balance Sheet
34
<PAGE>
Notes to Pro Forma Consolidated Balance Sheet:
(a) The acquisition of the net assets of Pro-Mix will be accounted for under
the purchase method of accounting pursuant to which the purchase price will
be allocated to the acquired assets and liabilities based upon their
relative fair values as of the closing date. The following table sets forth
the Company's preliminary allocation of the purchase price of the
acquisition of the net assets of Pro-Mix:
(Dollars in
thousands)
-----------
Cash and cash equivalents ................................... $ 291
Accounts receivable, net .................................... 1,056
Inventories ................................................. 86
Other current assets ........................................ 202
Property and equipment ...................................... 6,453
Goodwill .................................................... 859
Other assets ................................................ 1,532
Accounts payable and accrued expenses ....................... (570)
Payroll and sales taxes payable ............................. (61)
-------
Net purchase price .......................................... $ 9,848
=======
(b) Reflects the Initial Offering and certain other financing transactions as
follows:
(Dollars in
thousands)
-----------
Proceeds from the Initial Offering .......................... $ 100,000
Repayment of indebtedness under the Credit Facility ......... (65,100)
Capitalization of Deferred Financing costs .................. (3,700)
Acquisition of the net assets of Pro-Mix .................... (8,348)
---------
Net proceeds after refinancing .............................. $ 22,852
=========
c) Reflects the Real Estate Transaction as follows:
(Dollars in
thousands)
-----------
Net book value of real estate ............................. $(9,475)
Mortgages assumed:
Current portion ..................................... 670
Long-term ........................................... 3,014
-------
$(5,791)
=======
(d) Reflects the Preferred Units with an agreed value of $1.5 million, issued
in connection with the acquisition of the net assets of Pro-Mix.
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in connection with "Selected
Consolidated Financial Data" and the Company's Consolidated Financial Statements
and the notes thereto included elsewhere in this Prospectus.
General
The Company is a leading integrator, fabricator and supplier of a broad
range of products and services for the live entertainment (live theater, concert
touring and special events), corporate events (trade and industrial shows) and
themed entertainment (gaming, theme parks and themed retail) markets. The
Company's products and services include (i) scenery and exhibit fabrication,
(ii) computerized motion and show control systems, including the Company's
proprietary Stage Command System(R), (iii) theatrical lighting systems and
related products, and (iv) project management, which encompasses design
engineering, budgeting, logistical coordination and installation. Depending upon
its clients' needs, the Company's highly-skilled staff can integrate some or all
of these products and services to produce creative, technically sophisticated
and visually "spectacular" events or attractions. The Company's principal
production and distribution facilities are located in six states, including
major entertainment and convention centers such as the New York metropolitan
area, Las Vegas and Orlando.
Certain of the Company's accounting policies are summarized below:
Revenues
Revenues consist of sales and rentals of the Company's products and
services. Sales of products and services to clients in the corporate events and
live entertainment markets are generally recognized upon delivery. Sales of
products and services to clients in the themed entertainment market are
generally recognized based on the percentage-of-completion method. All rental
revenues are recognized ratably over the lives of the applicable rental
agreements.
Direct Production Costs
Direct production costs include costs related to the integration and
fabrication of certain of the Company's products, primarily raw materials and
labor. It also includes costs associated with the preparation and maintenance of
rental equipment, primarily lighting and motion and show control systems, and
the depreciation expense related to such equipment.
Gross Profit Margin
The Company's gross profit margins have been and will continue to be
affected primarily by acquisitions and the product and service mix in the
applicable period. Gross profit margins associated with rental revenue are
typically higher than those associated with sales. In addition, gross profit
margins associated with projects for the live entertainment and corporate events
markets are generally significantly higher than those associated with projects
for the themed entertainment market. Gross margins on themed entertainment
projects have varied significantly and historically certain of these projects
have been unprofitable. The Company has been building projects for the themed
entertainment market for the past two years and believes that its margins on
these projects will improve as it becomes more experienced in this market.
Comparability of Periods
Financial results for the nine months ended September 30, 1997 and the year
ended December 31, 1996 are not fully comparable to prior periods due to the
acquisitions of the net assets of Thoughtful Designs, Design Dynamics and Bash
during 1997 period and of Vanco and Cinema in the first quarter of 1996. The
Company's historical consolidated financial statements for the nine months ended
September 30, 1997 and the year ended
36
<PAGE>
December 31, 1996 include results of operations from such acquired operations
only from the dates of their respective acquisitions.
Results of Operations
The Company's operating data for the years ended December 31, 1994, 1995
and 1996 and the nine months ended September 30, 1996 and 1997 are set forth
below as percentages of revenues:
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
------------------------------- -------------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues .......................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
Direct production expenses ........................................ 71.7% 62.0% 66.0% 65.8% 73.0%
Depreciation expense .............................................. 2.5 8.5 6.3 6.6 5.8
----- ----- ----- ----- -----
Gross profit ...................................................... 25.8 29.5 27.7 27.6 21.2
Selling, general and administrative expenses ...................... 15.5 14.7 13.9 14.2 15.2
Other depreciation and amortization ............................... 1.5 1.1 1.1 1.1 2.0
Non-recurring compensation expense ................................ -- -- -- -- 2.9
----- ----- ----- ----- -----
Operating profit .................................................. 8.8 13.7 12.7 12.3 1.2
Loss on impairment of assets ...................................... -- -- 0.8 -- --
Interest expense .................................................. 0.9 1.6 2.1 2.2 3.3
Interest (income) ................................................. (0.2) (0.6) (0.2) (0.3) (0.1)
----- ----- ----- ----- -----
Income (loss) before income taxes and extraordinary item .......... 8.1 12.7 10.0 10.4 (2.1)
Provision for income taxes ........................................ 0.1 0.3 0.3 0.4 0.4
----- ----- ----- ----- -----
Income (loss) before extraordinary item ........................... 8.0 12.4 9.7 10.0 (2.5)
Extraordinary item ................................................ -- -- -- -- (0.9)
----- ----- ----- ----- -----
Net income (loss) ................................................. 8.0% 12.4% 9.7% 10.0% (3.4)%
===== ===== ===== ===== =====
</TABLE>
Nine Months Ended September 30, 1997 Compared to
Nine Months Ended September 30, 1996
Revenues. The Company's revenues increased to $69.8 million for the nine
months ended September 30, 1997, an increase of $26.4 million, or 60.8%, from
$43.4 million for the nine months ended September 30, 1996. The increase was
primarily attributable to a $16.0 million increase in revenues from themed
entertainment projects, including Star Trek, The Experience(SM) and several new
projects; $6.1 million in incremental revenues related to acquisitions,
including the acquisition of the net assets of Design Dynamics in June 1997
($2.8 million) and the acquisition of the net assets of Bash in August 1997
($3.3 million); and $1.5 million in incremental revenues related to the
commencement of lighting operations in Atlanta in February 1997. The Company
also benefited from the full year impact of the acquisitions of the net assets
of Vanco in January 1996 ($1.7 million of incremental revenue) and Cinema in
February 1996 ($0.5 million of incremental revenue).
Gross profit. The Company's gross profit increased to $14.8 million for the
nine months ended September 30, 1997, an increase of $2.8 million, or 23.3%,
from $12.0 million for the nine months ended September 30, 1996. The increase in
gross profit was primarily due to the increase in revenues. Gross profit margin
declined to 21.2% for the nine months ended September 30, 1997 from 27.6% for
the nine months ended September 30, 1996. The decrease was primarily
attributable to the higher proportion of revenues from themed entertainment
projects, which historically have had significantly lower gross profit margins
than live entertainment and corporate events projects.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased to $10.6 million for the nine months ended
September 30, 1997, an increase of $4.4 million, or 71.0%, from $6.2 million for
the nine months ended September 30, 1996. The increase was primarily
attributable to incremental
37
<PAGE>
selling, general and administrative expenses associated with the acquisitions of
the net assets of Design Dynamics and Bash and the commencement of lighting
operations in Atlanta, as well as increased overhead related to the hiring of
additional senior executives in connection with the overall growth of the
Company. Selling, general and administrative expenses as a percentage of
revenues increased to 15.2% for the nine months ended September 30, 1997 from
14.2% for the nine months ended September 30, 1996.
Non-recurring compensation expense. Non-recurring compensation expense,
which reflects bonuses paid to the two shareholders of Bash upon their execution
of employment agreements with the Company, totaled $2.0 million, or 2.9% of
revenues, for the nine months ended September 30, 1997.
Operating profit. Operating profit declined to $0.8 million for the nine
months ended September 30, 1997, a decrease of $4.6 million, or 85.2%, from $5.4
million for the nine months ended September 30, 1996. Operating profit as a
percentage of revenues declined to 1.1% for the nine months ended September 30,
1997 from 12.3% for the nine months ended September 30, 1996, primarily
attributable to the lower gross profit margin, the non-recurring compensation
expense and higher selling, general and administrative expenses as a percentage
of revenues for the nine months ended September 30, 1997.
Interest expense. Interest expense increased to $2.3 million for the nine
months ended September 30, 1997, an increase of $1.4 million from $0.9 million
for the nine months ended September 30, 1996. The increase was primarily
attributable to interest expense on additional indebtedness incurred to finance
the acquisitions of the net assets of Design Dynamics and Bash and capital
expenditures.
Extraordinary item. The Company recorded an extraordinary loss of $0.6
million for the nine months ended September 30, 1997 resulting from the
write-off of unamortized deferred financing costs related to the replacement of
the Company's then existing revolving credit facility with the Credit Facility
on July 31, 1997.
Net income (loss). The Company had a net loss of $2.4 million for the nine
months ended September 30, 1997 compared to net income of $4.3 million for the
nine months ended September 30, 1996. The net loss was due to the factors
discussed above.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues. The Company's revenues increased to $62.5 million in 1996, an
increase of $23.1 million, or 58.6%, from $39.4 million in 1995. The increase
was primarily attributable to $14.7 million of revenues contributed by the sale
and rental of lighting products following the acquisitions of the net assets of
Vanco in January 1996 and Cinema in February 1996. In addition, revenues from
themed entertainment projects increased $14.5 million, to $21.3 million,
primarily attributable to revenues from Masquerade in the Sky(TM) and additional
projects for Universal Studios Florida(R) and Nike(R).
Gross profit. The Company's gross profit increased to $17.4 million in
1996, an increase of $5.8 million, or 50.0%, from $11.6 million in 1995. The
increase was primarily due to the increase in revenues. Gross profit margin
declined to 27.7% in 1996 from 29.5% in 1995. The decrease was primarily
attributable to lower margins associated with the Company's lighting operations
and the higher proportion of revenues generated from themed entertainment
projects, which historically have had significantly lower gross profit margins
than live entertainment and corporate events projects.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased to $8.7 million in 1996, an increase of $2.9
million, or 50.0%, from $5.8 million in 1995. The increase was primarily due to
incremental selling, general and administrative expenses associated with the
commencement of the Company's lighting operations as well as increased overhead
related to the hiring of additional employees in connection with the overall
growth of the Company. Selling, general and administrative expenses as a
percentage of revenues declined to 13.9% in 1996 from 14.7% in 1995.
Operating profit. Operating profit increased to $8.0 million for 1996, an
increase of $2.6 million, or 48.1%, from $5.4 million in 1995. Operating profit
as a percentage of revenues decreased to 12.7% in 1996 from
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13.7% in 1995, primarily due to the lower gross profit margin in 1996, which was
partially offset by the decrease in selling, general and administrative expenses
as a percentage of revenues.
Loss on impairment of assets. The Company recorded a $0.5 million loss on
impairment of assets, which reflects a writedown in the carrying value of the
Company's former principal fabrication facility in Cornwall-on-Hudson, NY in
connection with commencement of the Company's operations at the New Windsor, NY
facility.
Interest expense. Interest expense increased to $1.3 million in 1996 from
$0.6 million in 1995, primarily due to interest expense on additional
indebtedness incurred to finance the acquisitions of the net assets of Vanco and
Cinema and capital expenditures.
Net income. Net income was $6.1 million in 1996, an increase of $1.2
million, or 24.5%, from $4.9 million in 1995. Net income as a percentage of
revenues declined to 9.7% in 1996 from 12.4% in 1995, due to the factors
discussed above.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Revenues. The Company's revenues increased to $39.4 million in 1995, an
increase of $8.4 million, or 27.1%, from $31.0 million in 1994. The increase was
primarily attributable to increased revenues from live entertainment and themed
entertainment projects. Revenues from live entertainment projects increased $2.9
million, or 12.4%, to $26.4 million, primarily due to revenues from additional
touring shows of Beauty & the Beast(TM) and a general increase in business
activity. Revenues from themed entertainment projects increased $6.5 million, to
$6.8 million in 1995, primarily due to revenues from Terminator 2-3D(TM) at
Universal Studios Florida(R).
Gross profit. The Company's gross profit increased to $11.6 million in
1995, an increase of $3.6 million, or 45.0%, from $8.0 million in 1994. The
increase was primarily attributable to the increase in revenues and improved
gross profit margins. Gross profit margin increased to 29.5% in 1995 from 25.8%
in 1994. The increase was primarily attributable to the increase in revenues in
1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased to $5.8 million in 1995, an increase of $1.0
million, or 20.8%, from $4.8 million in 1994. The increase was primarily due to
incremental selling, general and administrative expenses associated with
increased overhead related to the hiring of additional employees in connection
with the overall growth of the Company. Selling, general and administrative
expenses as a percentage of revenues decreased to 14.7% in 1995 from 15.5% in
1994.
Operating profit. Operating profit increased to $5.4 million in 1995, an
increase of $2.7 million, or 100.0%, from $2.7 million in 1994. Operating profit
as a percentage of revenues increased to 13.7% in 1995 from 8.8% in the prior
year, primarily due to the higher gross profit margin and lower selling, general
and administrative expenses as a percentage of revenues, slightly offset by
higher depreciation expense.
Interest expense. Interest expense increased to $0.6 million in 1995 from
$0.3 million in 1994, primarily due to increased capital expenditures.
Net income. Net income was $4.9 million in 1995, an increase of $2.4
million, or 96.0%, from $2.5 million in 1994. Net income as a percentage of
revenues increased to 12.4% in 1995 from 8.0% in 1994, due to the factors
discussed above.
Liquidity and Capital Resources
The Company's primary cash needs have historically been for working
capital, capital expenditures, including the purchase of rental equipment, and
acquisitions. The Company's primary sources of capital to finance such needs
have been cash flow from operations and borrowings under bank credit facilities.
The Company replaced its existing credit facility with the Credit Facility on
July 31, 1997 in connection with the acquisition of the net assets of Design
Dynamics and Bash. The Amended Credit Facility provides the Company with a $100
million, five-year, senior secured, reducing revolving credit facility, subject
to the Company satisfying certain covenants and
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conditions. See "Description of Other Indebtedness--Amended Credit Facility."
Borrowings under the Credit Facility were used to refinance existing
indebtedness, fund the acquisitions of the net assets of Design Dynamics and
Bash, purchase land for a new facility in Las Vegas, fund working capital needs
and pay fees and expenses incurred in connection with the refinancing. The
Company had $65.1 million of indebtedness outstanding under the Credit Facility
as of September 30, 1997 and subsequently borrowed an additional $3.2 million
under the Credit Facility as of November 30, 1997. Following the Initial
Offering and the application of net proceeds therefrom, the Company will have
$100 million of total commitments under the Amended Credit Facility, of which
approximately $0.6 million would have been available as of September 30, 1997,
after giving effect to the Transactions and the Amended Credit Facility. The
Company believes that its sources of capital, including net proceeds from the
Initial Offering and undrawn commitments under the Amended Credit Facility, are
adequate to fund its current level of operations and its expected growth,
including acquisitions, for the foreseeable future.
The Company's cash flows from operations were $6.2 million, $9.0 million
and $3.9 million in 1996, 1995 and 1994, respectively. The decline from 1995 to
1996 was primarily attributable to an increase in inventories and accounts
receivable to support higher revenues, partially offset by increased
profitability. The increase from 1994 to 1995 was primarily attributable to
increased profitability.
The Company's cash flows used in investing activities were $20.3 million,
$9.9 million and $5.6 million in 1996, 1995 and 1994, respectively. During 1996,
investing activities consisted primarily of $17.5 million of capital
expenditures and $2.1 million used to fund the acquisitions of the net assets of
Vanco and Cinema. The $17.5 million of capital expenditures in 1996 consisted of
approximately (i) $7.0 million to acquire the land and build the Company's new
facility in New Windsor, NY, (ii) $6.7 million to purchase additional lighting
equipment following the acquisitions of the net assets of Vanco and Cinema and
(iii) $3.5 million for components related to the growth in the revenues of the
Company's motion control systems. During 1995 and 1994, capital expenditures
totaled $9.6 million and $5.5 million, respectively.
For 1997, the Company has budgeted approximately $9.2 million for capital
expenditures, excluding acquisitions, primarily for purchases of rental
equipment. Of this amount, the Company had expended approximately $8.7 million
as of September 30, 1997. The Company anticipates capital expenditures,
excluding acquisitions, of approximately $9.5 million in 1998, primarily for
purchases of rental equipment.
The Company's cash flows provided by (used in) financing activities were
$15.1 million, $(0.7) million and $2.7 million in 1996, 1995 and 1994,
respectively. In 1996, $35.4 million in proceeds from long-term debt more than
offset $16.2 million of debt repayments and $3.6 million in member
distributions. In 1995, proceeds from borrowings totaling $4.8 million was less
than debt repayments of $4.3 million and member distributions of $1.1 million.
During 1994, debt repayments and member distributions were more than offset by
the proceeds of $6.3 million under a $9.3 million term loan agreement entered
into in October 1994.
Effects of Inflation
The impact of inflation on the Company's operations has not been
significant in recent years. There can be no assurance, however, that a high
rate of inflation in the future will not have an adverse effect on the Company's
results of operations and financial condition.
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BUSINESS
General
The Company is a leading integrator, fabricator and supplier of a broad
range of products and services for the live entertainment (live theater, concert
touring and special events), corporate events (trade and industrial shows) and
themed entertainment (gaming, theme parks and themed retail) markets. The
Company's products and services include (i) scenery and exhibit fabrication,
(ii) computerized motion and show control systems, including its proprietary
Stage Command System(R), (iii) theatrical lighting systems and related products,
and (iv) project management, which encompasses design engineering, budgeting,
logistical coordination and installation. Depending upon its clients' needs, the
Company's highly-skilled staff can integrate some or all of these products and
services to produce creative, technically sophisticated and visually
"spectacular" productions, events or attractions. The Company's principal
production and distribution facilities are located in six states, including
major entertainment and convention centers such as the New York metropolitan
area, Las Vegas and Orlando. On a pro forma basis, after giving effect to the
Transactions, the Company generated revenues and EBITDA of $131.5 million and
$23.3 million, respectively, for the twelve months ended September 30, 1997.
The Company initially developed its technical and creative expertise in
live theater and industrial shows and subsequently applied such expertise to a
broader range of corporate events and the themed entertainment market. In the
live entertainment market, the Company's products and services are featured in
18 of the 33 current Broadway shows, including Beauty & the Beast(TM), Les
Miserables(TM), Miss Saigon(TM), The Phantom of the Opera(TM), Ragtime(TM), and
Titanic(TM). In the corporate events market, the Company has served as project
manager for trade and industrial shows for a diverse base of large
multi-national corporations such as Chrysler(R), General Motors(R), Glaxo
Wellcome(TM), IBM(R), Mercedes Benz(R), Nike(R) and Toyota(R)/Lexus(R). In the
themed entertainment market, the Company participated in the fabrication of
several multi-million dollar attractions, including Terminator 2-3D(TM) at
Universal Studios Florida(R), Star Trek, The Experience(SM) at the Las Vegas
Hilton(R) and Nike(R)'s flagship superstore in New York City.
The Company estimates that the live entertainment, corporate events and
themed entertainment markets for sales of its products and services exceeded $11
billion in 1996. The live entertainment market includes live theater, concert
tours and special events such as the Olympics, political conventions and
debates, and televised award ceremonies. The corporate events market includes
industrial shows (primarily single corporation events such as large sales
meetings and new product launches) and trade shows. The themed entertainment
market includes various attractions within gaming, theme park and themed retail
establishments. The markets served by the Company are growing and the Company
believes that such markets will continue to grow as a result of favorable
industry trends. In addition, the Company believes that the demand for its
products and services will continue to grow as corporations increasingly utilize
more sophisticated technology and theatrical techniques to promote their
corporate or brand identities, differentiate their product offerings and attract
new customers. See "--Markets Overview."
Competitive Strengths
The Company believes that it is well-positioned to capitalize on the growth
of the live entertainment, corporate events and themed entertainment markets as
well as to enhance its market position. The following are, in management's view,
the Company's principal strengths:
Leading Provider. The Company has established itself as a leading provider
of technical and creative products and services in the markets that it serves.
The Company believes that its (i) ability to offer clients fully-integrated
solutions, (ii) staff of highly-skilled project managers, engineers and
craftsmen, (iii) high standards for service and reliability, (iv) ability to
handle multiple large projects simultaneously through its strategically located
facilities and (v) access to capital will allow it to increase its market share
in each of the markets that it serves.
Proprietary Products and Expertise. The Company's proprietary Stage Command
System(R), a state-of-the-art computerized system for moving scenery and other
props, has set the industry standard for motion control systems. Stage Command
System(R) has been used in over 55 theatrical productions and themed attractions
since it was developed by the Company in 1988. The Company also offers
technologically-advanced show control systems, which synchronize the various
physical elements of a production or attraction, including scenery, sound,
lighting
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and special effects. The Company's motion and show control systems allow for the
addition of more sophisticated production elements on a cost-effective basis. In
addition, the Company's projects often involve customized products and services
that require significant design engineering and fabrication expertise.
Diverse Client Base. The Company has expanded its revenue base and market
opportunities by applying its expertise in live entertainment to the corporate
events and themed entertainment markets. The Company currently serves a diverse
base of approximately 2,500 clients, ranging from large multi-national
corporations to small local businesses and organizations. The Company's
corporate clients are engaged in a number of different industries, including
automotive, computers, consumer products, entertainment, gaming and
pharmaceuticals.
Strong Client Relationships. The Company has developed strong,
long-standing relationships with many of its clients. For example, in the live
entertainment market, the Company has fabricated scenery and supplied its Stage
Command System(R) for such long-running shows as The Phantom of the Opera(TM)
and Les Miserables(TM). In the corporate events market, the Company has served
as project manager for the annual dealer meetings for Chrysler(R) and Toyota(R)
in each of the past ten years. In the themed entertainment market, the Company's
work on Universal Studios Florida(R)'s Terminator 2-3D(TM) attraction and
Nike(R)'s flagship superstore has led to additional projects for each of these
clients.
Experienced Management Team. Jeremiah J. Harris, the Company's Chairman and
Chief Executive Officer, comes from a family with four generations of experience
in live theater and has over 25 years of experience in providing products and
services for the live entertainment and corporate events markets. Mr. Harris is
supported by a team of ten senior executives with, on average, 14 years of
experience in the business.
Business Strategy
The Company's objective is to become the leading provider of technical and
creative products and services for the live entertainment, corporate events and
themed entertainment markets. The key elements of the Company's business
strategy are as follows:
Leverage Technical and Creative Expertise. The Company intends to leverage
its technical and creative expertise to further penetrate the corporate events
and themed entertainment markets. For example, the Company was awarded the
project management contract for the theater structure at IBM(R)'s Fall COMDEX
exhibit based on its ability to provide a fully-integrated solution. The Company
was required to integrate sophisticated scenery, lighting and audio/visual
equipment; fabricate a 24-foot high, 75-foot long structure containing 90 video
monitors that served as the focal point of IBM(R)'s exhibit; and collaborate
with IBM(R)'s advertising agency to ensure that the exhibit communicated
IBM(R)'s new business(R) marketing program in a matter consistent with IBM(R)'s
overall marketing strategy.
Expand Product and Service Offering. The Company plans to enhance its "one
stop shopping" product and services offering by adding complementary products
and services, through internal development and acquisitions. For example,
through the acquisition of three lighting providers since 1996, the Company has
become a leading supplier of theatrical lighting systems and related products in
the United States. The Company's proposed acquisition of the net assets of
Pro-Mix, which provides sound equipment and acoustical and sound design
consulting services primarily to the live theater market segment, represents the
most recent example of the Company's strategy to identify and acquire
complementary products and services. See "The Company."
Intensify Cross-Selling Efforts. The Company intends to intensify its
cross-selling efforts. Many of the companies acquired by the Company typically
provided a limited number of products and services to a single market segment.
The Company intends to leverage its existing relationships in order to sell
additional products and services to clients across each of the markets that it
serves. The Company is also creating a management information system that will
track the use of its products and services by client in order to support its
cross-selling efforts.
Develop and Implement Focused Marketing Effort. To enhance the overall
growth of its business and expansion into new markets, the Company is developing
a nationally focused marketing effort under the direction of
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its recently appointed Senior Vice President, Marketing and Sales. In connection
with this effort, the Company plans to target large, multi-national corporations
with significant, recurring events that require fully-integrated solutions.
Pursue Strategic Acquisitions. Strategic acquisitions have been and will
continue to be an important element of the Company's growth strategy. Each of
the markets that the Company serves has many small local or regional competitors
and, consequently, offers significant consolidation opportunities. The Company
will seek attractively priced acquisitions that expand or complement its
existing product and service offering, enhance relationships with existing
clients, provide an entry into new market segments or expand its operations into
domestic and international entertainment centers where it does not currently
have a significant presence.
Markets Overview
The Company provides its products and services to clients in the live
entertainment, corporate events and themed entertainment markets. The Company
has supplied products and services for many of the visually "spectacular"
Broadway theatrical productions of recent years and an increasing number of
other live productions, corporate events and themed entertainment attractions
and establishments. The following table represents a partial list of the
Company's significant projects by market:
<TABLE>
<CAPTION>
Live Entertainment Corporate Events Themed Entertainment
<S> <C> <C>
Beauty & the Beast(TM) Buick(R)dealer meetings Basketball Hall of Fame(R)
Pocahontas(TM)premiere in Central Chrysler(R)dealer meetings Caesars Magical Empire(TM)
Park Glaxo Welcome(TM)product introduction shop David Copperfield's Magic Underground
EFM! Hewlett Packard(R)Fall Internet World Exhibit Foxwoods Casino
Gloria Estefan concert tour IBM(R)Fall COMDEX exhibit NikeTown(R)flagship store (NYC)
Les Miserables Iomega(R)worldwide tradeshows NikeTown(R)(Las Vegas)
Metallica Concert tour Lexus(R)dealer meetings Masquerade in the Sky(TM)
Miss America(R)Pageant Marlboro(R)Adventure Team Tour Star Trek, The Experiencesm
Miss Saigon(TM) Mercedes Benz(R)dealer meetings Terminator 2-3D(TM)at Universal Studios
The Phantom of the Opera(TM) Nike(R)Supershow (Atlanta Florida(R)
Ragtime(TM) Volvo(R)Truck dealer meetings Warner Bros.(R)Stores
Titanic(TM)
Wheel of Fortune(R)traveling show
1996 Presidential Debates
</TABLE>
Live Entertainment
The live entertainment market includes the live theater, concert touring
and special events market segments. According to Variety, North American live
theater box office receipts have grown at a 6.4% compound annual growth rate
from approximately $470.8 million in 1982 to approximately $1.2 billion in 1996.
A significant portion of the growth is attributable to the increase in touring
shows which, according to Variety, accounted for approximately two-thirds of
live theater box office receipts in 1996, up from approximately one-half of live
theater box office receipts in 1982. In addition, new entrants such as large
entertainment corporations have begun to use live theater to cross-promote their
movies, television shows and tie-in products. Recent examples of new entrants
include The Walt Disney Company (Beauty & the Beast(TM)), Viacom Inc. (A
Christmas Carol(TM)) and Sony Corporation (That's Christmas(TM)).
According to Amusement Business, an entertainment industry journal, ticket
sales for North American concert tours have grown at a 10% compound annual
growth rate from approximately $321.7 million in 1985 to approximately $922.3
million in 1996. The special events market segment encompasses a diverse array
of events, including sports, such as the Olympics and boxing matches; politics,
such as the Democratic and Republican conventions and Presidential debates;
televised award ceremonies, such as the Tony(R) and Grammy(R) shows; and
religious and other large-scale events, such as the visit of Pope John Paul II
to New York City in 1995. The producers of concert tours, particularly rock
concerts in large football stadium type venues, and special events are
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beginning to utilize more sophisticated technology similar to that featured in
live theater. As such, the Company believes that these market segments present
significant growth opportunities.
Corporate Events
The Company believes that the corporate events market for sales of its
products and services is approximately $11 billion based upon its review of
information prepared by the Center for Exhibition Industry Research, and the
Convention Liaison Council. Industrial shows are single corporation events such
as large sales meetings and new product launches. Trade shows are events where
many corporations in a particular industry or market present their products and
services to consumers. The Company believes that the corporate events market has
grown significantly in recent years in response to several favorable trends. In
order to deploy their marketing budgets more effectively and counter the
diminished impact of traditional broad-based, mass advertising media,
corporations have been shifting their marketing efforts to more focused, direct
marketing that targets specific audiences, such as trade shows. In addition, in
order to concentrate on their core business competencies, corporations have been
outsourcing their industrial and trade show management activities with an
emphasis on utilizing single-source providers that offer a broad range of
products and services. Domestic corporations have also increased the use of
trade shows for marketing their products internationally. Most significantly for
the Company, corporations are increasingly employing theatrical techniques to
promote their corporate or brand identities, differentiate their product
offerings and attract new customers. The Company believes that these trends, as
well as the overall size of the market, present significant growth
opportunities.
Themed Entertainment
The themed entertainment market consists of gaming, theme parks and themed
retail establishments, including themed restaurants, and is an emerging market
for theatrical technical and creative expertise. The Company believes that the
themed entertainment market will continue to offer short and long-term growth
opportunities.
According to the Las Vegas Convention and Visitors Authority, approximately
30 million people visited Las Vegas in 1996, approximating a 41% increase since
1990, with many people bringing their entire family. Las Vegas hotels and
casinos are seeking to differentiate themselves and attract these new consumers
by offering a visually "spectacular" total environment including themed
attractions. There is approximately $6 billion of casino construction and
remodeling planned in Las Vegas through 1999, according to the Las Vegas
Convention and Visitors Authority.
Theme parks, many of which are owned by large entertainment companies such
as Universal Studios(R) and The Walt Disney Company, have been expanding their
existing theme parks and building new parks. Such growth has created significant
demand for new large themed attractions to attract visitors and cross-promote
movies, television shows and tie-in products. According to Amusement Business,
attendance at the top 50 North American theme parks has grown from approximately
137 million people in 1993 to approximately 160 million people in 1996.
Retailers have begun to use themed attractions to draw new consumers. As
consumers have become less responsive to the standard shopping experience, many
retailers, including restaurants, are seeking unique, dynamic and entertaining
in-store shopping and dining environments. The theme of "retail as
entertainment" is a growing trend as more entertainment companies have entered
the retail marketplace, such as The Walt Disney Company and Warner Bros.(R) and
many well-known manufacturers have developed product tie-ins to the
entertainment and sports industries, such as Nike(R).
Products and Services
The Company's principal products and services are (i) scenery and exhibit
fabrication, (ii) computerized motion and show control systems, including its
proprietary Stage Command System(R), (iii) theatrical lighting systems and
related products, and (iv) project management services. The Company's work has
been featured in numerous productions and attractions that have received awards,
including the 1997 Tony(R) for scenic design
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awarded to Titanic(TM), for which the Company fabricated the scenery and
provided all the motion and show control systems, including its Stage Command
System(R), and the 1997 TEA ("Themed Entertainment Association") awards for,
among others, the Nike(R) flagship superstore in New York City, Terminator
2-3D(TM) at Universal Studios Florida(R) and Caesars Magical Empire(TM) at
Caesars Palace(R) in Las Vegas. TEA was formed in 1990 by companies that supply
services and custom products to the themed entertainment, leisure, recreation,
retail, resort and restaurant markets.
Scenery and Exhibit Fabrication
The Company provides scenery and exhibits for the live entertainment,
corporate events and themed entertainment markets. The Company has created
sophisticated scenery for many well-known Broadway shows and other live
entertainment productions, including the Broadway and touring scenery for
Disney(R)'s Beauty & the Beast(TM), in which the stage is transformed into a
mythical palace, and EFX!(TM), which is one of the largest and most complex
stage productions in the United States. The Company also provides scenery and
exhibits for corporate events, including IBM(R)'s theater structure at its Fall
COMDEX exhibit and Nike(R)'s multimedia theater at the annual Athletic Footwear
Supershow. In addition, the Company has fabricated the scenery for themed
entertainment attractions such as Masquerade in the Sky(TM) at the Rio Suite
Hotel & Casino(R) in Las Vegas, Star Trek, The Experience(SM) at the Hilton(R)
in Las Vegas and Terminator 2-3D(TM) at Universal Studios Florida(R). Masquerade
in the Sky(TM) includes three separate parades, 17 different performing areas
and 1,250 feet of elevated track on which five, 22,000 pound floats continuously
"sail" above the casino floor. Terminator 2-3D(TM) at Universal Studios
Florida(R) provides for seamless interaction between live theater and
three-dimensional film.
The Company constructs its scenery and exhibits in its three production
facilities located in New York, Las Vegas and Denver. Once a client creates an
initial concept, the Company typically design engineers and fabricates the
scenery or exhibit for the production, event or attraction. The Company has the
ability to complete all aspects of a project in-house through a staff of
permanent employees comprised of (i) technical engineers trained in multiple
disciplines, (ii) designers adept in computer-aided and other sophisticated
design techniques, (iii) craftsmen skilled in scenic artistry, carpentry, steel
fabrication, electronics and lighting and (iv) project managers experienced in
supervising projects from initial concept design to installation and operation.
The Company also maintains relationships with subcontractors experienced in
plastics and glass custom fabrication, machining, steel cutting, fireproof resin
coating, upholstery, fiber optics, pyrotechnics and laser effects.
The period from inception to completion for scenery and exhibit fabrication
generally ranges from one to three months for the live entertainment and
corporate events markets to as long as six to eighteen months for the themed
entertainment market. The Company generally sells scenery and exhibits to its
clients. The Company has also begun to rent certain trade show exhibits to its
clients for multiple use. Prices for the Company's scenery and exhibits vary
significantly. Prices for scenery for the live entertainment market depend upon
the size and nature of the production. The prices for scenery for large musicals
approximate $1 million. Prices for scenery and exhibits for industrial and trade
shows generally range from $50,000 to more than $1 million for large complex
events. The prices for scenery for the themed entertainment markets tend to be
substantially higher, frequently between $5 and $15 million, because the
attractions are usually permanent, larger and more complex installations.
Computerized Motion and Show Control Systems
The Company has developed or acquired proprietary systems that have set the
standard for computerized motion control in the live entertainment market and
can be modified for use in the corporate events and themed entertainment
markets. Stage Command System(R) is a state-of-the-art motion control system for
moving scenery, platforms, lifts, screens and other props. Since 1988, with the
production of The Phantom of the Opera(TM), this technology has been used in
over 55 theatrical productions and themed attractions. Stage Command System(R)
was awarded 1996 Product of the Year at Lighting Dimensions International, a
theater industry trade show. Stage Command System(R) permits the user to achieve
visually "spectacular" effects such as the rotating and pivoting of the
barricades in Les Miserables(TM), the realistic landing and lift-off of the
helicopter in Miss Saigon(TM) and the chandelier swinging over the audience and
crashing on stage in The Phantom of the Opera(TM). For Masquerade in the
Sky(TM), two technicians, using graphical displays of real-time information,
control five floats, 1,250 feet of track and over 50 other automated effects,
including animatronics, hydraulic elevators and giant inflatables. Other
modified uses of Stage Command System(R) include controlling a projection screen
to facilitate the film to live action
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transitions in Terminator 2-3D(TM) at Universal Studios Florida(R) as well as
Caesars Magical Empire(TM) in Las Vegas, Star Trek, The Experience(SM) and the
total environment of Nike(R)'s flagship superstore in New York City. In
addition, the Company's acquisition of the net assets of Thoughtful Designs in
March 1997 has provided it with expertise in show control systems, which
synchronize the various physical elements of production, including scenery,
sound, lighting and special effects.
Stage Command System(R) utilizes hardware and proprietary software to offer
a high degree of precision, reliability and flexibility for motion-controlled
applications. The design of the system allows one operator to control
substantially all of the effects in a typical production. Permanent
installations of the Company's Stage Command System(R), such as in Terminator
2-3D(TM) at Universal Studios, Florida(R) and Nike(R)'s flagship superstore,
generally do not require the supervision of an operator since the elements
controlled by the system do not have to respond to unanticipated events or
actors. Stage Command System(R) features include user-friendly interface and
software, closed-loop computerized motion control, time-based or velocity-based
cueing and proven safety and automatic backups. The Company also provides
in-house programming, worldwide service and on-line support. The Company has
recently updated the interface controls (patent pending) of its Stage Command
Systems(R) to include a graphical, real-time display and analysis of the
position of each device, enhancing safety and operation. The system is modular
and can be reprogrammed and reconfigured for new uses at the end of a
production.
The Company purchases hardware and equipment components from third-party
manufacturers, including control systems, terminals, keyboard, motors, winch
components, cables and other rigging components. The Company's principal
supplier of such hardware during 1996 was Allen-Bradley Company, Inc., a
subsidiary of Rockwell International. The Company integrates hardware and
equipment, installs proprietary user-interface software and programs the
software to produce the desired effects.
The Company generally rents its Stage Command System(R) and show control
systems pursuant to run-of-show contracts, payable weekly, monthly or quarterly.
The rental payment depends on the complexity and number of effects controlled by
the system. The Company sells a modified version of its Stage Command System(R)
to the themed entertainment market.
Theatrical Lighting Systems and Related Products
The Company is one of the largest suppliers of theatrical lighting systems
and related products in the United States, with facilities in the New York
metropolitan area, Las Vegas, Orlando, Atlanta and Baltimore.
The Company supplies a wide variety of lighting products, including
automated theatrical and concert lighting systems, television and film lighting
systems, scenic backdrop projection equipment, grip equipment, special lighting,
sound and smoke systems, lighting dimmers and controllers, computer controlled
moving lights, silent-hush power generators, trusses, rigging and cable, and
perishables such as bulbs and gels. The Company's specialized lighting products
allow a lighting designer to choose the components necessary to design a
Broadway or touring show, an industrial or trade show or a less complex project
such as a school play or church social. The Company also provides lighting
design consultation, programming and installation. The Company's three
fully-equipped, mobile grip trucks in Las Vegas service the remote needs of its
Las Vegas clients 24 hours a day. The Company also provides installation
services using qualified third-party contractors on an as-needed basis.
The Company generally rents theatrical lighting systems to the live
entertainment and corporate events markets pursuant to run-of-show contracts,
which can range from one day to the full run of a Broadway show or concert tour.
The Company sells lighting systems for permanent installations in the themed
entertainment markets.
The Company is also a distributor for certain theatrical lighting
manufacturers, including Altman Stage Lighting Company, Inc., Electronic Theater
Controls, Group One Ltd., High-End Systems, Inc., Martin Professional, Inc.,
Moel-Richardson Co., Rosco Laboratories, Inc., and Strand Lighting Inc. These
manufacturers are also among the Company's principal suppliers of theatrical
lighting systems.
46
<PAGE>
Project Management
The Company provides a complete, turn-key service whereby it is responsible
for every phase of a production, event or attraction, including design
engineering, budgeting, logistical coordination and installation. The Company
has served as project manager and provided products for many productions, events
and attractions including Beauty & the Beast(TM), EFX!(TM), IBM(R)'s Fall COMDEX
exhibit, Masquerade in the Sky(TM), Star Trek, The Experience(SM) and the annual
dealer meetings and new product launches for many multi-national corporations,
including Chrysler(R), Glaxo Wellcome(TM), Mercedes Benz(R) and Toyota(R)/
Lexus(R).
The Company seeks to leverage its role as project manager in order to
cross-sell its other products and services and provide clients with efficient
"one-stop shopping." For example, the Company typically fabricates the scenery
and provides the lighting systems and other equipment for industrial shows where
it serves as project manager. In addition, the Company fabricated all the
scenery and provided the motion control systems for the Beauty & the Beast(TM)
and EFX!(TM) productions. Most recently, the Company's work for IBM(R) at Fall
COMDEX demonstrated its ability to leverage its role as project manager to
cross-sell its products and services.
Prices for the Company's project management services vary by market. The
Company receives periodic payments, usually quarterly, for its services as
project manager for the live entertainment and themed entertainment market. The
price for corporate events is typically based upon cost plus.
Clients
The Company provides its products and services to a diverse client base
that includes many large multi-national corporations. The Company also supplies
theatrical lighting systems and related products to schools, hotels, stores,
museums and other small users. The Company has developed strong, long-standing
relationships with many of its clients. For example, in the live entertainment
market, the Company has fabricated scenery and supplied Stage Command System(R)
for such long-running shows as The Phantom of the Opera(TM) and Les
Miserables(TM). In the corporate events market, the Company has managed annual
dealer meetings for Chrysler and Toyota in each of the past ten years. In the
themed entertainment market, the Company's work on Universal Studios
Florida(R)'s Terminator 2-3D(TM) and Nike(R)'s flagship superstore has led to
additional projects for each of these clients.
For the year ended December 31, 1996, Marnell Corrao Associates, the
general contractor and owner for Masquerade in the Sky(TM), accounted for
approximately 10.0% of the Company's pro forma revenues. For the nine months
ended September 30, 1997, Paramount Pictures, the owner of Star Trek, The
Experience(SM), represented approximately 11.4% of the Company's pro forma
revenues.
Sales and Marketing
Historically, the Company has relied primarily on referrals and its
reputation earned on high profile projects to generate new sales. The Company
also employs salespeople to market certain of its products and services in local
markets. To enhance the overall growth of its business and expansion into new
markets, the Company is developing a nationally focused marketing effort under
the direction of its recently appointed Senior Vice President, Marketing and
Sales. In connection with this effort, the Company plans to target large,
multi-national corporations with significant, recurring events that require
fully-integrated solutions. The Company expects to hire several national
salespeople who will focus on specific market segments and clients. In response
to the trend toward corporate outsourcing and to client demands, the Company
also plans to increase placement of its employees at clients, which will improve
the Company's ability to understand and serve clients needs. The Company is also
creating a management information system that will track the use of its products
and services by client in order to enhance its cross-selling efforts.
Competition
The markets for the Company's services are highly competitive and
fragmented. The Company's competitors include primarily small local or regional
firms and, several large national firms, some of which may have greater
financial, management and marketing resources than the Company. In the corporate
events market, the
47
<PAGE>
Company also competes with the in-house communications departments of existing
and potential clients. The primary competitive factors vary by market but
include technological capability, range of products and services, price,
reputation, reliability, responsiveness to client needs and geographic proximity
to the client.
48
<PAGE>
Properties
The following table sets forth information about the Company's principal
facilities at September 30, 1997:
<TABLE>
<CAPTION>
Number of Square Lease/
Location Facilities Function Feet Own
- -------- ---------- -------- ------ ------
<S> <C> <C> <C> <C>
New Windsor, NY 4 Principal executive offices, fabrication, testing and warehouse 185,000 Own
Orlando, FL 4* Administration, fabrication and lighting rental and sales 150,000 Lease
Las Vegas, NV 4 Administration, fabrication and lighting rental and sales 100,000 Lease
North Bergen, NJ 1 Administration, warehouse and lighting rental and sales 87,000 Lease
Denver, CO 2 Administration, fabrication and warehouse 77,000 Lease
Cornwall-on-Hudson, NY 1 Fabrication 62,000 Own
Atlanta, GA 1 Administration, warehouse and lighting rental sales 28,000 Lease
Baltimore, MD 1 Administration, warehouse and lighting rental and sales 18,000 Lease
New York, NY 3 Administration 14,000 Lease
Mount Vernon, NY 1 Administration, warehouse, rental and sales 24,000 Lease
</TABLE>
* Includes a new 80,000 square foot leased facility in Orlando that the Company
moved into in January 1998. The Company plans to vacate or sublease its other
Orlando facilities.
The Real Estate Transaction, pursuant to which the Company's New Windsor,
NY and Cornwall-on-Hudson, NY facilities and its land in Las Vegas, NV was
transferred to a member of the Company as payment for redemption of such
member's equity interests in the Company, and subsequently leased back to the
Company, was consummated on December 24, 1997. See "Certain Transactions." In
addition, the Company is planning the consolidation of its Las Vegas operations
into one 115,000 square foot facility, which is expected to be completed in the
first half of 1998. The Company is also considering the expansion of its
existing facility in Denver and expects to lease approximately 127,000 square
feet facility in North Bergen, New Jersey to replace its existing North Bergen
facility. Following completion of these plans, the Company believes that its
facilities will be adequate for its operations for the foreseeable future.
Employees
At December 31, 1997, the Company had approximately 762 full-time
employees. The Company routinely hires a significant number of temporary
employees on a project basis. Approximately 107 of the Company's full-time
employees are members of the International Alliance of Theatrical Stage
Employees. The current union contracts for the Company's New York and Las Vegas
employees expire in August 2001 and December 2001, respectively. The Company has
not experienced any significant labor disputes with its employees. The Company
believes that its relationship with its employees is good.
Legal Proceedings
The Company from time to time is involved in litigation arising in the
ordinary course of business. The Company does not believe that any such
litigation will, individually or in the aggregate, have a material adverse
effect on its business, results of operations or financial condition. The
Company, together with other companies involved in EFX!(TM), was sued by Michael
Crawford, the former star of EFX!(TM), with an action related to personal injury
claims. The Company has denied liability and continues to vigorously defend such
action. The Company believes it has meritorious defenses to such actions.
Although there can be no assurance as to the outcome of any
49
<PAGE>
litigation, the Company does not believe it would have a material adverse effect
on the Company's business, results of operations or financial condition.
In addition, the Company has recently filed an action in Federal district
court for the Southern District of New York seeking compensatory and punitive
damages against Stonebridge Partners Equity Fund, L.P. of White Plains New York,
Four Star Associates, L.P., and certain affiliated individuals related to
breach of contract and good faith and securities fraud in connection with the
Company's proposed acquisition of Four Star Holdings, Inc. The action seeks
specific performance and compensatory and punitive damages.
50
<PAGE>
MANAGEMENT
The following table sets forth certain information with respect to persons
who are members of the Company's Board of Advisors (each an "Advisor"),
executive officers of the Company and other significant employees.
<TABLE>
<CAPTION>
Board Members and Executive Officers
Name Age Positions(s)
----------------------------- --- -------------------------------------------------------------------
<S> <C> <C>
Jeremiah J. Harris 43 Chairman and Chief Executive Officer
Bradley G. Miller 34 Chief Operating and Financial Officer and Executive Vice President
Robert A. Manners 41 Senior Vice President, Business Affairs, and General Counsel
James M. Mahoney 31 Corporate Controller
Joseph W. Bartlett 64 Advisor
Joseph P. Harris 70 Advisor
Thomas D. Lips 53 Advisor
<CAPTION>
Significant Employees
Name Age Positions(s)
-------------------------------- --- -------------------------------------------------------------------
<S> <C> <C>
Kenneth L. Shearer 42 Senior Vice President, Marketing and Sales
Kevin J. Baxley 47 Executive Vice President, Scenery Operations
Fred J. Gallo 45 Executive Vice President, Scenery Automation
Joseph A. Schenk II 49 Executive Vice President, Nevada Operations
Donald Stern 58 Executive Vice President, Lighting
John Wolf 52 Executive Vice President, Project Management
William Ennis 49 Senior Vice President, Lighting
Roy Sears Jr. 43 Senior Vice President, Manufacturing
</TABLE>
There are no family relationships between any persons identified above,
except that Joseph P. Harris is the father of Jeremiah J. Harris.
Jeremiah J. Harris. Mr. Harris founded the predecessor of Production
Resource Group, L.L.C. in 1984 and has served as the Company's Chairman and
Chief Executive Officer since its formation in 1995. Mr. Harris comes from a
family with four generations of theatrical experience. Since 1970, he has been
involved with production in the live theater market. Mr. Harris developed the
original Stage Command System(R) and other related technological advances. Mr.
Harris is a member of the Board of Directors of Stage Technologies (UK) and F&D
Scene Changes Ltd. (Calgary, Canada). Mr. Harris is also a director of Beachport
Entertainment Corporation, a television production company.
Bradley G. Miller. Mr. Miller joined the Company in July 1997 as Chief
Operating and Financial Officer and Executive Vice President. From July 1988
until June 1997, Mr. Miller was employed at Schroders PLC, most recently as a
director in the investment banking department. Mr. Miller received a BA in
economics from Franklin and Marshall College in 1985 and an MBA from Columbia
University Business School in 1988. He is a director of Palomar Technologies,
Inc., a privately-held manufacturer of various technology-based industrial
products.
Robert A. Manners. Mr. Manners joined the Company in August 1997 as Senior
Vice President, Business Affairs and General Counsel. From June 1995 to August
1997, Mr. Manners was a partner at Pepe & Hazard LLP in Hartford, Connecticut
where he was instrumental in the formation of the Company and worked primarily
on its matters. Prior to joining Pepe and Hazard LLP, Mr. Manners was Of Counsel
to Gibson, Dunn & Crutcher in New York City for seven years. Mr. Manners
received a BA from the University of Pennsylvania, a JD from Columbia University
Law School and an LLM (in Taxation) from New York University School of Law.
51
<PAGE>
to June 1997, most recently as President. Mr. Shearer received a BS in general
engineering and political science from the United States Naval Academy and an
MBA from the University of Denver.
James M. Mahoney. Mr. Mahoney joined the Company in March 1997 as the
Corporate Controller. Prior to joining the Company, Mr. Mahoney was an Audit
Manager in the Entrepreneurial Services Group of Ernst & Young LLP in New York.
Mr. Mahoney received a BBA in accounting from Siena College in 1988 and is a
Certified Public Accountant.
Joseph W. Bartlett. Mr. Bartlett has been a partner in the law firm of
Morrison & Foerster LLP since March 1996. From July 1991 until March 1996 he was
a partner in the law firm of Mayer, Brown & Platt. Mr. Bartlett has also been an
Undersecretary of the U.S. Department of Commerce and a law clerk to Chief
Justice Earl Warren. Mr. Bartlett is a member of the Council on Foreign
Relations and is currently a director of Cyrk, Inc., which designs, manufactures
and distributes products for promotional programs and Semele Group, Inc., which
invests in real property and other assets. Mr. Bartlett received a BA from
Harvard University and an LLB from Stanford Law School.
Joseph P. Harris. Mr. Harris has been associated with more than 200
Broadway productions. He has been general manager for many dramatic and musical
productions. He has co-produced many shows including Chicago, On the Twentieth
Century and The 1940s Radio Hour, and received Tony(R) Awards as co-producer of
Bob Fosse's revival production of Sweet Charity, Dancing at Lughnasa and An
Inspector Calls. He also co-produced the 1993 Tony(R) Award nominee for Best
Play, Someone Who'll Watch Over Me. Mr. Harris most recently co-produced
Translations.
Thomas D. Lips. Mr. Lips has been a Senior Vice President--Investments of
PaineWebber, Inc. (and Kidder, Peabody & Co., prior to its acquisition by
PaineWebber, Inc.) in Hartford, Connecticut since 1990. Mr. Lips received a BA
from Dartmouth College in Liberal Arts and a JD from Harvard Law School.
Kenneth L. Shearer. Mr. Shearer joined the Company in June 1997 as Senior
Vice President, Marketing and Sales. Mr. Shearer is responsible for the
development of the Company's nationally focused marketing effort. Prior to
joining the Company, Mr. Shearer was employed in various positions at Design
Dynamics, Inc. from 1992
Kevin J. Baxley. Mr. Baxley joined the Company in May 1988 as Vice
President of Finance and was appointed Executive Vice President, Scenery
Operations in October 1997 where he is responsible for strategic planning and
product development. Prior to joining the Company, he served as a manager at
Ernst & Young LLP and as the Director of Finance at Spectramed, a medical device
manufacturer. Mr. Baxley received an MBA from the New York University Graduate
School of Business in 1976 and is a Certified Public Accountant.
Fred J. Gallo. Mr. Gallo joined the Company upon its founding in 1984 and
was appointed Executive Vice President, Scenery Production in October 1997. He
is responsible for the engineering and mechanical design of all projects. Mr.
Gallo is also a relationship manager for the live theater market. Prior to
joining the Company, he was self-employed as a technical coordinator on
Broadway. Mr. Gallo received a BS degree in architectural engineering from New
York Institute of Technology in 1974 and was instrumental in the design and
development of the Stage Command System(R). Mr. Gallo has been responsible for
the technical production of many successful theatrical productions, including
The Phantom of the Opera(TM), Les Miserables(TM) and Beauty & the Beast(TM).
Joseph A. Schenk II. Mr. Schenk joined the Company in August 1995 as Vice
President of the Las Vegas operations and was appointed Executive Vice
President, Nevada Operations in August 1997. Mr. Schenk has overall
responsibility for the Company's scenery fabrication operations in Las Vegas.
Prior to joining the Company, he was a real estate developer from 1994 to July
1995 and project manager for Showtech U.S.A., a theatrical production at a Las
Vegas hotel from 1992 to 1994. Mr. Schenk received a B.A. from the University of
Nevada, Las Vegas in 1974.
Donald Stern. Mr. Stern joined the Company in August 1997, was appointed
Executive Vice President, Lighting, in October 1997 and is responsible for the
overall management of the Company's lighting operations. Mr. Stern co-founded
Bash in 1976 and was responsible for its operations until it was acquired by the
Company in August 1997.
John Wolf. Mr. Wolf joined the Company upon its founding in 1984 and was
appointed Executive Vice President, Project Management in October, 1997. He is
responsible for the technical supervision of all corporate events. Prior to
joining the Company, he worked at McLean Industries as an ocean freight
consultant. Mr. Wolf
52
<PAGE>
received a BS in Mechanical Engineering from Kings Point Academy in 1968. Mr.
Wolf has been responsible for many innovative industrial shows including the
touring attraction for the Marlboro Adventure Team Tour.
William Ennis. Mr. Ennis joined the Company in January 1996 as Senior Vice
President, Lighting and is responsible for the strategic planning and financial
reporting of the Company's lighting operations. From July 1995 to December 1995,
Mr. Ennis served as a consultant to the Company, advising the Company with
respect to acquisitions. Prior to joining the Company, Mr. Ennis served as the
Managing Partner at Ennis, Cavuoto & Company, a consulting and accounting firm,
for twenty years. Mr. Ennis received a BBA from the University of Oklahoma in
1973 and is a Certified Public Accountant.
Roy Sears Jr. Mr. Sears joined the Company upon its founding in 1984 and
was appointed Senior Vice President, Manufacturing in October, 1997. He is
responsible for scenery fabrication and the installation and execution of all
projects. Prior to joining the Company, Mr. Sears worked at Theater Techniques
Associates where he was a production manager. Mr. Sears has been responsible for
the installation of productions including Terminator 2-3D(TM) at Universal
Studios Florida(R) in Orlando and Masquerade Show in the Sky(TM).
Compensation of Advisors
The Company does not currently provide cash compensation to Advisors for
services provided in such capacity. However, the Company has granted Capital
Appreciation Units to each of its Advisors. See "Principal Unitholders."
Compensation of Executive Officers
The following summary compensation table includes individual compensation
information for the Company's Chief Executive Officer for services rendered in
all capacities to the Company for the periods indicated.
Annual Compensation
----------------------------------
Name and Principal Position Year Salary($) Bonus($)
- --------------------------- ---- --------- --------
Jeremiah J. Harris 1996 $ 350,000 $150,000
Chairman and Chief Executive Officer 1995 $ 250,000 $300,000
199 $ 179,400 $360,000
Employment Agreements
The following summary of the material terms of certain employement
agreements with executive officers of the Company, does not purport to be
complete and reference is made the provisions of such employment agreements,
which have been filed as an exhibit to the Registration Statement.
Mr. Harris has an employment agreement with the Company, dated January 1,
1996, providing for a base salary of $350,000, which may be increased by
discretionary bonus payments and incentive compensation. The agreement provides
that the Company may terminate employment for cause (as defined) or upon 45 days
prior written notice. If such agreement is terminated without cause, the Company
is obligated to pay Mr. Harris his base salary and benefits for the period equal
to the longer of (i) the remainder of the term or (ii) the sum of (x) six months
from the termination date and (y) one additional month for each year of service
with the Company or a predecessor entity up to a maximum of six additional
months. The agreement has a three-year term and is automatically extendable for
one-year periods unless either party notifies the other, within 30 days of the
anniversary of such period, that the agreement will not be extended. Mr. Harris
has also agreed not to compete with the Company for a period of one year
following termination of his agreement.
Mr. Miller has an employment agreement with the Company, dated as of July
7, 1997, providing for a base salary of $175,000, which may be increased by
discretionary bonus payments. In addition, the agreement provided for a signing
bonus of $150,000. The Company may terminate employment for cause (as defined).
If such agreement is terminated without cause, or Mr. Miller terminates the
agreement for good reason (as defined), the
53
<PAGE>
Company is obligated to pay him base salary and benefits for the remainder of
the term. The agreement has a five-year term and is automatically extendable for
one-year periods unless either party notifies the other, within six months of
the anniversary of such period, that the agreement will not be extended. Mr.
Miller has agreed not to compete with the Company for a period of two years
following termination of the agreement; provided, however, that if his
employment is terminated by the Company, the covenant not to compete will be
limited to the time in which Mr. Miller receives payment of his base salary. The
employment agreement also provides that Mr. Miller will receive 452,000 Capital
Appreciation Units in the Company, consisting of four tranches of 113,000
Capital Appreciation Units with Threshold Values (as defined) of $55 million,
$70 million, $85 million and $95 million. Each Threshold Value will be reduced
by the amount of the Company's cash distribution to its members with a portion
of the net proceeds from the Initial Offering and the net fair market value of
the real estate transferred in connection with the Real Estate Transaction. See
"Certain Transactions." One-sixth of such units vested at the time of grant and
an additional one-sixth of such units will vest on each of the first through
fifth anniversaries thereof. See "Principal Unitholders."
Mr. Manners has an employment agreement with the Company, dated as of
August 6, 1997, providing for compensation consisting of a base salary of
$175,000, which may be increased by discretionary bonus payments. In addition,
the agreement provides for reimbursement of certain temporary living and moving
expenses associated with Mr. Manners' relocation to New Windsor, NY and a
four-year loan in an amount not to exceed $120,000 in connection with acquiring
a new residence. The Company may terminate employment for cause (as defined). If
such agreement is terminated without cause, or Mr. Manners terminates the
agreement for good reason (as defined), the Company is obligated to pay him base
salary and benefits for the remainder of the term. The agreement has a four-year
term and is automatically extendable for one-year periods unless either party
notifies the other, within six months of the anniversary of such period, that
the agreement will not be extended. Mr. Manners has agreed not to compete with
the Company for a period of two years following termination of the agreement;
provided, however, if his employment is terminated by the Company, the covenant
not to compete will be limited to the time in which Mr. Manners receives payment
of his base salary. The employment agreement also provides that Mr. Manners will
receive 113,000 Capital Appreciation Units in the Company with a Threshold Value
of $55 million, 20% of which were vested at the time of grant and the balance of
which vest 20% on the first, second and third anniversaries of Mr. Manners'
employment with the Company. The Threshold Value will be reduced by the amount
of the Company's cash distribution to its members with a portion of the net
proceeds from the Initial Offering and the net fair market value of the real
estate transferred in connection with the Real Estate Transaction. See "Certain
Transactions." The final 20% of Mr. Manners' units will vest on the fourth
anniversary of Mr. Manners' employment provided that (i) Mr. Manners has not
been terminated for Cause and has not voluntarily departed without good reason
and (ii) the Company has completed an initial public offering and has had a
market capitalization of its outstanding securities of at least $250.0 million
dollars for a ten consecutive trading day period. See "Principal Unitholders."
The other senior executives of the Company also have employment agreements
with the Company on terms similar to those of Mr. Harris, other than
compensation, including agreements not to compete with the Company following
termination of employment.
Unit Plans
The Company maintains the Production Resource Group L.L.C. Restricted
Limited Liability Company Unit Incentive Compensation Plan (the "Restricted
Plan") and the Phantom Limited Liability Company Unit Incentive Compensation
Plan (the "Phantom Plan" and, together with the Restricted Plan, the "Plans").
The Plans were established on January 1, 1996 to optimize profitability and
growth of the Company, to provide rewards for employees and to attract and
retain new employees of the Company. Participation in the Plans is limited to
officers and other key employees who are selected to participate in the Plan. Up
to 750,000 units subject to anti-dilution adjustments may be awarded under each
of the Restricted Plan ("Restricted Units") and the Phantom Plan ("Phantom
Units" and together, with the Restricted Units, the "Units"). The Units, in
addition to any restrictions imposed in the Owners' Agreement are subject to
significant restrictions on transferability, the securities laws and the
Operating Agreement of the Company. Restricted Units entitle the holder to
participate in the appreciation and profits of the Company, but do not allow a
right to participate in management. Phantom Units entitle the holder to receive
a bonus equal to ten dollars per Phantom Unit upon a sale of the Company, or at
such
54
<PAGE>
other time as such employee is entitled to receive payments with respect to
such units. In no event shall a participant be entitled to receive duplicate
payments under the Phantom Plan and the Restricted Plan. Restrictions on the
Units lapse ratably over a specified period as set forth in the grant letter
awarding such Units (the "Restriction Period"); provided, however, that the
Purchase Units are subject to a Restriction Period not to exceed ten years. The
holders of Units still subject to the Restriction Period do not have any rights
under the Operating Agreement other than the right to receive distributions with
respect to such Units. Upon a Change in Control or any termination other than
for Cause (each as defined in the Plans) all restrictions on the Units lapse and
the value thereof becomes immediately payable. Phantom Units will be canceled
without any payments being required thereon upon the occurrence of an initial
public offering of the Company or a successor in interest to the Company.
As of September 30, 1997, Messrs. Baxley and Ennis have been issued 129,980
and 51,992 Units, respectively, for which restrictions lapse in five annual
installments commencing January 1, 1997.
55
<PAGE>
CERTAIN TRANSACTIONS
The Company incurred fees for theatrical management services provided by J.
Harris, Inc., which is owned 50% by Mr. Joseph P. Harris, the father of Jeremiah
J. Harris. In 1996, 1995 and 1994, the Company incurred fees and other charges
of approximately $189,000, $182,000 and $372,000, respectively. In addition, the
Company had revenues from J. Harris, Inc. of approximately $64,000 in 1996. The
Company also subleases approximately 3000 square feet from J. Harris, Inc. at
1500 Broadway, New York, NY, for approximately $109,000 per year, which is equal
to the amount payable by J. Harris, Inc. for its lease on such space.
In 1996, 1995 and 1994, the Company had revenues of approximately $1.9
million, $2.0 million, $253,000, respectively, from an affiliated advertising
and production management company for industrial shows. A majority of the stock
of this company is owned by members of the Company (Messrs. Harris, Baxley,
Gallo, Sears and Wolf own 19%, 2.5%, 9.5%, 9.5%, and 9.5%, respectively). In
addition, the Company receives management fees for administrative services from
this affiliated company for which it was paid $70,500 and $90,000 in 1996 and
1995, respectively.
The Company retained the legal services of Pepe & Hazard LLP during 1996
and 1997. Mr. Manners was a partner at Pepe & Hazard LLP during such period
until joining the Company in August 1997. In connection with Mr. Manners'
employment agreement, the Company extended a four year limited recourse loan,
bearing interest at 6.1%, with approximately $97,000 outstanding as of the date
hereof.
In 1996, 1995 and 1994, the Company paid accounting fees of approximately
$274,000, $243,000 and $118,000, respectively, to Ennis, Cavuoto & Company, a
consulting and accounting firm of which Mr. Ennis, who joined the Company as a
Senior Vice President in January 1996, was a Partner.
On December 24, 1997, the Company redeemed 500,000 SPLLC Units held by
Scenic Properties, L.L.C. ("SPLLC") in exchange for its interests in real
property located in New Windsor, NY and Cornwall-on-Hudson, NY, and the
Company's land in Las Vegas, NV subject to mortgage debt aggregating
approximately $3.7 million. The Company believes the fair market value of such
property to be $8.7 million which approximates its book value of $9.5 million.
All of the equity interests of SPLLC are currently owned by officers and
beneficial owners of the Company (Messrs. Harris, Baxley, Gallo, Sears and Wolf
own 38%, 5%, 19%, 19% and 19%, respectively). The properties transferred to
SPLLC have been leased back to the Company on arm's-length terms. The Company
expects unaffiliated investors to acquire a 51% interest in SPLLC sometime
during the first half of 1998.
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<PAGE>
PRINCIPAL UNITHOLDERS
The following table sets forth certain information as of the date hereof
with respect to the beneficial ownership of the Company's membership interests.
<TABLE>
<CAPTION>
Capital Convertible Percentage
Regular Appreciation Preferred Preferred of Total
Name of Beneficial Owner Units(1) Units(2) Units(3) Units(4) Units(5)
------------------------ -------- ------------ ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
Harris Production Services, Inc.(6)............. 5,000,200 84.5%
Kevin J. Baxley(7).............................. 129,980 2.2
William Ennis(7)................................ 51,992 0.9
Theodore Van Bemmel, Jr......................... 17,241 0.3
Bradley G. Miller(8)............................ 452,000 7.6
Robert A. Manners(9)............................ 113,000 1.9
Robert Cannon(10)...............................
Donald Stern(10)................................
Pro-Mix (11).................................... 79,179 1.3
Kenneth L. Shearer.............................. 54,539 0.9
Joseph W. Bartlett(12).......................... 10,000 *
Thomas D. Lips(12).............................. 3,000 *
Joseph P. Harris(13)............................ 3,000 *
---------- -------- -------- ------
Total......................................... 5,199,413 581,000 133,718 100.0%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Less than .1%.
(1) Regular Units are the only Units entitling the holder to vote in the
Company's business and affairs.
(2) Capital Appreciation Units entitle their holder to an annual return of $0.05
per Unit and upon a sale of the Company, an initial public offering or a similar
event, share in the appreciation of the Company above a specified equity value
(the "Threshold Value").
(3) Convertible Preferred Units have an 8% per annum cumulative distribution
priority. These Units are senior in liquidation preference to the Regular Units
and are convertible into the securities that may be offered to the public by the
Company at the time of any initial public offering at a price equal to 62.5% of
the per share price of any such security. Upon conversion, all accrued
distributions will be eliminated. In addition, holders of Convertible Preferred
Units are entitled to redemption thereof, at the option of holder after the
third anniversary of issuance or notice of an initial public offering, whichever
occurs earlier.
(4) Preferred Units entitle the holder to share in distributions and
appreciation with the Regular Units and have a liquidation preference equal to
the amount paid for such Units ($2,250,000 in the aggregate).
(5) Percentage of Total Units represents the fraction of units held by such
beneficial owner divided by the sum of Regular Units, Capital Appreciation
Units, Convertible Preferred Units and Preferred Units outstanding.
(6) Mr. Jeremiah J. Harris owns 100% of the voting stock of Harris Production
Services, Inc. ("HPS") which owns 96.2% of the voting interests in the Company.
Mr. Harris owns 38% of the economic interests in HPS and the balance of the
economic interests are owned 19% by each of Messrs. Gallo, Sears and Wolf and 5%
by Mr. Baxley.
(7) Restrictions on these units lapse in five annual installments commencing
December 31, 1996. See "Management--Unit Plans."
(8) Mr. Miller has been issued four tranches of Units, each consisting of
113,000 units with Threshold Values, subject to adjustment, of $55 million, $70
million and $85 million and $95 million, respectively. One-sixth of each tranche
was vested at the time of grant with an additional one-sixth of each tranche
vesting on the first through fifth anniversaries of Mr. Miller's employment with
the Company. See "Management--Employment Agreements."
(9) Mr. Manners has been issued units with a $55 million Threshold Value,
subject to adjustment. One-fifth of Mr. Manners' units vested at the time of
grant with an additional one-fifth vesting on the first, second and third
anniversaries of Mr. Manners' employment with the Company. The final one-fifth
of Mr. Manners' units will vest on the fourth anniversary of Mr. Manners'
employment, subject to certain conditions. See "Management--Employment
Agreements."
(10) Messrs. Cannon and Stern, former shareholders of Bash, have an option to
acquire an aggregate amount of up to $3 million of 8% Convertible Preferred
Units in the Company, which option is exercisable through early 1998.
(11) Pro-Mix was granted 79,179 Preferred Units as partial consideration for the
contribution of a portion of its assets to the Company.
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(12) Mr. Bartlett has been issued Capital Appreciation Units with a $55 million
Threshold Value. Three-quarters of such units were vested at the time of grant
and the final one-quarter will vest on the first anniversary of the date of
grant.
(13) Mr. Lips and Mr. Harris have been issued Capital Appreciation Units with a
$55 million Threshold Value, one-half of such units were vested at the time of
grant and one-quarter will vest on each of the first and second anniversaries of
the date of grant.
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DESCRIPTION OF OPERATING AGREEMENT
The rights and obligations of the equityholders of the Company (the
"Members") are governed by the Limited Liability Company Agreement of Production
Resource Group, L.L.C., dated as of August 7, 1995 and amended and restated by
the Amended and Restated Limited Liability Company Agreement, dated as of
January 1, 1996, further amended by the First Amendment to the Amended and
Restated Operating Agreement, dated as of July 12, 1996, and further amended and
restated by the Second Amended and Restated Limited Liability Company Agreement,
dated as of December 1, 1997 (the "Operating Agreement"). The summary herein of
certain provisions of the Operating Agreement does not purport to be complete
and reference is made to the provisions of the Operating Agreement, which has
been filed as an exhibit to the Registration Statement.
Members and History
The original members (the "Initial Members") of the Company were Harris
Production Services, Inc., ("HPS"), ECTS, A Scenic Technology Company, Inc.
("STNY"), ECTS Contracting of Las Vegas, Inc. ("SCLV"), Showpay, Inc.
("Showpay"), Scenic Properties, L.L.C. ("SPLLC") and Theatre Techniques
Associates, Inc. ("TTA"). In December 1997, SCLV, STNY and TTA were merged into
HPS and the Units issued to Showpay were transferred to HPS. Each of the Initial
Members contributed all of their assets, subject to their liabilities to the
Company in July 1996. Ownership interests in the Company are represented by
"Units." In connection with the consummation of the Real Estate Transaction on
December 24, 1997, SPLLC no longer holds membership interests in the Company.
See "Certain Transactions."
Limited Liability
As with a corporation, the Members of the Company are not liable for the
debts, liabilities, contracts or other obligations of the Company in excess of
their capital contributions.
Management
The Company is managed by a board of managers (the "Managers"), currently
consisting of a single manager, Jeremiah J. Harris, which has control over the
business and affairs of the Company. The Members can increase the number of
Managers up to a maximum of nine. The Company's officers are appointed by the
Managers. Except for situations in which the approval of the Members or of the
Board of Advisors (as defined) is expressly required by the Operating Agreement
or by non-waivable provisions of applicable law, the Managers have full and
complete authority, power and discretion to manage and control the business,
affairs and properties of the Company. Managers may be appointed by, or removed
by a majority vote of the Members. Currently, Mr. Harris has the ability to
control such election or removal, as he indirectly owns approximately the 96.2%
of the voting interests in the Company. See "Principal Unitholders."
Description of Units
The Company's Units consist of the following classes: Regular Units;
Preferred Units; Capital Appreciation Units; Preferred Capital Appreciation
Units; and Convertible Preferred Units. Regular Units entitle the holder thereof
to share in the profits and losses of the Company, subject to certain
adjustments, and are the only class of voting equity of the Company. Preferred
Units entitle the holder thereof to the same rights and privileges as holders of
Regular Units, except that the holders of Preferred Units have the right to
receive liquidation distributions prior to the holders of Regular Units and the
Preferred Units do not have voting rights. Capital Appreciation Units entitle
the holder thereof to (i) an annual return of $0.05 per Unit and (ii) share in
the appreciation in the value of the Company upon the occurrence of an Initial
Public Offering (as defined in the Operating Agreement), the sale of
substantially all of the assets of the Company or a sale of fifty percent or
more of the interests in the Company held by the Initial Members; provided that
such holder shall only be entitled to share in the appreciation in value above
the designated value provided in the Operating Agreement. Capital Appreciation
Units rank pari passu with Regular Units in right of payment in the event of a
liquidation of the Company. Preferred Capital Appreciation Units entitle the
holder thereof to the same rights and privileges as holders of Capital
Appreciation Units, except that the holders of Preferred Capital Appreciation
Units have the right to receive liquidation distributions prior to the holders
of
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Regular Units. Convertible Preferred Units entitle the holder thereof to
receive an eight percent per annum cumulative distribution priority. The
Operating Agreement provides that such distribution shall accumulate currently
but not be paid. These Units are senior in liquidation preference to the Regular
Units and are convertible into securities offered by the Company in an Initial
Public Offering at a price equal to 62.5% of the per share price of such
securities. For purposes of such conversion, the Operating Agreement provides
that all accrued distributions will be eliminated. In addition, upon the earlier
of the third anniversary of the issuance of the Convertible Preferred Units or
an Initial Public Offering, the holder of such Units has the option to require
the Company to redeem its Units. The Operating Agreement provides the Managers
with discretion to create other classes or series of Units or other equity
interests in the Company, which Units or other equity interests in the Company
may have voting rights, rights to distributions and allocations, or other rights
that are different from, and superior or inferior to those of, the then-existing
Units. The creation of a new class or classes of Units does not constitute or
require an amendment to the Agreement.
Long-Term Incentive Plan
The Operating Agreement permits the Company to adopt a long-term incentive
plan ("LTIP") under which the Managers are authorized to issue up to 750,000
Units to Managers, officers and employees. Units may also be issued under
employment agreements with the Company's senior managers and to members of the
Company's Board of Advisors. The Managers may authorize the grant of additional
units under the LTIP or otherwise.
Advisory Board
The Company has an advisory board (the "Board of Advisors") to advise it
with respect to the formulation and implementation of the Company's strategic
plan and such other advice as may be requested by the Managers. With the two
exceptions noted below, the Operating Agreement contemplates that members of the
Board of Advisors serve purely an advisory role. The Company is required to
obtain the approval of a majority of the members of the Board of Advisors for
any related party transaction. In addition, the Managers may, by notice to the
Board of Advisors and their written consent, elect to entrust the Board of
Advisors with the rights and responsibilities of a corporate board established
pursuant to the Delaware General Corporation Law. The members of the Board of
Advisors are entitled to compensation for their services as the Managers deem
appropriate, including equity incentives.
Liability, Exculpation and Indemnification
The Operating Agreement provides that no officer, director or other
"Covered Persons" (as defined therein) shall be liable for any act or omission
performed or omitted by such person in good faith on behalf of the Company and
in a manner reasonably believed to be within the scope of such person's
authority, except for acts and omissions involving gross negligence or willful
misconduct. In addition, the Operating Agreement provides that the Company will
indemnify "Covered Persons" for any loss, damage or claim incurred by them by
reason of any act or omission performed or omitted by such person in good faith
on behalf of the Company and in a manner reasonably believed to be within the
scope of authority conferred on such person, unless such loss, damage or claim
was incurred by reason of gross negligence or willful misconduct on behalf of
such "Covered Person."
Assignment
The Operating Agreement, with limited exceptions, prohibits Members from
transferring, assigning or pledging as security for indebtedness its Units, in
whole or in part, except to the Company's senior institutional lender.
Dissolution
The Company shall be dissolved and its affairs shall be wound up upon (i)
the written consent of all Members, (ii) the death, retirement, resignation,
expulsion, bankruptcy or dissolution of a Member who is a Manager or the
occurrence of any other event under the Delaware Limited Liability Company Act
that terminates the continued membership of a Member who is a Manager in the
Company unless, within 90 days after the
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occurrence of such an event, a majority in interest of the remaining Members
agree in writing to continue the business of the Company and to the appointment,
if necessary or desired, effective as of the date of such event, of one or more
additional Members or (iii) the entry of a decree of judicial dissolution under
Section 18-802 of the Delaware Limited Liability Company Act.
Amendments
The Operating Agreement provides for amendment by a majority of the
Members. However, unanimous consent of the affected Members is required to
subject the Members to additional liability. Furthermore, the amendment of any
provision that materially adversely affects the economic interests of a Member
requires the consent of (i) two-thirds in interest of all Members in the case of
an amendment applying in a substantially similar manner to all classes of Units
or (ii) two-thirds in interest of each affected class of Units in the case of
any other amendment.
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DESCRIPTION OF OTHER INDEBTEDNESS
Amended Credit Facility
The Company is party to the Amended Credit Facility. The following is a
summary of the material terms and conditions of the Amended Credit Facility and
is subject to the detailed provisions of the Amended Credit Facility and various
related documents which have been attached as exhibits to the Registration
Statement.
General
The Amended Credit Facility, a five-year senior reducing revolving credit
facility, provides for borrowings in a principal amount of up to $100 million,
subject to certain covenants and conditions. Borrowings may be used by the
Company for working capital, acquisitions and for general corporate purposes. Up
to $30 million of the amount available under the Amended Credit Facility may be
used for acquisitions without approval of the Required Lenders (as defined in
the Amended Credit Facility). Additional acquisitions are permitted without
approval of the Required Lenders provided the Company's total leverage ratio is
less than 3.5 to 1.0 and certain other conditions are met. The Amended Credit
Facility permits the Company to issue up to $150 million of subordinated debt
which indebtedness would include the Initial Offering of the Notes.
Interest Rates; Fees
Amounts outstanding under the Amended Credit Facility bear interest, at the
Company's option, at certain spreads over LIBOR or the greater of the Federal
Funds rate plus 0.50% or BNY's prime rate. The interest rate spreads are
adjusted based on the Company's total leverage ratio. The Company pays a
commitment fee on unused availability of 0.375% to the extent that the Company's
total leverage ratio is greater than or equal to 1.5 to 1.0, and 0.250% if such
ratio is less than 1.5 to 1.0.
Mandatory Prepayments and Commitment Reductions
Amounts outstanding under the Amended Credit Facility are subject to, among
others, the following mandatory prepayments, which will also permanently reduce
commitments under the Amended Credit Facility: (i) up to $25 million from
proceeds of any permitted indebtedness issuance in excess of $100 million by the
Company, (ii) beginning January 1, 1999, if the Company's total leverage ratio
is greater than 3.5 to 1.0, 50% of annual Excess Cash Flow for the prior fiscal
year (including any net proceeds of an equity issuance, as defined in the
Amended Credit Facility) and (iii) 100% of net cash proceeds from asset or
property dispositions (as defined in the Amended Credit Facility).
Collateral and Guarantees
In order to secure their obligations under the Amended Credit Facility, the
Company and each subsidiary party to the security agreement have granted to the
Lenders a continuing security interest in all of their tangible and intangible
assets. In addition, Members of the Company have pledged to the Lenders
substantially all of the membership interests and capital stock of the Company
and its subsidiaries. All existing and future domestic subsidiaries of the
Company guarantee the indebtedness under the Amended Credit Facility. In
addition, HPS and certain other holders of interests in the Company have
guaranteed the obligations of the Company under the Amended Credit Facility.
Covenants
The obligations of the Lenders to lend under the Amended Credit Facility
are subject to the satisfaction of certain conditions precedent, including the
absence of a material adverse change in the affairs of the Company. The Amended
Credit Facility contains various covenants that, subject to specified
exceptions, restrict the ability of the Company and its subsidiaries with
respect to: (i) the incurrence of additional indebtedness and other obligations
and the granting of additional liens; (ii) mergers, acquisitions, investments
and dispositions of assets; (iii) the declaration or payment of Restricted
Payments (as defined in the Amended Credit Facility); (iv) the declaration or
payment of
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dividends; (v) prepayments or repurchases of other indebtedness and amendments
to certain agreements, including the organizational documents and operating
agreement of the Company, the Indenture and the Notes; (vi) engaging in
transactions with affiliates and formation of subsidiaries; (vii) the making of
Investments (as defined in the Amended Credit Facility); and (viii) changes of
lines of business. There are also covenants relating to compliance with ERISA,
environmental and other laws, payment of taxes, maintenance of corporate
existence and rights, maintenance of insurance and financial reporting. Certain
of these covenants are more restrictive than those set forth in the Indenture.
In addition, the Amended Credit Facility requires the Company to maintain
compliance with certain specified financial covenants, including covenants
relating to minimum interest coverage, minimum fixed charge coverage and maximum
leverage. The Amended Credit Facility also prohibits prepayment or defeasance of
the Notes.
Events of Default
The Amended Credit Facility contains customary events of default,
including, without limitation, payment defaults, the occurrence of a Change of
Control (as defined in the Amended Credit Facility) of the Company or its
subsidiaries, the invalidity of guarantees or security documents under the
Amended Credit Facility, any Material Adverse Change (as defined in the Amended
Credit Facility), breach of any representation or warranty under any Loan
Document in the Amended Credit Facility and any cross-default to other
indebtedness of the Company and its subsidiaries. The occurrence of any such
event of default could result in acceleration of the Company's obligations under
the Amended Credit Facility and foreclosure on the collateral securing such
obligations, which could have a material adverse effect on holders of the Notes.
Mortgage Debt
The Company has three mortgages in the principal amount of approximately
$3.9 million, which are collateralized by its properties. The mortgages require
monthly payments of both principal and interest at varying rates ranging from
7.4% to 8.7%. Maturity dates on these mortgages expire on various dates from
June 30, 1997 through June 1, 2025. In connection with the Real Estate
Transaction, the Company's mortgage debt was reduced by $3.7 million.
Treasury Rate Lock
On October 27, 1997 the Company entered into a Treasury Rate Lock agreement
("T-Lock") with Bankers Trust Company (the "Counterparty"), an affiliate of BT
Alex. Brown Incorporated, to hedge against the impact of rising interest rates
on the 10-year Treasury Note (the "Reference Security"). The T-Lock has a
notional amount of $100.0 million. On December 15, 1997, ("Settle Date"), the
rate on the 10-year Reference Security (the "Reference Rate") is compared to the
predetermined Lock Rate (5.863%). If the Reference Rate is above the Lock Rate,
the Counterparty will make a payment to the Company equal to the present value
of the difference between the Reference Rate and the Lock Rate to the maturity
of the reference security. If the Reference Rate is below the Lock Rate, the
Company will make a payment to the Counterparty equal to the present value
difference. On December 5, 1997, the Company elected to terminate the T-Lock and
received payment of $425,000 from the Counterparty.
Interest Rate Swap Agreement
On September 25, 1996, in connection with the Credit Agreement (as defined
in the notes to the Consolidated Financial Statements included elsewhere in this
Prospectus), the Company entered into an interest rate swap agreement ("IRSA")
with The Bank of New York to hedge the impact of fluctuations in interest rates
on its floating rate credit facilities. At December 31, 1996, the IRSA had a
notional amount of $8.75 million, which was subsequently increased to $22.5
million. The estimated fair value of the IRSA at December 31, 1996 was
approximately $58,000, which was based on dealer quoted market prices, and
generally reflected the estimated amount that the Company would have to pay to
terminate the contract. Gains and losses pertaining to the IRSA are recorded
over its life as an adjustment to interest expense. The Company terminated the
IRSA on January 8, 1998, recording a loss of $33,360.
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DESCRIPTION OF NOTES
General
Set forth below is a summary of certain provisions of the New Notes. The
New Notes will be issued under the Indenture among the Issuers, the Guarantors
and the Trustee. This summary does not purport to be complete and reference is
made to the provisions of the Indenture, which has been filed as an exhibit to
the Registration Statement and a copy of the Indenture may be obtained by
contacting the Office of the Secretary and General Counsel at the principal
executive offices of the Company, 539 Temple Road, New Windsor, NY 12553,
telephone (914) 567-5700.
The terms of the New Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), as in effect on the date of the Indenture.
The New Notes are subject to all such terms, and holders of the New Notes (the
"Holders") are referred to the Indenture and the Trust Indenture Act for a
statement of those terms. The statements under this caption relating to the
Notes and the Indenture are summaries and do not purport to be complete. Such
summaries may make use of certain terms defined in the Indenture and are
qualified in their entirety by express reference to the Indenture.
Except as otherwise indicated below, the following summary applied to both
the Old Notes and the New Notes. As used herein, the term "Notes" means the Old
Notes and the New Notes, unless otherwise indicated.
The form and term of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that the New Notes will
be registered under the Securities Act, and therefore such New Notes will not be
subject to certain transfer restrictions, registration rights and related
Liquidate Damages provisions applicable to the Old Notes. See "The Exchange
Offer."
The Notes were issued pursuant to the Indenture among the Issuers, the
Guarantors and First Union National Bank, as trustee (the "Trustee"), in a
private transaction that was not subject to the registration requirements of the
Securities Act. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The Notes are subject to all such
terms, and Holders of Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of the material
provisions of the Indenture does not purport to be complete and is qualified in
its entirety by reference to the Indenture, including the definitions therein of
certain terms used below. Copies of the proposed form of Indenture and
Registration Rights Agreement will be made available to prospective investors as
set forth under the caption "--Additional Information." The definitions of
certain terms used in the following summary are set forth below under the
caption "--Certain Definitions." For purposes of this "Description of Notes,"
the term "Company" refers only to Production Resource Group, L.L.C. and not to
any of its Subsidiaries.
The Notes are general unsecured obligations of the Issuers and are
subordinated in right of payment to all existing and future Senior Debt of the
Issuers. As of September 30, 1997, after giving effect to the Transactions, the
Issuers would have had approximately $1.0 million of consolidated Senior Debt
outstanding. In addition, after consummation of the Initial Offering, the
Company had $100 million of total commitments under the Amended Credit Facility,
of which $0.6 million would have been available as of September 30, 1997, after
giving effect to the Transactions and the terms of the Amended Credit Facility.
The Company and its Subsidiaries would have had additional liabilities
(including trade payables) aggregating approximately $10.7 million. The
Indenture permits the incurrence of additional indebtedness, including
additional Senior Debt, subject to certain restrictions. See "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock."
Finance Corp. will have no outstanding indebtedness other than the Notes.
PRG Finance Corporation ("Finance Corp."), a wholly-owned subsidiary of the
Company incorporated in Delaware, was formed for the purpose of serving as a
co-issuer of the Notes in order to facilitate the Initial Offering. The Company
believes that certain prospective purchasers of the Notes may be restricted in
their ability to purchase debt securities of limited liability companies, such
as the Company, unless such debt securities are jointly issued by a corporation.
Finance Corp. will not have any substantial operations or assets and will not
have any revenues. As a
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result, prospective purchasers of the Notes should not expect Finance Corp. to
participate in servicing the interest and principal obligations on the Notes.
As of the date of the Indenture, all of the Company's Subsidiaries
(including Finance Corp.) were Restricted Subsidiaries. However, under certain
circumstances, the Company is allowed to designate current or future
Subsidiaries (other than Finance Corp.) as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants set forth in the Indenture. The Issuers' payment obligations under the
Notes are jointly and severally guaranteed, on a senior subordinated basis, by
all of the Company's Restricted Subsidiaries (other than Finance Corp.). See
"--Subsidiary Guarantees."
Principal, Maturity and Interest
The Notes are limited in aggregate principal amount to $100 million and
mature on January 15, 2008. Interest on the Notes accrues at the rate of 11 1/2%
per annum and is payable semi-annually in arrears on January 15 and July 15 of
each year, commencing on July 15, 1998, to Holders of record on the immediately
preceding January 1 and July 1. Interest on the Notes accrues from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance. Interest is computed on the basis of a
360-day year comprised of twelve 30-day months.
Principal of and premium, interest and Liquidated Damages, if any, on the
Notes is payable at the office or agency of the Issuers maintained for such
purpose within the City and State of New York or, at the option of the Issuers,
payment of interest and Liquidated Damages, if any, may be made by check mailed
to the Holders of the Notes at their respective addresses set forth in the
register of Holders of Notes; provided that all payments of principal, premium,
interest and Liquidated Damages, if any, with respect to Notes the Holders of
which have given wire transfer instructions to the Company will be required to
be made by wire transfer of immediately available funds to the accounts
specified by the Holders thereof. Until otherwise designated by the Issuers, the
Issuers' office or agency in New York will be the office of the Trustee
maintained for such purpose. The Notes have been issued in denominations of
$1,000 and integral multiples thereof.
Subordination
The payment of principal of and premium, interest and Liquidated Damages,
if any, on the Notes is subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full of all Senior Debt of the Issuers,
whether outstanding on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of either Issuer in a liquidation or
dissolution of such Issuer or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Issuer or its property, an
assignment for the benefit of creditors or any marshalling of either Issuer's
assets and liabilities, the holders of Senior Debt of such Issuer will be
entitled to receive payment in full of all Obligations due in respect of such
Senior Debt (including interest after the commencement of any such proceeding at
the rate specified in the applicable Senior Debt) before the Holders of Notes
will be entitled to receive any payment with respect to the Notes, and until all
Obligations with respect to Senior Debt are paid in full, any distribution to
which the Holders of Notes would be entitled shall be made to the holders of
Senior Debt (except that Holders of Notes may receive Permitted Junior
Securities and payments made from the trust described under the caption "--Legal
Defeasance and Covenant Defeasance").
The Issuers also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under the
caption "--Legal Defeasance and Covenant Defeasance") if (i) a default in the
payment of the principal of or premium, or interest on any Designated Senior
Debt occurs and is continuing beyond any applicable period of grace or (ii) any
other default occurs and is continuing with respect to any Designated Senior
Debt that permits holders of the Designated Senior Debt as to which such default
relates to accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from the holders of such Designated Senior
Debt. Payments on the Notes may and shall be resumed (a) in the case of a
payment default, upon the date on which such default is cured or waived and (b)
in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt has been
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accelerated. No new period of payment blockage may be commenced unless and until
360 days have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice. No nonpayment default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such nonpayment
default shall have been cured or waived for a period of not less than 90
consecutive days.
The Indenture requires that the Trustee or the Holders of the Notes
promptly notify holders of Senior Debt if payment of the Notes is accelerated
because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Issuers who are holders of Senior Debt. As of September 30,
1997, after giving effect to the Transactions, the Issuers would have had
approximately $1.0 million of consolidated Senior Debt outstanding. The Issuers
are able to incur additional Senior Debt in the future, subject to certain
limitations. See "--Certain Covenants--Incurrence of Indebtedness and Issuance
of Disqualified Stock."
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Amended Credit Facility and (ii) any other Senior Debt or Guarantor Senior Debt
permitted under the Indenture the principal amount of which is $25.0 million or
more and that has been designated by the Company as "Designated Senior Debt."
"Guarantor Senior Debt" means with respect to any Guarantor (i) all
Indebtedness of such Guarantor outstanding under Credit Agreements and all
Hedging Obligations with respect thereto, (ii) any other Indebtedness of such
Guarantor permitted to be incurred under the terms of the Indenture, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is subordinated in right of payment to the Subsidiary Guarantee of such
Guarantor and (iii) all Obligations of such Guarantor with respect to the
foregoing.
Notwithstanding anything to the contrary in the foregoing, Guarantor Senior Debt
will not include (a) any liability for federal, state, local or other taxes owed
or owing by such Guarantor, (b) any Indebtedness of such Guarantor to any of its
Subsidiaries or other Affiliates, (c) any trade payables or (d) any Indebtedness
that is incurred in violation of the Indenture.
"Permitted Junior Securities" means Equity Interests in the Company or debt
securities of the Company or the relevant Guarantor that are subordinated to all
Senior Debt (and any debt securities issued in exchange for Senior Debt) or
Guarantor Senior Debt (and any debt securities issued in exchange for Guarantor
Senior Debt), as applicable, to substantially the same extent as, or to a
greater extent than, the Notes are subordinated to Senior Debt or the Subsidiary
Guarantees are subordinated to Guarantor Senior Debt, as applicable, pursuant to
the Indenture.
"Senior Debt" of an Issuer means (i) all Indebtedness of such Issuer
outstanding under Credit Agreements and all Hedging Obligations with respect
thereto, (ii) any other Indebtedness of such Issuer permitted to be incurred
under the terms of the Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is subordinated in right of
payment to the Notes and (iii) all Obligations of such Issuer with respect to
the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Debt of an Issuer does not include (a) any liability for federal, state, local
or other taxes owed or owing by such Issuer, (b) any Indebtedness of such Issuer
to any of its Subsidiaries or other Affiliates, (c) any trade payables or (d)
any Indebtedness that is incurred in violation of the Indenture.
Subsidiary Guarantees
The Issuers' payment obligations under the Notes are jointly and severally
guaranteed (the "Subsidiary Guarantees") by each of the Company's current and
future domestic Restricted Subsidiaries other than Finance Corp. (the
"Guarantors"). The Subsidiary Guarantee of each Guarantor is subordinated in
right of payment to all existing and future Guarantor Senior Debt of such
Guarantor to the same extent as the Notes are subordinated to Senior Debt of the
Issuers. See "--Subordination." As of September 30, 1997, after giving effect to
the Initial Offering and the application of net proceeds therefrom, the
Guarantors would have had no Guarantor Senior Debt outstanding. The Indenture
permits the Guarantors to incur additional indebtedness, including additional
Guarantor Senior Debt, subject to certain restrictions. See "--Certain
Covenants--Incurrence of Indebtedness and Issuance of
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Disqualified Stock." The obligations of each Guarantor under its Subsidiary
Guarantee is limited so as not to constitute a fraudulent conveyance under
applicable law. See "Risk Factors--Fraudulent Conveyance Matters."
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Registration Rights Agreement;
(ii) immediately after giving effect to such transaction, no Default or Event of
Default exists; and (iii) the Company would be permitted by virtue of the
Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect
to such transaction, to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the covenant described
below under the caption "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Disqualified Stock;" provided that the merger of any Guarantor with
or into the Company or another Guarantor under circumstances where the Company
or such Guarantor, as applicable, is the surviving Person shall not be subject
to the foregoing provisions.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "--Repurchase at
the Option of Holders--Asset Sales."
Optional Redemption
The Notes are not redeemable at the Issuers' option prior to January 15,
2003. Thereafter, the Notes are subject to redemption at any time at the option
of the Issuers, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date fixed for redemption, if redeemed during
the twelve-month period beginning on January 15 of the years indicated below:
Year Percentage
---- -----------
2003........................................................ 105.750%
2004........................................................ 103.834%
2005........................................................ 101.917%
2006 and thereafter......................................... 100.000%
Notwithstanding the foregoing, prior to January 15, 2001, the Issuers may
redeem up to 35% of the aggregate principal amount of the Notes originally
issued at a redemption price of 110% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
fixed for redemption, with the net cash proceeds of one or more public offerings
of Capital Stock of the Company (other than Disqualified Stock), provided that
(i) at least 65% of the aggregate principal amount of the Notes originally
issued remains outstanding immediately after the occurrence of such redemption
and (ii) each such redemption shall occur within 90 days after the date of the
closing of any such offering of Capital Stock of the Company.
In addition, at any time prior to January 15, 2003, the Issuers may, at
their option, redeem the Notes, in whole or in part, at a redemption price equal
to 100% of the principal amount thereof plus the applicable Make-Whole Premium.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee
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shall deem fair and appropriate; provided that no Notes of $1,000 or less shall
be redeemed in part. Notices of redemption shall be mailed by first class mail
at least 30 but not more than 60 days before the date fixed for redemption to
each Holder of Notes to be redeemed at its registered address. Notices of
redemption may not be conditional. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. Notes called for redemption
become due on the date fixed for redemption. On and after the date fixed for
redemption, interest ceases to accrue on Notes or portions of them called for
redemption.
Mandatory Redemption
Except as set forth below under the caption "--Repurchase at the Option of
Holders," the Issuers are not required to make mandatory redemption or sinking
fund payments with respect to the Notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, the Issuers are obligated to
make an offer (a "Change of Control Offer") to each Holder of Notes to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Notes at an offer price in cash equal to 101% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date fixed for repurchase (the "Change of Control Payment").
Within ten business days following a Change of Control, the Issuers will mail a
notice to each Holder describing the transaction or transactions that constitute
the Change of Control and offering to repurchase Notes on the date specified in
such notice, which date shall be no earlier than 30 days and no later than 60
days from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by the Indenture and described in such
notice. The Issuers must comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Issuers. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Indenture provides that,
prior to complying with the provisions of this covenant, but in any event within
90 days following a Change of Control, the Issuers will either repay all
outstanding Senior Debt or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Debt to permit the repurchase of Notes
required by this covenant. The Issuers will publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
The Change of Control provisions described above are applicable whether or
not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require the Issuers to
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Amended Credit Facility prohibits, and future Credit Agreements or
other agreements relating to Senior Debt to which the Issuers become a party may
prohibit, the Issuers from purchasing any Notes following a Change of Control
and provide that certain change of control events with respect to the Company
would constitute a default thereunder. In the event a Change of Control occurs
at a time when the Issuers are prohibited from purchasing Notes, the Issuers
could seek the consent of its lenders to the purchase of Notes or could attempt
to refinance the indebtedness that contain such prohibition. If the Issuers do
not obtain such a consent or repay such
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indebtedness, the Issuers will remain prohibited from purchasing Notes. The
Issuers' failure to purchase tendered Notes following a Change of Control would
constitute an Event of Default under the Indenture which would, in turn,
constitute as default under the Amended Credit Facility. In such circumstances,
the subordination provisions in the Indenture would likely restrict payments to
the Holders of Notes. See "--Subordination."
The Issuers are not required to make a Change of Control Offer following a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Issuers and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
Asset Sales
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash; provided that the amount of (a) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet) of
the Company or such Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such Restricted
Subsidiary from further liability and (b) any securities, notes or other
obligations received by the Company or such Restricted Subsidiary from such
transferee that are substantially concurrently converted by the Company or such
Restricted Subsidiary into cash (to the extent of the cash received) shall be
deemed to be cash for purposes of this provision.
Within 270 days of the receipt of any Net Proceeds from an Asset Sale, the
Company may apply such Net Proceeds, at its option, (i) to repay Senior Debt
(and to correspondingly reduce commitments with respect thereto in the case of
revolving borrowings) or (ii) to the acquisition of a controlling interest in a
Permitted Business, the making of a capital expenditure or the acquisition of
other long-term assets, in each case, used or useful in a Permitted Business.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce Senior Debt or otherwise invest such Net Proceeds in any
manner that is not prohibited by the Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $5.0 million, the Issuers will be required to
make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date fixed for purchase, in accordance with the procedures set
forth in the Indenture. To the extent that the aggregate amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for any purpose not otherwise
prohibited by the Indenture. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased as provided above under the
caption "Selection and Notice." Upon completion of an Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
Certain Covenants
Restricted Payments
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiary's Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company or any Restricted Subsidiary) or to any direct or indirect
holders of the Company's Equity Interests in their capacity as such (other than
dividends or distributions (a) payable in Equity Interests (other than
Disqualified Stock) of the Company or (b) to the Company or any Wholly Owned
Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving the Company) any Equity
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Interests of the Company or any direct or indirect parent of the Company (other
than any such Equity Interests owned by the Company or any Wholly Owned
Restricted Subsidiary of the Company); (iii) make any payment on or with respect
to, or purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness of the Company or any Restricted Subsidiary that is subordinated to
the Notes, except a payment of interest or principal at Stated Maturity; or (iv)
make any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant described
below under the caption "--Incurrence of Indebtedness and Issuance of
Disqualified Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of the Indenture (excluding Restricted Payments permitted by
clause (ii) through (v) of the next succeeding paragraph), is less than the sum
of (i) 50% of the Consolidated Net Income of the Company for the period (taken
as one accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus (ii) 100%
of the aggregate net cash proceeds received by the Company as a contribution to
its common equity capital or from the issue or sale since the date of the
Indenture of Equity Interests of the Company (other than Disqualified Stock) or
of Disqualified Stock or debt securities of the Company that have been converted
into such Equity Interests (other than Equity Interests (or Disqualified Stock
or convertible debt securities) sold to a Subsidiary of the Company and other
than Disqualified Stock or convertible debt securities that have been converted
into Disqualified Stock), plus (iii) 50% of any dividends received by the
Company or a Wholly Owned Restricted Subsidiary after the date of the Indenture
from an Unrestricted Subsidiary of the Company, to the extent that such
dividends were not otherwise included in Consolidated Net Income of the Company
for such period, plus (iv) to the extent that any Restricted Investment that was
made after the date of the Indenture is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (A) the cash return of capital with respect to
such Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment, plus (v) $5.0 million.
The foregoing provisions do not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at the date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Equity Interests of the Company or subordinated Indebtedness
of the Company or any Guarantor in exchange for, or out of the net cash proceeds
of the substantially concurrent sale (other than to a Subsidiary of the Company)
of, other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (c)(ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness; (iv) the payment of any dividend by a Restricted
Subsidiary of the Company to the holders of its Equity Interests on a pro rata
basis; (v) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Restricted Subsidiary of the
Company held by any member of the Company's (or any of its Restricted
Subsidiaries") management or board of directors pursuant to any management
equity subscription agreement, stock option agreement or other similar agreement
or any successor arrangement entered into in connection with the reorganization
of the Company as a corporation (provided that such successor arrangement is on
terms substantially similar to the arrangement so replaced); provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $500,000 in any twelve-month period and no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction; (vi) Investments in non-Wholly Owned Restricted
Subsidiaries of the Company in an aggregate amount at any time outstanding not
to exceed $5.0 million; (vii) cash distributions to members of the Company as
described under "Use
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of Proceeds" and the distribution of real estate in connection with the Real
Estate Transaction; (viii) so long as the Company is treated as a partnership
for United States federal income tax purposes, payments by the Company to
members of the Company to satisfy tax obligations to the extent such obligations
are then due and owing, and in accordance with the Tax Sharing Agreement as in
effect on the date of the Indenture; provided that such amounts do not exceed
the amounts that would otherwise be due and owing if the Company and its
Subsidiaries were an independent taxpayer; and (ix) at any time the Company has
$15.0 million of availability under the Amended Credit Facility, a one-time cash
distribution by the Company to its members not to exceed $10.0 million; provided
that the Company shall have delivered to the Trustee, at the time of such
distribution, an Officers' Certificate stating that, in management's reasonable
judgment, based on the Company's operations and cash flow projections the
Company will continue to have $15.0 million of availability under the Credit
Facility for at least the succeeding four quarters.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined in good
faith by the Board of Directors whose resolution with respect thereto shall be
delivered to the Trustee (which shall certify that such valuation has been
approved by a majority of the Independent Directors). Not later than the date of
making any Restricted Payment, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed.
The Board of Directors may designate any Restricted Subsidiary (other than
Finance Corp.) to be an Unrestricted Subsidiary if such designation would not
cause a Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the greatest of (i) the net book value of such Investments at the time
of such designation, (ii) the fair market value of such Investments at the time
of such designation and (iii) the original fair market value of such Investments
at the time they were made. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
Any such designation by the Board of Directors shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions. If, at any time, any
Unrestricted Subsidiary would fail to meet the definition of an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under the caption "--Incurrence of Indebtedness and
Issuance of Disqualified Stock," the Issuers shall be in default of such
covenant). The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under the covenant described under the caption "--Incurrence of
Indebtedness and Issuance of Disqualified Stock," calculated on a pro forma
basis as if such designation had occurred at the beginning of the four-quarter
reference period, and (ii) no Default or Event of Default would be in existence
immediately following such designation.
Incurrence of Indebtedness and Issuance of Disqualified Stock
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) or issue any shares of Disqualified Stock; provided, however,
that, so long as no Default or Event of Default has occurred and is continuing,
the Company and any Guarantor may incur Indebtedness (including Acquired Debt)
or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2.0 to 1,
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determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred or the
Disqualified Stock had been issued at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following (collectively, "Permitted Debt"):
(i) the incurrence by the Company and the Guarantors of Indebtedness under
Credit Agreements in an aggregate amount not to exceed $75 million at any time
outstanding (with letters of credit being deemed to have a principal amount
equal to the maximum potential liability of the Company and the Guarantors
thereunder), less the aggregate amount of all Net Proceeds of Asset Sales
applied to repay any such Indebtedness pursuant to clause (i) of the second
paragraph of the covenant described above under the caption "--Repurchase at the
Option of Holders--Asset Sales;"
(ii) the incurrence by the Company and the Guarantors of Indebtedness
represented by the Notes and the Subsidiary Guarantees;
(iii) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(iv) the incurrence of Indebtedness between or among the Company and any of
its Wholly Owned Restricted Subsidiaries; provided, however, that (a) if the
Company is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full of all Obligations with respect to the
Notes and (b) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the Company
or a Wholly Owned Restricted Subsidiary, and any sale or other transfer of any
such Indebtedness to a Person that is not either the Company or a Wholly Owned
Restricted Subsidiary, shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as
the case may be;
(v) the incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding;
(vi) the guarantee by the Company or any of the Guarantors of Indebtedness
that was permitted to be incurred by another provision of this covenant;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding under this clause (vii), including all
Permitted Refinancing Indebtedness incurred pursuant to clause (ix) below to
refund, refinance or replace any Indebtedness incurred pursuant to this clause
(vii), not to exceed $15 million;
(viii) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company that was not permitted by this clause (viii); and
(ix) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness) that was permitted by the Indenture to be incurred by the first
paragraph of this covenant, or by clauses (ii), (iii), (v), (vi) and (vii) of
this covenant.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (ix) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof.
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Accrual of interest, the accretion of accreted value and the payment of interest
in the form of additional Indebtedness will not be deemed to be an incurrence of
Indebtedness for purposes of this covenant.
Limitation on Other Senior Subordinated Debt
The Indenture provides that (i) the Company will not directly or indirectly
incur any Indebtedness that is subordinate or junior in right of payment to any
Senior Debt and senior in any respect in right of payment to the Notes and (ii)
no Guarantor will incur any Indebtedness that is subordinate or junior in right
of payment to its Guarantor Senior Debt and senior in any respect in right of
payment to such Guarantor's Subsidiary Guarantee.
Liens
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien securing Indebtedness or trade payables on any asset
now owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except Permitted Liens.
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided that the Company and the Guarantors may enter into a sale
and leaseback transaction if (i) the Company or such Guarantor could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt relating to
such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Disqualified Stock" and
(b) incurred a Lien to secure such Indebtedness pursuant to the covenant
described above under the caption "--Liens," (ii) the gross cash proceeds of
such sale and leaseback transaction are at least equal to the fair market value
(as determined in good faith by the Board of Directors and set forth in an
Officers' Certificate delivered to the Trustee, which shall certify that such
valuation has been approved by a majority of the Independent Directors) of the
property that is the subject of such sale and leaseback transaction and (iii)
the transfer of assets in such sale and leaseback transaction is permitted by,
and the proceeds of such transaction are applied in compliance with, the
covenant described above under the caption "--Repurchase at the Option of
Holders--Asset Sales." The foregoing provisions did not prohibit the sale and
leaseback of real estate in connection with the Real Estate Transaction.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, (b) the Amended Credit
Facility as in effect as of the date of the Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the Amended
Credit Facility as in effect on the date of the Indenture, (c) the Indenture,
the Notes and the Subsidiary Guarantees, (d) applicable law, (e) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, provided that,
in the case of Indebtedness, such Indebtedness was permitted by the terms of the
Indenture to be incurred, (f) by reason of customary non-assignment provisions
in leases entered into in the ordinary course of business and consistent with
past practices, (g) purchase money obligations for property acquired
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in the ordinary course of business that impose restrictions of the nature
described in clause (iii) above on the property so acquired, or (h) Permitted
Refinancing Indebtedness, provided that the restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced.
Merger, Consolidation or Sale of Assets
The Indenture provides that neither the Company nor Finance Corp. may
consolidate or merge with or into (whether or not the Company or Finance Corp.,
as the case may be, is the surviving corporation), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets in one or more related transactions, to another corporation, Person or
entity unless (i) the Company or Finance Corp., as the case may be, is the
surviving corporation or the entity or the Person formed by or surviving any
such consolidation or merger (if other than the Company or Finance Corp.) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company or Finance Corp.) or the entity or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made assumes all the obligations of the Company or Finance Corp., as the
case may be, under the Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee; (iii) immediately
after such transaction no Default or Event of Default exists; and (iv) except in
the case of a merger of the Company with or into a Wholly Owned Restricted
Subsidiary of the Company (including the merger of Finance Corp. with or into
the Company at any time when the Company is a corporation), the Company or the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (a) will have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction and
(b) will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "--Incurrence
of Indebtedness and Issuance of Disqualified Stock."
Notwithstanding the foregoing, the Indenture permits the Company to
reorganize as a corporation in accordance with the procedures established in the
Indenture provided that such reorganization is not materially adverse to holders
of Notes (it being recognized that such reorganization shall not be considered
materially adverse to holders of Notes solely because (i) of the accrual of
deferred tax liabilities resulting from such reorganization or (ii) the
successor or surviving corporation (a) is subject to income taxation as an
entity or (b) is considered to be an "includible corporation" of an affiliated
group of corporations within the meaning of Section 1504(a)(1) of the Code or
any similar state or local law) and certain other conditions are satisfied.
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or such Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and a majority of the
Independent Directors and (b) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration in
excess of $7.5 million, an opinion as to the fairness to Company of such
Affiliate Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing. The foregoing
provisions will not prohibit (i) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Restricted
Subsidiary, (ii)
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transactions between or among the Company and/or its Restricted Subsidiaries
and/or Finance Corp.; and (iii) any Restricted Payment that is permitted by the
provisions of the Indenture described above under the caption "--Restricted
Payments."
Independent Directors
From and after the earlier of 30 days after the consummation of the
Exchange Offer or 180 days after the Closing Date, so long as any of the Notes
are outstanding, the Company shall have at least two-thirds of its Board of
Directors who are neither an officer nor an employee of the Company or any of
its Affiliates (the "Independent Directors"). Any transaction requiring the
approval of the majority of the Independent Directors shall be prohibited at any
time that at least two-thirds of the Company's Board of Directors are not
Independent Directors.
Additional Subsidiary Guarantees
The Indenture provides that if the Company or any of its Restricted
Subsidiaries shall acquire or create another Restricted Subsidiary after the
date of the Indenture, or any Unrestricted Subsidiary shall cease to be an
Unrestricted Subsidiary, then such Subsidiary shall execute a Subsidiary
Guarantee of the Notes and deliver an opinion of counsel, in accordance with the
terms of the Indenture.
Payments for Consent
The Indenture provides that neither the Company, Finance Corp. nor any of
the Company's Restricted Subsidiaries will, directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or otherwise, to
any Holder of any Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the Notes unless
such consideration is offered to be paid or is paid to all Holders of the Notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
Business Activities
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses.
Reports
The Indenture provides that upon the consummation of the Exchange Offer or
the effectiveness of the Shelf Registration Statement, as the case may be,
whether or not required by the rules and regulations of the Commission, so long
as any Notes are outstanding, the Company will furnish to the Holders of Notes
(i) all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" that describes the
financial condition and results of operations of the Company and its
consolidated Subsidiaries (showing in reasonable detail, either on the face of
the financial statements or in the footnotes thereto and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
financial condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial information and results of operations
of the Unrestricted Subsidiaries of the Company) and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such reports. In
addition, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities analysts
and prospective investors upon request. In addition, the Issuers will agree
that, for so long as any Notes remain outstanding, they will furnish to the
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Act.
Activities of Finance Corp.
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The Indenture provides that Finance Corp. may not hold any material assets,
become liable for any material obligations or engage in any significant business
activities; provided, however, that Finance Corp. may be a co-obligor or
guarantor with respect to Indebtedness of which the Company is an obligor.
Notwithstanding the foregoing, Finance Corp. shall at all times prior to the
reorganization of the Company as a corporation remain a Wholly Owned Restricted
Subsidiary of the Company.
Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes (whether or not
prohibited by the subordination provisions of the Indenture), (ii) default in
payment when due of the principal of or premium, if any, on the Notes (whether
or not prohibited by the subordination provisions of the Indenture); (iii)
failure by the Company or any Restricted Subsidiary to comply with the
provisions described under the captions "--Repurchase at the Option of
Holders--Change of Control," "--Repurchase at the Option of Holders--Asset
Sales," "--Certain Covenants--Restricted Payments," "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock" or
"--Certain Covenants--Merger, Consolidation or Sale of Assets;" (iv) failure by
the Company or any Restricted Subsidiary for 30 days after written notice by the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes to comply with any of its other agreements in the Indenture or
the Notes; (v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries), whether such Indebtedness or guarantee now exists or
is created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (vi) failure
by the Company or any of its Restricted Subsidiaries to pay final judgments
aggregating in excess of $5.0 million, which judgments are not paid, discharged
or stayed for a period of 60 days; (vii) except as permitted by the Indenture,
any Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor, or any Person acing on behalf of any Guarantor, shall
deny or disaffirm its obligations under its Subsidiary Guarantee; and (viii)
certain events of bankruptcy or insolvency with respect to the Issuers or any of
the Company's Restricted Subsidiaries that constitutes a Significant Subsidiary
or any group of Restricted Subsidiaries of the Company that, taken together,
would constitute a Significant Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Issuers, any Restricted Subsidiary
of the Company that constitutes a Significant Subsidiary or any group of
Restricted Subsidiaries of the Company that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Issuers with
the intention of avoiding payment of the premium that the Issuers would have had
to pay if the Issuers then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
January 15, 2003 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Issuers with the intention of avoiding the
prohibition on redemption of the Notes prior to such date, then the premium
specified in the Indenture shall also become immediately due and payable to the
extent permitted by law upon the acceleration of the Notes.
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The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Issuers are required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuers are required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Advisors, Managers, Officers, Employees,
Incorporators, Members and Stockholders
No director, advisor, manager, officer, employee, incorporator, member or
stockholder of either Issuer or any Guarantor, as such, shall have any liability
for any obligations of the Issuers or any Guarantor under the Notes, the
Subsidiary Guarantees, the Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The Issuers may, at their option and at any time, elect to have all of
their obligations discharged with respect to the outstanding Notes and to have
each Guarantor's obligation discharged with respect to its Subsidiary Guarantee
("Legal Defeasance") except for (i) the rights of Holders of outstanding Notes
to receive payments in respect of the principal of and premium, interest and
Liquidated Damages, if any, on the Notes when such payments are due from the
trust referred to below, (ii) the Issuers' obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Issuers' obligations in connection
therewith and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Issuers may, at their option and at any time, elect to have the
obligations of the Issuers and each Guarantor released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under the caption
"Events of Default" will no longer constitute an Event of Default with respect
to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Issuers must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of and premium, interest and Liquidated Damages, if any, on
the outstanding Notes on the stated maturity or on the applicable date fixed for
redemption, as the case may be, and the Issuers must specify whether the Notes
are being defeased to maturity or to a particular date fixed for redemption;
(ii) in the case of Legal Defeasance, the Issuers shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to the
Trustee confirming that (a) the Issuers have received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon, such opinion of counsel shall
confirm that, the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Issuers shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit) or insofar as Events of
Default from
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bankruptcy or insolvency events are concerned, at any time in the period ending
on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant
Defeasance will not result in a breach or violation of, or constitute a default
under any material agreement or instrument (other than the Indenture) to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound; (vi) the Issuers shall have delivered to the
Trustee an opinion of counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; (vii) the Issuers shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Issuers with
the intent of preferring the Holders of Notes over the other creditors of the
Issuers with the intent of defeating, hindering, delaying or defrauding
creditors of the Issuers or others; and (viii) the Issuers shall have delivered
to the Trustee an Officers' Certificate and an opinion of counsel, each stating
that all conditions precedent provided for relating to the Legal Defeasance or
the Covenant Defeasance have been complied with.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Issuers may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Issuers are not required to transfer or exchange any Note
selected for redemption. Also, the Issuers are not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed. The registered Holder of a Note will be treated as the owner of it for
all purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture,
the Notes and the Subsidiary Guarantees may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Notes), and any
existing default or compliance with any provision of the Indenture, the Notes or
the Subsidiary Guarantees may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, interest or Liquidated
Damages, if any, on the Notes (except a rescission of acceleration of the Notes
by the Holders of at least a majority in aggregate principal amount of the Notes
and a waiver of the payment default that resulted from such acceleration), (v)
make any Note payable in money other than that stated in the Notes, (vi) make
any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of Holders of Notes to receive payments of principal of
or premium, interest or Liquidated Damages, if any, on the Notes, (vii) waive a
redemption payment with respect to any Note (other than a payment required by
one of the covenants described above under the caption "--Repurchase at the
Option of Holders"), (viii) release any Guarantor from its Subsidiary Guarantee
or (ix) make any change in the foregoing amendment and waiver provisions. In
addition, any amendment to the provisions of Article 10 of the Indenture (which
relate to subordination) will require the consent of the Holders of at least 75%
in aggregate principal amount of the Notes then outstanding if such amendment
would adversely affect the rights of Holders of Notes, and the written consent
of holders of Designated Senior Debt.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Issuers, a Guarantor (with respect to a Subsidiary Guarantee or the
Indenture to which it is a party) and the Trustee may amend or supplement the
Indenture, the Notes or any Subsidiary Guarantee to cure any ambiguity, defect
or inconsistency, to provide for uncertificated Notes in addition to or in place
of certificated Notes, to provide for the assumption of the Company's, Finance
Corp.'s or any Guarantor's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely
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affect the legal rights under the Indenture of any such Holder or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuers, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent person in the
conduct of his or her own affairs. Subject to such provisions, the Trustee will
be under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
Additional Information
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to Production Resource
Group, L.L.C., 539 Temple Hill Road, New Windsor, New York 12553, Attention:
Chief Financial Officer.
Book-Entry, Delivery and Form
The Notes are being offered and sold (a) to "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act) in reliance on the
exemption from the registration requirements of the Securities Act provided by
Rule 144A ("Rule 144A Notes") and (b) outside the United States in reliance on
Regulation S under the Securities Act ("Regulation S Notes"). Except as set
forth below, Notes will be issued in registered, global form without interest
coupons in minimum denominations of $1,000 and integral multiples of $1,000 in
excess thereof. The Old Notes were issued at the closing of the Initial Offering
only against payment in immediately available funds.
Rule 144A Notes initially will be represented by one or more Notes in
registered, global form without interest coupons (collectively, the "Rule 144A
Global Notes"). The Rule 144A Global Notes will be deposited upon issuance with
the Trustee as custodian for The Depository Trust Company ("DTC"), in New York,
New York, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant in DTC as described
below.
Regulation S Notes initially will be represented by one or more temporary
Notes in registered, global form without interest coupons (collectively, the
Regulation S Temporary Global Notes"). The Regulation S Temporary Global Notes
will be deposited on behalf of the subscribers thereof with a custodian for DTC.
The Regulation S Temporary Global Notes will be registered in the name of a
nominee of DTC for credit to the subscribers' respective accounts at the
Euroclear System ("Euroclear") and Cedel Bank, S.A. ("Cedel Bank"). Beneficial
interests in the Regulation S Temporary Global Notes may be held only through
Euroclear or Cedel Bank.
After the occurrence of (i) the expiration of a 40-day restricted period,
as defined under Regulation S (the "Restricted Period"), or (ii) the exchange of
a beneficial interest in the Regulation S Global Notes for a beneficial interest
in a global note representing Exchange Notes upon consummation of the Exchange
Offer and upon delivery of certification that the beneficial owners thereof are
not U.S. persons (as defined in Rule 902(o) under the Securities Act) or that
such beneficial owners purchased such Notes in a transaction that did not
require registration under the Securities Act and are in the process of
obtaining a beneficial interest in the Rule 144A Global Note in exchange for
their beneficial interest in the Regulation S Temporary Global Note, a
beneficial interest in the Regulation S Temporary Global Note may be exchanged
for an interest in one or more permanent Notes in
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registered, global form without interest coupons (collectively, the "Regulation
S Permanent Global Notes" and, together with the Regulation S Temporary Global
Notes, the "Regulation S Global Note") (the Regulation S Global Note and the
144A Global Note collectively, the "Global Notes") which is expected to be
deposited with the Trustee as custodian for, and registered in the name of, a
nominee of DTC. Investors may hold beneficial interests in the Regulation S
Permanent Global Note through organizations other than Euroclear and Cedel Bank
that are Participants in DTC's system. Euroclear and Cedel Bank will hold
interests in the Regulation S Global Note on behalf of their Participants
through customers' securities accounts in their respective names on the books of
their respective depositaries, which are Morgan Guaranty Trust Company of New
York, Brussels office, as operator of Euroclear, and Citibank, N.A., as operator
of Cedel Bank. In turn, each of Euroclear and Cedel Bank will hold such
interests in the Regulation S Global Note in customers' securities accounts in
its name on the books of DTC.
The Notes that are issued as described below under the caption
"--Certificated Securities" will be issued in the form of registered definitive
certificates (the "Certificated Securities"). Such Certificated Securities may,
unless the Global Notes have previously been exchanged for Certificated
Securities, be exchanged for an interest in a Global Note representing the
principal amount of Notes being transferred.
DTC is a limited-purpose trust company that was created to hold securities
for its participating organizations (collectively, the "Participants" or the
"Depositary's Participants") and to facilitate the clearance and settlement of
transactions in such securities between Participants through electronic
book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the DTC's system is also available to other entities
such as banks, brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depositary's Indirect Participants") that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only thorough the Depositary's Participants or the
Depositary's Indirect Participants.
The Issuers expect that, pursuant to procedures established by DTC, (i)
upon deposit of the Global Notes, DTC will credit the accounts of Participants
designated by the Initial Purchasers with portions of the principal amount of
the Global Notes and (ii) ownership of the Notes evidenced by the Global Notes
will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by DTC (with respect to the interests of the
Depositary's Participants), the Depositary's Participants and the Depositary's
Indirect Participants. Prospective purchasers are advised that the laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer Notes evidenced
by the Global Notes will be limited to such extent.
Beneficial interests in one Global Note may be transferred to a person who
takes delivery in the form of a beneficial interest in another Global Note only
upon receipt by the Trustee of a written certification (in the form provided in
the Indenture) to the effect that such transfer is being made in accordance with
the Indenture and with the Securities Act and any applicable securities laws of
any state of the United States or any other jurisdiction. Any beneficial
interest in one of the Global Notes that is transferred to a person who takes
delivery in the form of a beneficial interest in another Global Note will, upon
transfer, cease to be a beneficial interest in such Global Note and become a
beneficial interest in the other Global Note and accordingly, will thereafter be
subject to all transfer restrictions, if any, and other procedures applicable to
beneficial interests in such other Global Note for as long as it remains such a
beneficial interest.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Notes. Beneficial owners of Notes evidenced by the
Global Notes will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Issuers nor the Trustee will have any responsibility or liability for any aspect
of the records of DTC or for maintaining, supervising or reviewing any records
of DTC relating to the Notes.
Payments in respect of the principal of and premium, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under
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the terms of the Indenture, the Issuers and the Trustee may treat the persons in
whose names Notes, including the Global Notes, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Issuers nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes. The Issuers believe,
however, that it is currently the policy of DTC to immediately credit the
accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of DTC. Payments by the Depositary's
Participants and the Depositary's Indirect Participants to the beneficial owners
of Notes will be governed by standing instructions and customary practice and
will be the responsibility of the Depositary's Participants or the Depositary's
Indirect Participants.
Additional Information Concerning Euroclear and Cedel Bank
Euroclear and Cedel Bank hold securities for participating organizations
and facilitate the clearance and settlement of securities transactions between
their respective participants through electronic book-entry changes in accounts
of such participants. Euroclear and Cedel Bank provide to their participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Euroclear and Cedel Bank interface with domestic securities markets.
Euroclear and Cedel Bank participants are financial institutions such as
underwriters, securities brokers and dealers, banks, trust companies and certain
other organizations. Indirect access to Euroclear and Cedel Bank is also
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodian relationship with a Euroclear or Cedel
Bank participant, either directly or indirectly.
When beneficial interests are to be transferred from the account of a
Participant (other than Morgan Guaranty Trust Company of New York and Citibank,
N.A., as depositaries for Euroclear and Cedel Bank, respectively) to the account
of a Euroclear participant or a Cedel Bank participant, the purchaser must send
instructions to Euroclear or Cedel Bank through a participant at least one
business day prior to settlement. Euroclear or Cedel Bank, as the case may be,
will instruct Morgan Guaranty Trust Company of New York or Citibank, N.A. to
receive the beneficial interests against payment. Payment will include interest
attributable to the beneficial interest from and including the last payment date
to and excluding the settlement date, on the basis of a calendar year consisting
of twelve 30-day calendar months. For transactions settling on the 31st day of
the month, payment will include interest accrued to and excluding the first day
of the following month. Payment will then be made by Morgan Guaranty Trust
Company of New York or Citibank, N.A., as the case may be, to the Participant's
account against delivery of the beneficial interests. After settlement has been
completed, the beneficial interests will be credited to the respective clearing
systems and by the clearing system, in accordance with its usual procedures, to
the Euroclear participants' or Cedel Bank participants' account. Credit for the
beneficial interests will appear on the next business day (European time) and
the cash debit will be back-valued to, and interest attributable to the
beneficial interests will accrue from, the value date (which would be the
preceding business day when settlement occurs in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the Euroclear or
Cedel Bank cash debit will instead be valued as of the actual settlement date.
Euroclear participants and Cedel Bank participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to pre-position
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Euroclear or Cedel Bank. Under
this approach, such participants may take on credit exposure to Euroclear or
Cedel Bank until the beneficial interests are credited to their accounts one day
later. Finally, day traders that use Euroclear or Cedel Bank and that purchase
beneficial interests from Participants for credit to Euroclear participants or
Cedel Bank participants should note that these trades would automatically fall
on the sale side unless affirmative action were taken to avoid these potential
problems.
Due to time zone differences in their favor, Euroclear participants and
Cedel Bank participants may employ their customary procedures for transactions
in which beneficial interests are to be transferred by the respective clearing
system, through Morgan Guaranty Trust Company of New York or Citibank, N.A., to
another Participant. The seller must send instructions to Euroclear or Cedel
Bank through a participant at least one business day prior to settlement. In
these cases, Euroclear or Cedel Bank will instruct Morgan Guaranty Trust Company
of New York or Citibank, N.A., as the case may be, to credit the beneficial
interests to the Participant's account against payment. Payment will include
interest attributable to the beneficial interest from and including the last
payment date to and
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excluding the settlement date on the basis of a calendar year consisting of
twelve 30-day calendar months. For transactions settling on the 31st day of the
month, payment will include interest accrued to and excluding the first day of
the following month. The payment will then be reflected in the account of the
Euroclear participant or Cedel Bank participant the following business day, and
receipt of the cash proceeds in the Euroclear or Cedel Bank participant's
account will be back-valued to the value date (which would be the preceding
business day, when settlement occurs in New York). If the Euroclear participant
or Cedel Bank participant has a line of credit with its representative clearing
system and elects to draw on such line of credit in anticipation of receipt of
the sale proceeds in its account, the back-valuation may substantially reduce or
offset any overdraft charges incurred over that one-day period. If settlement is
not completed on the intended value date (i.e., if trade fails), receipt of the
cash proceeds in the Euroclear or Cedel Bank participant's account would instead
be valued as of the actual settlement date.
Certificated Securities
Subject to certain conditions, any person having a beneficial interest in a
Global Note may, upon request to the Trustee, exchange such beneficial interest
for Notes in the form of Certificated Securities. Upon any such issuance, the
Trustee is required to register such Certificated Securities in the name of, and
cause the same to be delivered to, such person or persons (or the nominee of any
thereof). All such certificated Notes are subject to the legend requirements
described in the Offering Memorandum under the caption "Notice to Investors." In
addition, if (i) the Issuers notify the Trustee in writing that DTC is no longer
willing or able to act as a depositary and the Issuers are unable to locate a
qualified successor within 90 days or (ii) the Issuers, at their option, notify
the Trustee in writing that they elect to cause the issuance of Notes in the
form of Certificated Securities under the Indenture, then, upon surrender by the
Global Note Holder of the Global Notes, Notes in such form will be issued to
each person that the Global Note Holder and DTC identify as being the beneficial
owner of the related Notes.
Neither the Issuers nor the Trustee will be liable for any delay by the
Global Note Holder or DTC in identifying the beneficial owners of Notes and the
Issuers and the Trustee may conclusively rely on, and will be protected in
relying on, instructions from the Global Note Holder or DTC for all purposes.
Same-Day Settlement and Payment
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, interest and Liquidated Damages,
if any) be made by wire transfer of immediately available funds to the accounts
specified by the Global Note Holder. With respect to Certificated Securities,
the Issuers will make all payments of principal, premium, interest and
Liquidated Damages, if any, by wire transfer of immediately available funds to
the accounts specified by the Holders thereof or, if no such account is
specified, by mailing a check to each such Holder's registered address.
The Notes represented by the Global Notes are expected to be eligible to
trade in the PORTAL market and to trade in DTC's Same-Day Funds Settlement
System, and any permitted secondary market trading activity in such Notes will,
therefore, be required by DTC to be settled in immediately available funds. The
Issuers expect that secondary trading in the Certificated Securities will also
be settled in immediately available funds.
Registration Rights; Liquidated Damages
The Issuers, the Guarantors and the Initial Purchasers entered into the
Registration Rights Agreement on December 24, 1997. Pursuant to the Registration
Rights Agreement, the Issuers and the Guarantors agreed to file with the
Commission the Exchange Offer Registration Statement on the appropriate form
under the Securities Act with respect to the Exchange Notes. Upon the
effectiveness of the Exchange Offer Registration Statement, the Issuers will
offer to the Holders of Transfer Restricted Securities pursuant to the Exchange
Offer who are able to make certain representations the opportunity to exchange
their Transfer Restricted Securities for Exchange Notes. If (i) the Issuers and
the Guarantors are not required to file the Exchange Offer Registration
Statement or permitted to consummate the Exchange Offer because the Exchange
Offer is not permitted by applicable law or Commission policy or (ii) any Holder
of Transfer Restricted Securities notifies the Company prior to the 20th day
following consummation of the Exchange Offer that (a) it is prohibited by law or
Commission policy from participating in the Exchange Offer or (b) that it may
not resell the Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the prospectus contained in the Exchange
Offer Registration Statement is not
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appropriate or available for such resales or (c) that it is a broker-dealer and
owns Notes acquired directly from the Issuers or an affiliate of the Issuers,
the Issuers and the Guarantors will file with the Commission a Shelf
Registration Statement to cover resales of the Notes by the Holders thereof who
satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. The registration statement to
be declared effective as promptly as possible by the Commission. For purposes of
the foregoing, "Transfer Restricted Securities" means each Note until (i) the
date on which such Note has been exchanged by a person other than a
broker-dealer for an Exchange Note in the Exchange Offer, (ii) following the
exchange by a broker-dealer in the Exchange Offer of Old Note for a New Note,
the date on which such New Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Old Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iv) the date
on which such Old Note is distributed to the public pursuant to Rule 144 under
the Act.
The Registration Rights Agreement provides that (i) the Issuers and the
Guarantors will file an Exchange Offer Registration Statement with the
Commission on or prior to 60 days after the date of the original issuance of the
Old Note, (ii) the Issuers and the Guarantors will use their best efforts to
have the Exchange Offer Registration Statement declared effective by the
Commission on or prior to 150 days after the date of the original issuance of
the Old Note, (iii) unless the Exchange Offer would not be permitted by
applicable law or Commission policy, the Issuers will commence the Exchange
Offer and use its best efforts to issue, on or prior to 30 business days after
the date on which the Exchange Offer Registration Statement was declared
effective by the Commission, New Notes in exchange for all Old Notes tendered
prior thereto in the Exchange Offer and (iv) if obligated to file the Shelf
Registration Statement, the Issuers and the Guarantors will use their best
efforts to file the Shelf Registration Statement with the Commission on or prior
to 60 days after such filing obligation arises and to cause the Shelf
Registration to be declared effective by the Commission on or prior to 150 days
after such obligation arises. If (a) the Issuers and the Guarantors fail to file
any of the Registration Statements required by the Registration Rights Agreement
on or before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c) the
Issuers fail to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (d) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (d) above a "Registration Default"),
then the Issuers and the Guarantors will pay Liquidated Damages to each Holder
of Notes, with respect to the first 90-day period immediately following the
occurrence of the first Registration Default, in an amount equal to one-half of
one percentage point (0.5%) per annum of the principal amount of Notes held by
such Holder. The amount of the Liquidated Damages will increase by an additional
one-half of one percent (0.5%) per annum for each subsequent 90-day period until
all Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages of two percent (2.0%) per annum. All accrued Liquidated Damages will be
paid by the Issuers on each Damages Payment Date to the Global Note Holder by
wire transfer of immediately available funds or by federal funds check and to
Holders of Certificated Securities by wire transfer to the accounts specified by
them or by mailing checks to their registered addresses if no such accounts have
been specified. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
Holders of Old Notes will be required to make certain representations to
the Issuers (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
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"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Equity Interests of a Person
shall be deemed to be control.
"Amended Credit Facility" means that certain Credit Facility, dated as of
July 31, 1997, by and among the Company, the lenders party thereto and Bank of
New York, as Agent, as amended by Amendment No. 1, dated as of December 18,
1997, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback), excluding sales of services and products in the ordinary course of
business consistent with past practices (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole will be governed by the
provisions of the Indenture described above under the caption "--Repurchase at
the Option of Holders--Change of Control" and/or the provisions described above
under the caption "--Certain Covenants-- Merger, Consolidation or Sale of
Assets" and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by the Company or any of its Subsidiaries of Equity Interests of
any of the Company's Subsidiaries, in the case of either clause (i) or (ii),
whether in a single transaction or a series of related transactions (a) that
have a fair market value in excess of $1.0 million or (b) for net proceeds in
excess of $1.0 million. Notwithstanding the foregoing: (i) a transfer of assets
by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned
Restricted Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary,
(iii) the transfer of obsolete equipment in the ordinary course of business,
(iv) the sale and leaseback of any assets within 90 days of the acquisition of
such assets and (v) a Restricted Payment that is permitted by the covenant
described above under the caption "--Certain Covenants--Restricted Payments"
will not be deemed to be Asset Sales. Notwithstanding the foregoing, the Real
Estate Transaction will not be deemed to be an Asset Sale.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Board of Directors" means (i) in respect of a limited liability company,
the board of advisors of the Company, (ii) in respect of a corporation, the
board of directors of the Company, or any authorized committee thereof, and
(iii) in respect of any other Person, the board or committee of the Company
serving a similar function.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
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"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500.0 million and a Thompson Bank Watch Rating
of "B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above and (v) commercial paper having the highest
rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation and in each case maturing within six months after the date of
acquisition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than one or more Principals or Related Parties, (ii) the adoption of
a plan relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than the Principals and their Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 35% of the Voting Equity
Interests of the Company (measured by voting power rather than number of shares)
or (iv) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors. Notwithstanding the
foregoing, the reorganization of the Company as a corporation shall not be
deemed to constitute a Change of Control, so long as such reorganization does
not result in any of the occurrences described above under clauses (i) through
(iv).
"Consolidated EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus, to the extent
deducted in computing such Consolidated Net Income, (i) an amount equal to any
extraordinary loss plus any net loss realized in connection with an Asset Sale,
(ii) provision for taxes based on income or profits, (iii) consolidated interest
expense whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations); (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash charges (including non-cash equity based compensation
charges but excluding any such non-cash charge to the extent that it represents
an accrual of or reserve for cash charges in any future period or amortization
of a prepaid cash expense that was paid in a prior period); (v) an amount equal
to all premiums paid on prepayments of Indebtedness; and (vi) in the case of
calculations with respect to the Company, the amount of any tax payments to its
members pursuant to clause (viii) of the second paragraph of the covenant
described above under the caption "--Certain Covenants--Restricted Payments" or,
following the reorganization of the Company as a corporation, any tax sharing
payment made pursuant to a tax sharing agreement executed in connection
therewith, in each case, on a consolidated basis and determined in accordance
with GAAP. Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization of, a Restricted
Subsidiary of a Person shall be added to Consolidated Net Income to compute
Consolidated EBITDA only to the extent (and in the same proportion) that the Net
Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to the Company by
such Restricted Subsidiary without prior approval (that has not been obtained)
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted
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Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Wholly Owned Restricted Subsidiary thereof,
(ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded, (iv) the
cumulative effect of a change in accounting principles shall be excluded, (v)
the Net Income (but not loss) of any Unrestricted Subsidiary shall be excluded,
whether or not distributed to the Company or one of its Restricted Subsidiaries
and (vi) in the case of calculations with respect to the Company, the amount of
any tax payments to its members pursuant to clause (viii) of the second
paragraph of the covenant described above under the caption "--Certain
Covenants--Restricted Payments" shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (a) the consolidated equity of the common stockholders or members, as
applicable, of such Person and its consolidated Subsidiaries as of such date,
plus (b) the respective amounts reported on such Person's balance sheet as of
such date with respect to any series of preferred stock (other than Disqualified
Stock) that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (i) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the date of the Indenture
in the book value of any asset owned by such Person or a consolidated Subsidiary
of such Person, (ii) all investments as of such date in unconsolidated
Subsidiaries and in Persons that are not Subsidiaries and (iii) all unamortized
debt discount and expense and unamortized deferred charges as of such date, in
each case, determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Credit Agreements" means one or more debt facilities (including, without
limitation, the Amended Credit Facility) or commercial paper facilities with
banks or other institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time. Indebtedness under Credit Agreements outstanding on the
date on which Notes are first issued and authenticated under the Indenture shall
be deemed to have been incurred on such date in reliance on the exception
provided by clause (i) of the definition of Permitted Debt.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the Holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness in existence on the date of the
Indenture (other than Indebtedness under the Amended Credit Facility), until
such Indebtedness is repaid.
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"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), (ii) the consolidated
interest expense of such Person and its Restricted Subsidiaries that was
capitalized during such period, (iii) any interest expense on Indebtedness of
another Person that is guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such guarantee or Lien is called upon)
and (iv) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated EBITDA of such Person for such period to
the Fixed Charges of such Person and its Restricted Subsidiaries for such
period. In the event that the Company or any of its Restricted Subsidiaries
incurs, assumes, guarantees or redeems any Indebtedness (other than revolving
credit borrowings) or issues preferred stock subsequent to the commencement of
the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated EBITDA for such reference
period shall be calculated without giving effect to clause (iii) of the proviso
set forth in the definition of Consolidated Net Income, (ii) the Consolidated
EBITDA attributable to discontinued operations, as determined in accordance with
GAAP, and operations or businesses disposed of prior to the Calculation Date,
shall be excluded and (iii) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but only to the
extent that the obligations giving rise to such Fixed Charges will not be
obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, (i) any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of
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the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, (ii) all indebtedness of others secured by a
Lien on any asset of such Person (whether or not such indebtedness is assumed by
such Person) and (iii) to the extent not otherwise included, the guarantee by
such Person of any indebtedness of any other Person.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP
(excluding equity in undistributed earnings). If the Company or any Subsidiary
of the Company sells or otherwise disposes of any Equity Interests of any direct
or indirect Subsidiary of the Company such that, after giving effect to any such
sale or disposition, such Person is no longer a Subsidiary of the Company, the
Company shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in the
third paragraph of the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Make-Whole Premium" means, with respect to a Note, an amount equal to the
greater of (i) 5.75% of the outstanding principal amount of such Note and (ii)
the excess of (a) the present value of the remaining interest, premium and
principal payments due on such Note as if such Note was redeemed on January 15,
2003, computed using a discount rate equal to the Treasury Rate plus 50 basis
points, over (b) the outstanding principal amount of such Note.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness: (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise) or (c) constitutes the lender; (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness (other than the Notes being
offered hereby) of the Company or any of its Restricted Subsidiaries to declare
a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its
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stated maturity; and (iii) as to which the lenders have been notified in writing
that they will not have any recourse to the stock or assets of the Company or
any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" shall mean and include products and services furnished
in the live entertainment (live theater, concert touring and special events),
corporate events (trade and industrial shows) and themed entertainment (gaming,
theme parks and themed retail) markets, including but not limited to (i) scenery
and exhibit fabrication, (ii) computerized motion and show control systems,
including the Company's proprietary Stage Command System(R), (iii) theatrical
lighting systems and related products, and (iv) project management, which
encompasses design engineering, budgeting, logistical coordination and
installation. Without limiting the foregoing, "Permitted Business" shall include
lines of businesses which are related or complementary to any of the above,
including the acquisition and ownership of firms which are principally but not
exclusively engaged in one or more of the above lines, and any businesses which
are, in the reasonable judgment of the Board of Directors, logical extensions of
any of the above.
"Permitted Investments" means (i) any Investment in the Company or in a
Wholly Owned Restricted Subsidiary of the Company; (ii) any Investment in Cash
Equivalents; (iii) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment (a) such Person
becomes a Wholly Owned Restricted Subsidiary of the Company or (b) such Person
is merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Wholly Owned Restricted Subsidiary of the Company; (iv) any Restricted
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with the covenant
described above under the caption "--Repurchase at the Option of Holders--Asset
Sales;" (v) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company; (vi) advances
and loans to employees of the Company and its Restricted Subsidiaries in the
ordinary course of business; (vii) Investments acquired by the Company or any of
its Restricted Subsidiaries in exchange for any other Investments or accounts
receivable held by the Company or such Restricted Subsidiary in connection with
or as result of a bankruptcy, workout, reorganization or recapitalization of the
issuer of such Investment or accounts receivable; (viii) any Hedging Obligation;
and (ix) other Investments in any Person, when taken together with all other
Investments made pursuant to this clause (ix) that are at the time outstanding,
not to exceed $5.0 million.
"Permitted Liens" means (i) Liens securing Senior Debt or Guarantor Senior
Debt of the Company and its Restricted Subsidiaries that was permitted by the
terms of the Indenture to be incurred; (ii) Liens in favor of the Company or any
of its Restricted Subsidiaries; (iii) Liens on property of a Person existing at
the time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary of the Company; provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company; (iv) Liens on property existing at the time of acquisition thereof by
the Company or any Restricted Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such acquisition; (v)
Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (vi) Liens to secure Indebtedness (including
Capital Lease Obligations) incurred in connection with the acquisition of assets
by the Company or its Restricted Subsidiaries permitted by the covenant
described under the caption "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Disqualified Stock;" provided that (a) such Indebtedness was
incurred by the prior owner of such assets prior to such acquisition and was not
incurred in connection with, or in contemplation of, such acquisition and (b)
such Lien covers only the assets acquired with such Indebtedness; (vii) Liens
existing on the date of the Indenture; (viii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefore;
(ix) Liens of landlords or of mortgagees of landlords arising by operation of
law, provided that the rental payments secured thereby are not yet due and
payable; (x) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security; (xi) easements, rights-of-way, restrictions, minor defects
or irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of the Company or any of
its Restricted Subsidiaries; (xii) judgment or attachment
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Liens not giving rise to an Event of Default; (xiii) Liens arising out of the
purchase, consignment, shipment or storage of inventory or other goods in the
ordinary course of business; (xiv) any interest or title of a lessor in property
subject to any Capital Lease Obligation or other lease; (xv) Liens arising from
filing Uniform Commercial Code financing statements regarding leases; (xvi)
leases or subleases permitted by the Indenture that are granted to others and do
not interfere in any material respect with the business of the Company or any
Restricted Subsidiary, (xvii) any interest or title of a lessor in the property
subject to any lease, whether characterized as capitalized or operating other
than any such interest or title resulting from or arising out of a default by
the company or any Restricted Subsidiaries of its obligations under such lease;
and (xviii) Liens incurred in the ordinary course of business of the Company or
any Restricted Subsidiary of the Company with respect to obligations that do not
exceed $2.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Restricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (ii) such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness is subordinated in right of payment to the Notes on terms at least
as favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary that is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Principals" means Jeremiah J. Harris, his spouse, his issue and any of
their respective spouses, including any trust with respect to which any such
individual is a beneficiary, and the descendants and heirs of Jeremiah J.
Harris.
"Related Party" with respect to any Principal means (i) any controlling
stockholder or member, 80% (or more) owned Subsidiary, or spouse or immediate
family member (in the case of an individual) of such Principal or (ii) any
trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such Principal and/or such other
Persons referred to in the immediately preceding clause (i).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence
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of any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519))
which has become publicly available at least two business days prior to the date
fixed for redemption (or, if such Statistical Release is no longer published,
any publicly available source of similar market data)) most nearly equal to the
then remaining average life to the first date on which the Notes as subject to
optional redemption by the Issuers; provided, however, that, if such period is
not equal to the constant maturity of a United States Treasury security for
which a weekly average yield is given, the Treasury Rate shall be obtained by
linear interpolation (calculated to the nearest one-twelfth of a year) from the
weekly average yields of United States Treasury securities for which such yields
are given, except that if the average life of such Notes is less than one year,
the weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
"Unrestricted Subsidiary" means (i) any Subsidiary (other than Finance
Corp.) that is designated by the Board of Directors as an Unrestricted
Subsidiary pursuant to a Board Resolution, but only to the extent that such
Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (1) to subscribe for additional Equity Interests or (2) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries and has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries.
"Voting Equity Interests" of any Person as of any date means the Equity
Interests of such Person that is at the time, or would be if such Person were a
Delaware corporation, entitled to vote in the election of the board of
directors, executive committee or other governing body of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person, 99% or more of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the material U.S. federal income
tax considerations relevant to the purchase, ownership and disposition of the
Notes, but does not purpose to be a complete analysis of all potential tax
effects. The discussion is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), U.S. Treasury Regulations, Internal Revenue Service
("IRS") rulings and pronouncements and judicial decisions all in effect as of
the date hereof, all of which are subject to change at any time, and any such
change may be applied retroactively in a manner that could adversely affect a
holder of the Notes. The discussion does not address all of the
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U.S. federal income tax consequences that may be relevant to a holder in light
of such holder's particular circumstances or to holders subject to special
rules, such as certain financial institutions, insurance companies, dealers in
securities, tax-exempt organizations and persons holding the Notes as part of a
"straddle," "hedge" or "conversion transaction." In addition, this discussion is
limited to persons purchasing the Notes for cash at original issue. Moreover,
the effect of any applicable state, local or foreign tax laws is not discussed.
The discussion deals only with Notes held as "capital assets" within the meaning
of Section 1221 of the Code.
As used herein, "U.S. holder" means a beneficial owner of the Notes who or
that (i) is a citizen or resident of the United States, (ii) is a corporation,
partnership or other entity taxable as a corporation created or organized in or
under the laws of the United States or political subdivision thereof, (iii) is
an estate the income of which is subject to U.S. federal income taxation
regardless of its source, (iv) is a trust if (A) a U.S. court is able to
exercise primary supervision over the administration of the trust and (B) one or
more U.S. persons have authority to control all substantial decisions of the
trust, or (v) is otherwise subject to U.S. federal income tax on a net income
basis in respect of the Notes. As used herein, a "non-U.S. holder" means a
holder who or that is not a U.S. holder.
The Company has not sought and will not seek any rulings from the IRS with
respect to the matters discussed below. There can be no assurance that the IRS
will not take a different position concerning the tax consequences of the
purchase, ownership or disposition of the Notes or that any such position would
not be sustained.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO
THE APPLICATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW TO THEIR PARTICULAR
SITUATIONS AS WELL AS THE APPLICATION OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX
LAWS, INCLUDING GIFT AND ESTATE TAX LAWS.
U.S. Holders
Exchange Offer. The exchange of Old Notes for New Notes pursuant to the
Exchange Offer will not constitute a taxable exchange. As a result, (i) a U.S.
holder will not recognize taxable gain or loss as a result of exchanging Old
Notes for New Notes pursuant to the Exchange Offer; (ii) the holding period of
the New Notes will include the holding period of the Old Notes exchanged
therefore; and (iii) the adjusted tax basis of the New Notes will be the same as
the adjusted tax basis of the Old Notes exchanged therefore immediately before
such exchange. The Exchange Offer will not have any U.S. Federal income tax
consequences to a non-exchanging Holder.
Interest. The stated interest on the Notes generally will be taxable to a
U.S. holder as ordinary income at the time that it is paid or accrued, in
accordance with the U.S. holder's method of accounting for U.S. federal income
tax purposes.
Sale, Retirement or Redemption of a Note. A U.S. holder of a New Note will
recognize gain or loss upon the sale, retirement, redemption or other taxable
disposition of such Note in an amount equal to the difference between (a) the
amount of cash and the fair market value of other property received in exchange
therefor (other than amounts attributable to accrued but unpaid stated interest)
and (b) the U.S. holder's adjusted tax basis in such Note. The recently enacted
Taxpayer Relief Act of 1997 made certain changes to the Code with respect to
taxation of capital gains of noncorporate taxpayers. In general, the maximum tax
rate for noncorporate taxpayers on long-term capital gain has been lowered to
20% from the previous 28% rate with respect to capital assets (including the
Notes), but only if they have been held for more than 18 months at the time of
disposition. Capital gain on assets sold on or after July 29, 1997, having a
holding period of more than one year but not more than 18 months will be taxed
as "mid-term gain" at a maximum 28% rate.
U.S. holders should be aware that the resale of the Notes may be affected
by the "market discount" rules of the Code under which a purchaser of a New Note
acquiring the New Note at a market discount generally would be required to
include as ordinary income a portion of the gain realized upon the disposition
or retirement of such Note, to the extent of the market discount that has
accrued but not been included in income while the debt instrument was held by
such purchaser.
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Liquidated Damages. The Company intends to take the position that the
Liquidated Damages described above under "Description of Notes; Registration
Rights; Liquidated Damages" will be taxable to a U.S. holder as ordinary income
in accordance with such holder's method of accounting for tax purposes. The IRS,
however, may take a different position, which could affect the timing of both a
U.S. holder's income and the timing of the Company's deduction with respect to
such Liquidated Damages.
Non-U.S. Holders
U.S. Withholding Tax
Interest paid to non-U.S. holders of the New Notes will not be subject to
U.S. income or withholding tax, provided that (i) the non-U.S. holder does not
actually or constructively own 10% or more of the capital or profit of the
Company, (ii) the non-U.S. holder is not (a) a controlled foreign corporation as
to the United States that is related to the Company through stock ownership or
(b) a bank that received the New Note on an extension of credit made pursuant to
a loan agreement entered into in the ordinary course of its trade or business,
and (iii) the beneficial owner of the New Note provides a statement signed under
penalties of perjury that includes its name and address and certifies that it is
not a U.S. person in compliance with applicable requirements or an exemption is
otherwise established. If these requirements cannot be met, a non-U.S. holder
will be subject to U.S. withholding tax at a rate of 30% (or lower treaty rate,
if applicable) on interest payments on the Notes.
In general, any gain realized by any non-U.S. holder upon the sale,
exchange or redemption of a Note will not be subject to U.S. income or
withholding tax. However, such gain will be subject to U.S. withholding tax if
(i) a non-U.S. holder is an individual who is present in the United States for a
total of 183 days or more during the taxable year in which the gain is realized
and certain other conditions are satisfied or (ii) the non-U.S. holder is
subject to tax pursuant to the provisions of U.S. tax law applicable to certain
U.S. expatriates.
If interest on the New Notes is exempt from withholding of U.S. federal
income tax under the rules described above, the New Notes will not be included
in the estate of a deceased non-U.S. holder for U.S. federal estate tax
purposes.
Information Reporting and Backup Withholding
Certain noncorporate U.S. persons may be subject to backup withholding at a
rate of 31% on payments of principal and interest on the New Notes, and the
proceeds from a disposition of the New Notes. Backup withholding will only be
imposed where the holder (i) fails to furnish its taxpayer identification number
("TIN"), which, for an individual, would ordinarily be his or her social
security number, (ii) furnishes an incorrect TIN, (iii) is notified by the IRS
that he or she has failed to properly report payments of interest or dividends,
or (iv) under certain circumstances, fails to certify, under penalties of
perjury, that he or she has furnished a correct TIN and has not been notified by
the IRS that he or she is subject to backup withholding. Notwithstanding the
foregoing, the Company will institute backup withholding with respect to
payments made on a Note to a holder if instructed to do so by the IRS. Holders
of the Notes should consult their own tax advisors regarding their qualification
for exemption from backup withholding and the procedure for obtaining such an
exemption, if applicable. However, interest paid with respect to a Note and
received by a non-U.S. holder will not be subject to information reporting or
backup withholding if the payor has received appropriate certification
statements and provided that the payor does not have actual knowledge that the
holder is a U.S. person.
The payment of the proceeds from the disposition of New Notes to or through
the U.S. office of any U.S. or foreign broker will be subject to information
reporting and possible backup withholding unless the owner certifies as to its
non-U.S. status under penalties of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
holder is a U.S. person or that the conditions of any other exemption are not,
in fact, satisfied. The payment of the proceeds from the disposition of a New
Note to or through a non-U.S. broker that is not a U.S. related person will not
be subject to information reporting or backup withholding. For this purpose, a
"U.S. related person" is (i) a "controlled foreign corporation" for U.S. federal
income tax purposes or (ii) a foreign person 50% or more of whose gross income
from all sources for the three-year period ending with the close of its taxable
year preceding the payment (or for such part of the period that the broker has
been in existence) is derived from activities that are effectively connected
with the conduct of a U.S. trade or business.
93
<PAGE>
In the case of the payment of proceeds from the disposition of Notes to or
through a non-U.S. office of a broker that is a U.S. related person, U.S.
Treasury Regulations require information reporting on the payment unless the
broker has documentary evidence in its files that the owner is a non-U.S. holder
and the broker has no knowledge to the contrary. Backup withholding will not
apply to payments made through foreign offices of a broker that is a U.S. person
or a U.S. related person (absent actual knowledge that the payee is a U.S.
person).
Any amounts withheld under the backup withholding rates from a payment to a
non-U.S. holder will be allowed as a refund or a credit against such non-U.S.
holders' U.S. federal income tax liability, provided that the requisite
procedures are followed.
Prospective Final Regulations
On October 6, 1997, new U.S. Treasury Regulations ("New Regulations") were
issued that modify the requirements imposed on a non-U.S. holder and certain
intermediaries for establishing the recipient's status as a non-U.S. holder
eligible for exemption from or reduction in U.S. withholding tax and backup
withholding described above. In general, the New Regulations do not
significantly alter the substantive withholding and information reporting
requirements but rather unify current certification procedures and forms and
clarify reliance standards. The New Regulations are generally effective for
payments made after December 31, 1998, subject to certain transition rules. In
addition, the New Regulations impose more stringent conditions on the ability of
financial intermediaries acting for a non-U.S. holder to provide certifications
on behalf of the non-U.S. holder, which may include entering into an agreement
with the IRS to audit certain documentation with respect to such certifications.
Non-U.S. holders should consult their tax advisors to determine the effects of
the application on the New Regulations to their particular circumstances.
94
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that received New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Issuers have agreed that, starting of the Expiration
Date and ending of one year after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until such date, all dealers
effecting transactions in the New Notes may be required to deliver a prospectus.
The Issuers will not receive any proceeds from any sales of New Notes by
broker-dealers or others. New Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such methods
of resale, at market prices prevailing at the time of resale, at prices related
to such prevailing market prices or negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealer who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit from any such resale of New Notes and any
commissions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period one year after the Expiration Date, the Issuers will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Issuers have agreed to pay all expenses incident to the
Exchange Offer (including the expenses of one counsel for the holders of the
Notes) other that commissions or concessions of any brokers or dealers and will
indemnify the holders of the Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
95
<PAGE>
LEGAL MATTERS
The validity of the New Notes will be passed upon for the Company by
Morrison & Foerster LLP, New York, New York. Certain other legal matters will be
passed upon for the Company by Pepe & Hazard LLP. Joseph W. Bartlett, an advisor
of the Company, is a partner of Morrison & Foerster LLP and owns Units of the
Company.
EXPERTS
The consolidated financial statements and schedule of Production Resource
Group, L.L.C. at December 31, 1995 and 1996 and for each of the three years in
the period ended December 31, 1996, and the combined financial statements of
Bash Theatrical Lighting, Inc. and Affiliates at December 31, 1996 and for the
year then ended, appearing in this Registration Statement, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
96
<PAGE>
Index to Consolidated Financial Statements
Production Resource Group, L.L.C.
Report of Independent Auditors F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996 and
September 30, 1997 (Unaudited) F-3
Consolidated Statements of Operations and Members' Equity for the
Years Ended December 31, 1994, 1995 and 1996 and the Nine
Months Ended September 30, 1996 and 1997 (Unaudited) F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1995 and 1996 and the Nine Months
Ended September 30, 1996 and 1997 (Unaudited) F-5
Notes to Consolidated Financial Statements F-6
Bash Theatrical Lighting, Inc. and Affiliates
Report of Independent Auditors F-18
Combined Balance Sheets as of December 31, 1996 and
June 30, 1997 (Unaudited) F-19
Combined Statements of Income and Retained Earnings for the
Year Ended December 31, 1996 and the Six Months Ended
June 30, 1996 and 1997 (Unaudited) F-20
Combined Statements of Cash Flows for the Year Ended
December 31, 1996 and the Six Months Ended June 30, 1996
and 1997 (Unaudited) F-21
Notes to Combined Financial Statements F-22
F-1
<PAGE>
Report of Independent Auditors
Members
Production Resource Group, L.L.C.
We have audited the accompanying consolidated balance sheets of Production
Resource Group, L.L.C. (the "Company") as of December 31, 1995 and 1996, and the
related consolidated statements of operations and members' equity and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Production
Resource Group, L.L.C. as of December 31, 1995 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
New York, New York
April 4, 1997
F-2
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31, September 30,
----------------- -------------
1995 1996 1997
------- ------- -------
(unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ............................................. $ 2,030 $ 3,010 $ 5,186
Accounts receivable, net of allowance of $100, $323 and $647 in
1995, 1996 and 1997, respectively ................................... 3,990 10,787 14,064
Inventories ........................................................... 1,392 3,346 4,670
Other current assets .................................................. 247 817 1,802
------- ------- -------
Total current assets .................................................... 7,659 17,960 25,722
Property and equipment--net ............................................. 16,738 31,189 43,220
Goodwill--net of accumulated amortization of $55 in 1996 and $266 in 1997 -- 845 14,800
Other assets ............................................................ 479 2,001 4,658
------- ------- -------
Total assets ............................................................ $24,876 $51,995 $88,400
======= ======= =======
Liabilities and Members' Equity
Current liabilities:
Current portion of long-term debt ..................................... $ 5,234 $ 8,231 $ 805
Accounts payable ...................................................... 3,805 5,337 8,207
Other current liabilities ............................................. 259 208 528
Payroll and sales taxes payable ....................................... 111 1,172 1,014
Deferred revenue ...................................................... 1,414 3,879 339
------- ------- -------
Total current liabilities ............................................... 10,823 18,827 10,893
Long-term debt:
Credit facilities ..................................................... 1,501 15,000 65,100
Other long-term debt .................................................. 644 3,770 3,908
Commitments
Members' equity ......................................................... 11,908 14,398 8,499
------- ------- -------
Total liabilities and members' equity ................................... $24,876 $51,995 $88,400
======= ======= =======
</TABLE>
See accompanying notes.
XXXX F-3
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND MEMBERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
Year ended December 31, September 30,
-------------------------------------- -----------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues ................................................ $ 31,040 $ 39,388 $ 62,506 $ 43,445 $ 69,831
Direct costs:
Direct production costs ............................... 22,250 24,424 41,230 28,583 50,952
Depreciation expense .................................. 770 3,342 3,920 2,859 4,061
-------- -------- -------- -------- --------
23,020 27,766 45,150 31,442 55,013
Gross profit ............................................ 8,020 11,622 17,356 12,003 14,818
Selling, general and administrative expenses ............ 4,813 5,794 8,676 6,179 10,642
Other depreciation and amortization ..................... 461 445 715 459 1,373
Non-recurring compensation expense ...................... -- -- -- -- 2,000
-------- -------- -------- -------- --------
Operating profit ........................................ 2,746 5,383 7,965 5,365 803
Loss on impairment of assets ............................ -- -- 495 -- --
Interest expense ........................................ 279 632 1,292 941 2,322
Interest (income) ....................................... (74) (268) (128) (99) (76)
-------- -------- -------- -------- --------
Income (loss) before income taxes and
extraordinary item .................................... 2,541 5,019 6,306 4,523 (1,443)
Provision for income taxes .............................. 28 122 206 186 298
-------- -------- -------- -------- --------
Income (loss) before extraordinary item ................. 2,513 4,897 6,100 4,337 (1,741)
Extraordinary item ...................................... -- -- -- -- (614)
-------- -------- -------- -------- --------
Net income (loss) ....................................... 2,513 4,897 6,100 4,337 (2,355)
Members' equity--beginning of period .................... 6,899 8,146 11,908 11,908 14,398
Less distributions ...................................... (1,266) (1,135) (3,610) (3,610) (3,544)
-------- -------- -------- -------- --------
Members' equity--end of period .......................... $ 8,146 $ 11,908 $ 14,398 $ 12,635 $ 8,499
======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
Year ended December 31, September 30,
-------------------------------- --------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Net income (loss) .................................................. $ 2,513 $ 4,897 $ 6,100 $ 4,337 $ (2,355)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Extraordinary item ................................................. -- -- -- -- 614
Depreciation and amortization ...................................... 1,231 3,787 4,635 3,318 5,434
Provision for doubtful accounts .................................... 364 -- 311 232 634
Gain on sale of property and equipment ............................. -- -- (239) (138) (84)
Loss on impairment of assets ....................................... -- 495 -- --
Changes in operating assets and liabilities:
Accounts receivable ............................................. (1,141) (903) (6,644) (5,132) (382)
Inventories ..................................................... (1,175) 577 (1,864) (403) (223)
Other current assets ............................................ (116) 8 (548) (798) (976)
Accounts payable ................................................ 2,070 597 670 3,542 247
Other current liabilities ....................................... 35 141 (51) 57 320
Payroll and sales taxes payable ................................. (662) (114) 854 444 (158)
Deferred revenue ................................................ 733 (16) 2,465 (379) (3,541)
-------- -------- -------- -------- --------
Net cash provided by (used in) operating activities ................... 3,852 8,974 6,184 5,080 (470)
-------- -------- -------- -------- --------
Investing activities
Acquisition of net assets of Vanco Lighting Services,
Inc., net of cash acquired ....................................... -- -- (274) (274) --
Acquisition of net assets of Cinema Services of Las
Vegas, Inc. ...................................................... -- -- (1,800) (1,800) --
Acquisition of net assets of Design Dynamics, Inc., net of
cash acquired ................................................... -- -- -- -- (3,980)
Acquisition of net assets of Bash Theatrical
Lighting, Inc. .................................................. -- -- -- -- (20,000)
Purchases of property and equipment ................................ (5,467) (9,621) (17,456) (14,059) (8,664)
Proceeds from sale of rental equipment ............................. -- -- 419 210 527
Additions to software development costs ............................ -- -- (586) -- --
Organizational costs incurred ...................................... -- -- (536) (525) (13)
Other assets ....................................................... (174) (241) (69) (85) (2,249)
-------- -------- -------- -------- --------
Net cash used in investing activities ................................. (5,641) (9,862) (20,302) (16,533) (34,379)
-------- -------- -------- -------- --------
Financing activities
Proceeds from long-term debt ........................................ 6,300 4,799 35,400 31,367 75,320
Additions to deferred financing costs ............................... -- -- (446) (304) (1,866)
Repayments of long-term debt ........................................ (2,342) (4,315) (16,246) (17,009) (32,885)
Distributions to members ............................................ (1,266) (1,135) (3,610) (3,610) (3,544)
-------- -------- -------- -------- --------
Net cash provided by (used in) financing activities ................... 2,692 (651) 15,098 10,444 37,025
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents .................. 903 (1,539) 980 (1,009) 2,176
Cash and cash equivalents--beginning of period ........................ 2,666 3,569 2,030 2,030 3,010
-------- -------- -------- -------- --------
Cash and cash equivalents--end of period .............................. $ 3,569 $ 2,030 $ 3,010 $ 1,021 $ 5,186
======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 1997 and for the Nine Months ended
September 30, 1996 and 1997 is Unaudited)
1. Organization and Basis of Consolidation
Production Resource Group, L.L.C. (the "Company") was formed as a Delaware
limited liability company in August 1995 and began operations on July 25, 1996,
when the accounts of Harris Production Services, Inc. ("HPS"), ECTS, A Scenic
Technology Company, Inc. ("ECTS"), Showpay, Inc. ("Showpay"), Theatre Techniques
Associates, Inc. ("TTA") and ECTS Contracting of Las Vegas, Inc. ("STLV") were
transferred to the Company in exchange for membership units in the Company.
Prior to July 25, 1996, HPS, ECTS, Showpay, TTA and STLV were under common
control. The exchange was accounted for in a manner similar to a pooling of
interests and has been retroactively reflected in the accompanying financial
statements. Intercompany transactions and balances among all of the related
entities have been eliminated in consolidation.
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries, three of which are wholly-owned and the other
in which the Company owns 99% of the outstanding membership interests. These
subsidiaries have no material assets, liabilities or operations.
The Company is an integrator, fabricator and supplier of a broad range of
products and services for the live entertainment (live theatre, concert touring
and special events), corporate events (trade and industrial shows) and themed
entertainment (gaming, theme parks and themed retail) markets. These products
and services include (i) scenery and exhibit fabrication, (ii) computerized
motion and show control systems, (iii) automated lighting systems and related
products, and (iv) project management, which encompasses design engineering,
budgeting, logistical coordination and installation.
Members of the Company are not personally liable for any indebtedness,
liability or obligation of the Company.
In accordance with the Company's operating agreement, the Company will
terminate in 2094.
2. Acquisitions
On January 18, 1996, the Company acquired substantially all of the assets
and assumed certain liabilities of Vanco Lighting Services, Inc. ("Vanco"), a
provider of theatrical lighting systems and related products for the rental and
retail marketplace. The purchase price of the acquisition was $300,000 in cash
plus an adjustable $700,000 ten year contingent promissory note (see Note 6).
On February 8, 1996, the Company acquired substantially all of the assets,
excluding cash and accounts receivable and assumed certain liabilities of Cinema
Services of Las Vegas, Inc. ("Cinema"), a provider of theatrical lighting
systems and related products for the rental and retail marketplace. The purchase
price of the acquisition was $1,800,000 in cash plus a $500,000 contingent,
non-interest bearing promissory note. The Company is required to make annual
payments on the note in the amount of 20% of the net profits of Cinema, as
defined, for each calendar year through 2000 payable within 30 days of the
determination of such profit. The note matures on January 1, 2001. The Company
recorded goodwill of approximately $900,000 related to the Cinema acquisition.
On June 6, 1997, the Company acquired substantially all of the assets and
assumed certain liabilities of Design Dynamics, Inc. ("Design Dynamics") for
$3,985,000 in cash. Design Dynamics specializes in fabricating trade show
exhibits. The Company recorded goodwill of approximately $3,134,000 related to
the Design Dynamics acquisition.
On August 15, 1997, the Company acquired substantially all of the assets
and assumed certain liabilities of Bash Theatrical Lighting, Inc. and four
affiliated companies (collectively "Bash"), a supplier of theatrical lighting
systems and related products for the rental and retail marketplace. The purchase
price of the acquisition was $20,000,000, which may be modified for certain
purchase price adjustments that could be claimed by the Company. Currently,
management does not anticipate any such adjustments to the purchase price. The
Company recorded goodwill of approximately $10,823,000 related
F-6
<PAGE>
to the Bash acquisition. The two shareholders of Bash have an option to acquire
an aggregate amount of up to $3,000,000 of 8% Convertible Preferred Units of the
Company.
F-7
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1997 and for the Nine Months ended
September 30, 1996 and 1997 is Unaudited)
2. Acquisitions--(Continued)
The above acquisitions were accounted for under the purchase method.
Accordingly, results related to the acquired operations are included in the
Company's results of operations from their respective dates of acquisition.
3. Summary of Significant Accounting Policies
Cash and Cash Equivalents
All highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents. At December 31, 1995 and 1996,
substantially all of the Company's cash and cash equivalents were held in one
financial institution.
Supplementary Cash Flow Information
Interest paid amounted to approximately $262,000, $652,000 and $1,095,000
for the years ended December 31, 1994, 1995 and 1996, respectively. Income taxes
paid amounted to approximately $27,000, $14,000 and $330,000 for the years ended
December 31, 1994, 1995 and 1996, respectively.
Inventories
Inventories represent raw materials and work-in-process and are stated at
the lower of cost or market. Raw materials consist of steel, aluminum, wood and
electronic automation parts. Work-in-process includes direct materials, direct
labor and a ratable share of manufacturing overhead on partially completed
items. Cost is determined by the specific identification method. Also included
in inventories are certain lighting products. Cost for such inventory is
determined using the average cost method which approximates the first-in,
first-out method.
Inventories consist of the following (in thousands):
December 31, September 30,
----------------- -------------
1995 1996 1997
------ ------ ------
Raw materials ........................ $ 138 $1,277 $2,250
Work-in-process ...................... 1,254 1,611 240
Lighting products .................... -- 458 2,180
------ ------ ------
$1,392 $3,346 $4,670
====== ====== ======
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets, which
range from five to 39 years. Rental equipment, including motion control and
lighting systems, are included in property and equipment and are being
depreciated by the straight-line method over periods ranging from five to seven
years.
F-8
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1997 and for the Nine Months ended
September 30, 1996 and 1997 is Unaudited)
3. Summary of Significant Accounting Policies--(Continued)
Goodwill
Goodwill represents the excess of the cost of assets acquired over the fair
market value of assets received and is being amortized using the straight-line
method over 15 years.
Intangible Assets
Intangible assets, which include organization and loan origination costs,
are stated at cost and are being amortized using the straight-line method over
five years and the term of the related loan, respectively (see Note 6).
Software Development Costs
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed," all software development costs are charged to expense as
incurred until technological feasibility has been established for the product.
Software development costs incurred after technological feasibility has been
established have been capitalized and included in other assets (see Note 5).
Such costs are amortized, commencing with product use, using the straight-line
method over three years.
Income Taxes
Effective July 25, 1996, the Company began operations as a limited
liability company and, therefore, is not subject to federal, state and local
income taxes. Income taxes payable by the individual members of the Company for
the period from July 25, 1996 through December 31, 1996, based on their
respective shares of the Company's income, have not been reflected in the
accompanying financial statements.
Effective January 1, 1989, HPS and ECTS elected by consent of their
shareholders to be taxed under the provisions of Subchapter S of the Internal
Revenue Code for federal income tax purposes. Under these provisions, these
members did not pay federal corporate income taxes on their taxable income.
Instead, such members' shareholders were liable for individual federal income
taxes on their respective shares of their taxable income.
The provision for income taxes reflected in the accompanying financial
statements represents amounts due to various states in which income was subject
to reduced corporate income taxes because of Subchapter S status for the period
from January 1, 1996 through July 24, 1996 and the years ended December 31, 1994
and 1995 and other state and local taxes.
Revenue Recognition and Deferred Revenue
Themed entertainment and live theater sales revenue is recognized generally
based on the percentage of total costs incurred to date to total estimated
costs. Management reviews estimated total project costs on individual projects
and makes adjustments accordingly. Losses expected to be incurred on projects in
progress are charged to income as soon as such losses are known. Amounts
received in advance on sales which exceed revenue recognized to date are
recorded as deferred revenue and recognized when earned. Amounts reflected as
revenue which exceed billings to date are included in accounts receivable and
amounted to approximately $34,000 and $722,000 at December 31, 1995 and 1996,
respectively ($3,322,000 at September 30, 1997).
Themed entertainment and live theater rental revenue is recognized as
earned over the productions' lives. Non-refundable preparation fees received in
advance on the design and construction of rental elements are
F-9
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1997 and for the Nine Months ended
September 30, 1996 and 1997 is Unaudited)
3. Summary of Significant Accounting Policies--(Continued)
deferred and recognized as revenue upon commencement of the production. Revenue
from the rental of lighting systems and related products is recognized ratably
over the lives of the rental contracts.
Revenue from corporate events is recognized upon delivery and installation
of scenic elements or staging.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenue and expenses during the reporting
period. The principal area of estimation is in determining total project costs.
Actual results could differ from those estimates.
Impairment of Long-Lived Assets
Long-lived assets to be held and used are reviewed for impairment whenever
events or changes of circumstances indicate that the related carrying amount may
not be recoverable. When required, impairment losses on assets to be held and
used are recognized based on the excess of the asset's carrying amount over its
fair value. Long-lived assets to be disposed of are reported at the lower of
their carrying amount or fair value less disposal costs.
Fair Value of Financial Instruments
The fair value of financial instruments is determined by reference to
market data and other valuation techniques as appropriate. The Company's
financial instruments consist of cash and cash equivalents, long-term debt, and
an interest rate swap agreement. Unless otherwise disclosed, the fair value of
financial instruments approximates their recorded values.
Unaudited Information
The unaudited financial statements at September 30, 1997 and for the nine
months ended September 30, 1996 and 1997 reflect adjustments, all of which are
of a normal recurring nature, which are, in the opinion of management, necessary
to a fair presentation. The results of the interim periods are not necessarily
indicative of full year results.
Recently Issued Accounting Standards
SFAS No. 128, "Disclosure of Information about Capital Structure," will be
effective for the Company's financial statements for the year ended December 31,
1997. SFAS No. 128 establishes standards for disclosing information about an
entity's capital structure. The Company does not anticipate that SFAS No. 128
will significantly affect its financial statement disclosures.
SFAS No. 130, "Reporting Comprehensive Income," will be effective for the
Company's financial statements for the year ended December 31, 1998. SFAS No.
130 establishes standards for the reporting and display of comprehensive income
and its components in a full set of general purpose financial statements. This
statement requires that all items that are required to be recognized as
components of comprehensive income be reported in a financial statement with the
same prominence as other financial statements. The Company has not determined
the effects, if any, that SFAS No. 130 will have on its consolidated financial
statements.
F-10
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1997 and for the Nine Months ended
September 30, 1996 and 1997 is Unaudited)
3. Summary of Significant Accounting Policies--(Continued)
SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," will be effective for the Company's financial statements for the
year ended December 31, 1998. This new standard changes the way that public
companies report selected information about operating segments in annual
financial statements and requires that those companies report selected
information about segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic areas and major customers. The Company does not anticipate
that SFAS No. 131 will significantly affect its financial statement disclosures.
4. Property and Equipment
The following is a summary of property and equipment at December 31, 1995
and 1996 (in thousands):
1995 1996
------- -------
Land and buildings ................................... $ 672 $ 7,981
Building improvements ................................ 1,107 319
Rental equipment ..................................... 19,205 28,887
Machinery and equipment .............................. 1,512 828
Furniture and fixtures and office equipment .......... 550 1,492
Transportation equipment ............................. 182 208
Construction in progress ............................. 2,204 --
------- -------
25,432 39,715
Less accumulated depreciation ........................ 8,694 8,526
------- -------
Property and equipment--net .......................... $16,738 $31,189
======= =======
During 1996, the Company transferred certain of its operations to a new
facility and placed the old facility up for sale. This circumstance called into
question the recoverability of the carrying amounts of the former building and
related improvements. Pursuant to SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," an impairment
loss has been recognized related to these assets. In calculating the impairment
loss, fair value was determined by reviewing quoted market prices for current
sales of similar building facilities. During 1997, as a result of the Company's
growth, the old facility was returned to service.
5. Other Assets
The following is a summary of other assets at December 31, 1995 and 1996
and September 30, 1997 (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Organization costs, net of accumulated amortization of
$53 in 1996 and $135 in 1997 ............................ $ -- $ 483 $ 414
Deferred financing costs, net of accumulated amortization
of $62 in 1996 and $69 in 1997 .......................... -- 384 1,567
Software costs, net of accumulated amortization of $146 in 1997 -- 586 440
Other ......................................................... 479 548 2,237
------ ------ ------
$ 479 $2,001 $4,658
====== ====== ======
</TABLE>
F-11
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1997 and for the Nine Months ended
September 30, 1996 and 1997 is Unaudited)
6. Long-Term Debt
Long-term debt consisted of the following at December 31, 1995 and 1996 and
September 30, 1997 (in thousands):
1995 1996 1997
------- ------- -------
Credit facilities ................. $ 6,690 $22,500 $65,100
Mortgages payable ................. 689 4,066 3,879
Note payable and other ............ -- 435 834
------- ------- -------
7,379 27,001 69,813
Less current portion .............. 5,234 8,231 805
------- ------- -------
Long-term debt .................... $ 2,145 $18,770 $69,008
======= ======= =======
Credit Facilities
As of December 31, 1995, credit facilities consisted of several loans under
a term loan agreement with maturity dates ranging from July 1996 to October
1997, bearing interest at various rates ranging from 8.49% to 9%. These amounts
were refinanced during 1996.
On June 30, 1996, the Company entered into a credit agreement (the "Credit
Agreement") with a bank to borrow funds in the amount of $17,500,000. Such funds
were used to refinance existing bank debt provided under the Company's
aforementioned term loan agreement. The Credit Agreement consisted of a
revolving credit facility (the "Revolving Loan") and a term loan facility (the
"Term Loan") in the amount of $7,500,000 and $10,000,000, respectively, maturing
on December 31, 2000.
Under the Revolving Loan, the Company was able to borrow up to the full
amount of the credit facility at any time until the final maturity date, at
which time the outstanding balance was due and payable. The Term Loan was
payable in equal quarterly payments of $625,000, which commenced on March 31,
1997. All such borrowings were collateralized by a first lien on substantially
all of the Company's assets and were guaranteed by the Company's members.
Borrowings under the Credit Agreement bore interest, payable quarterly, at
0.5% plus (i) the higher of the bank's prime rate and the federal funds rate
plus 0.5% or (ii) LIBOR plus 1.75%. The interest rate decreases on the
achievement of certain financial ratios, as defined. The interest rate at
December 31, 1996 was 7.4%. Under the Credit Agreement, the Company was required
to maintain certain financial statement ratios, as defined.
On December 13, 1996, the Company received additional funds, under similar
terms associated with the Credit Agreement, from the bank in the amount of
$5,000,000 ("Bridge Note"). The Bridge Note matured on June 30, 1997.
In connection with the Credit Agreement, the Company entered into an
interest rate swap agreement ("IRSA") with The Bank of New York to hedge the
impact of fluctuations in interest rates on its floating rate credit facilities.
At December 31, 1996, the IRSA had a notional amount of $8,750,000, which was
subsequently increased to $22,500,000. The estimated fair value of the IRSA at
December 31, 1996 was approximately $58,000, which was based on dealer quoted
market prices, and generally reflected the estimated amount that the Company
would have to pay to terminate the contract. Gains and losses pertaining to the
IRSA are recorded over its life as an adjustment to interest expense.
On July 31, 1997, the Company entered into a credit agreement (the "Credit
Facility") with a syndicate of financial institutions that provided for a
reducing revolver for borrowings in a principal amount up to $130,000,000
through June 30, 2003. The borrowings were used to refinance the Credit
Agreement and Bridge
F-12
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1997 and for the Nine Months ended
September 30, 1996 and 1997 is Unaudited)
6. Long-Term Debt--(Continued)
Note and finance working capital requirements, including acquisitions. As of
September 30, 1997, there was $65,100,000 of borrowings outstanding under the
Credit Facility.
Amounts outstanding under the Credit Facility bear interest, at the
Company's option, at (i) certain spreads over the Eurodollar rate, or (ii)
certain spreads over the higher of (a) the Federal Funds rate plus 0.50%, or (b)
the agent's prime rate. The interest rate spreads are adjusted based on the
Company's total leverage ratio. At September 30, 1997, the Company was paying
interest on $62,000,000 and $3,100,000 at interest rates of 7.563% and 9.25%,
respectively. In addition, during the commitment period, the Company is
obligated to pay a fee on the unused availability ranging from 0.25% to 0.375%
based on its total leverage ratio.
The Credit Facility contains certain restrictive financial covenants,
including the maintenance of a minimum pro forma interest coverage ratio and
fixed charge coverage ratio, a maximum leverage ratio and limitations on the
issuance of additional indebtedness. Borrowings under the Credit Facility are
secured by a security interest in all of the Company's tangible and intangible
personal property and fixtures and are guaranteed by the members and
subsidiaries of the Company. All such guarantees are collateralized by a
security interest in the tangible and intangible personal property and fixtures
of the respective guarantor. In addition, the members of the Company have
pledged their equity interests in the Company and in each of the subsidiaries as
additional collateral. As of September 30, 1997, the Company was in compliance
with the covenants of the Credit Facility.
In connection with the Credit Facility, the Company incurred approximately
$1,636,000 of loan organization and syndication costs, which are being amortized
over the life of such agreement.
The refinancing of the Credit Agreement was treated as an early
extinguishment of debt and, accordingly, unamortized financing costs of
approximately $614,000 were written off and included as an extraordinary item in
the statement of operations for the nine months ended September 30, 1997.
Mortgages Payable
The Company has three mortgages, which are collateralized by its
properties. The mortgages require monthly payments of both principal and
interest at varying rates ranging from 7.4% to 8.7%. Maturity dates on these
mortgages expire on various dates from June 30, 1997 through June 1, 2025.
Note Payable
In January 1996, the Company issued a contingent note payable for $700,000
as partial payment for the purchase of the net assets of Vanco. The principal
balance of such note was adjusted to approximately $468,000 to reflect certain
adjustments arising from the finalization of the purchase price for Vanco. The
note bears interest at a rate of 9.5% per annum and matures on December 31,
2006. As of December 31, 1996, the Company paid principal and interest of
approximately $33,000 and $32,000, respectively, with respect to this note. The
balance of the note payable as of December 31, 1996 was approximately $435,000
($400,000 at September 30, 1997).
F-13
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1997 and for the Nine Months ended
September 30, 1996 and 1997 is Unaudited)
6. Long-Term Debt--(Continued)
The following are future maturities of outstanding long-term debt at
December 31, 1996 (in thousands):
1997 .................................................. $ 8,231
1998 .................................................. 2,789
1999 .................................................. 2,794
2000 .................................................. 10,300
2001 .................................................. 306
Thereafter ............................................ 2,581
-------
$27,001
=======
The following are future maturities of outstanding long-term debt at
September 30, 1997 (in thousands):
1998 .................................................. $ 805
1999 .................................................. 379
2000 .................................................. 385
2001 .................................................. 399
2002 .................................................. 32,824
Thereafter ............................................ 35,021
-------
$69,813
=======
The Company incurred interest costs on all debt of approximately $279,000,
$632,000 and $1,292,000 for the years ended December 31, 1994, 1995 and 1996,
respectively. These costs exclude capitalized interest in 1995 and 1996 of
$134,000 and $255,000, respectively.
7. Commitments and Other
Collective Bargaining Agreement
The Company is a party to various collective bargaining agreements of
limited duration concerning its labor union employees. The terms of those
agreements require contributions by the Company to a number of union employee
benefit plans. Contributions to all plans totaled approximately $319,000,
$412,000 and $621,000 for the years ended December 31, 1994, 1995 and 1996,
respectively.
Benefit Plans
The Company has a defined contribution plan covering all eligible
employees, which qualifies under section 401(k) of the Internal Revenue Code.
The Company's 401(k) plan provides that eligible employees may make
contributions subject to Internal Revenue Code limitations. The Company matches
each employee's contributions up to a maximum of 3% of their salary. Such
contributions aggregated approximately $85,000 and $150,000 for the years ended
December 31, 1995 and 1996, respectively.
The Company also has a profit sharing plan that covers certain employees of
the Company. Contributions to the plan, which are determined by the members,
are based on the amount of an eligible employee's wages, and total contributions
may not exceed 15% of the annual compensation of all of the plan's participants.
The Company's last two contributions to the plan were in 1994 and 1995 and
amounted to approximately $125,000 and $75,000, respectively.
F-14
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1997 and for the Nine Months ended
September 30, 1996 and 1997 is Unaudited)
7. Commitments and Other--(Continued)
Units Plan
On January 1, 1996, the Company established the Production Resource Group
L.L.C. Restricted Limited Liability Company Unit Incentive Compensation Plan
(the "Restricted Plan") and the Phantom Limited Liability Company Unit Incentive
Compensation Plan (the "Phantom Plan" and, together with the Restricted Plan,
the "Plans"). Participation in the Plans is limited to officers and other key
employees who are selected to participate in the Plans. Up to 750,000 units
subject to anti-dilution adjustments may be awarded under each of the Restricted
Plan ("Restricted Units") and the Phantom Plan ("Phantom Units" and, together
with the Restricted Units, the "Units"). Units granted under the Plans are
subject to significant restrictions on transferability, the securities laws and
the Operating Agreement of the Company. Restricted Units entitle the holder to
participate in the appreciation and profits of the Company but do not allow a
right to participate in management. Phantom Units entitle the holder to receive
a bonus equal to ten dollars per Phantom Unit upon a sale of the Company or at
certain other defined times. In no event shall a participant be entitled to
receive duplicate payments under the Phantom Plan and the Restricted Plan.
Restrictions on the Units lapse ratably over specified periods. Upon a Change in
Control or any termination other than for Cause (each as defined in the Plans)
all restrictions on the Units lapse and the value thereof becomes immediately
payable. Phantom Units will be canceled without any payments being required
thereon upon the occurrence of an initial public offering by the Company or a
successor in interest to the Company. At December 31, 1996 and September 30,
1997, 181,972 units of each of the Plans have been issued with restrictions that
lapse in five annual installments commencing January 1, 1997.
Operating Leases
The Company leases certain property and equipment under leases that expire
at various dates through 2001. As of December 31, 1996, future minimum lease
payments under noncancelable leases are as follows (in thousands):
December 31:
1997 .................................................. $1,326
1998 .................................................. 217
1999 .................................................. 140
2000 .................................................. 96
2001 .................................................. 54
------
$1,833
======
Rent expense was approximately $310,000, $311,000 and $671,000 for the
years ended December 31, 1994, 1995 and 1996, respectively.
8. Related Party Transactions
The Company contracts work from an entity that is partially owned by
related parties. In connection therewith, the Company earned revenues of
approximately $253,000, $1,959,000 and $1,929,000 for the years ended December
31, 1994, 1995 and 1996, respectively. The Company incurred fees and other
charges amounting to $50,000 from this entity during the year ended December 31,
1996. The Company had receivables from this entity amounting to approximately
$81,000 and $366,000 at December 31, 1995 and 1996, respectively. Additionally,
the entity paid management fees for administrative services of approximately
$70,500 and $90,000 to the Company during 1995 and 1996, respectively.
F-15
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1997 and for the Nine Months ended
September 30, 1996 and 1997 is Unaudited)
8. Related Party Transactions--(Continued)
The Company also conducts business with a related entity that provides
theatrical management services. In connection therewith, the Company incurred
fees and other charges amounting to approximately $372,000, $182,000 and
$189,000 for the years ended December 31, 1994, 1995 and 1996, respectively.
Additionally, the Company earned revenues of approximately $64,000 from this
entity in the year ended December 31, 1996.
9. Major Customers
One of the Company's customers accounted for approximately 35% of the
Company's revenue for the year ended December 31, 1994. Two customers accounted
for approximately 31% and 14% of the Company's 1995 revenue and 28% and 16% of
its 1995 accounts receivable. Another customer accounted for approximately 16%
of its 1995 accounts receivable. One customer accounted for approximately 18% of
the Company's 1996 revenue and 33% of its 1996 accounts receivable. One customer
accounted for approximately 11% of the Company's revenues for the nine months
ended September 30, 1997 and another customer accounted for approximately 16% of
the Company's accounts receivable at September 30, 1997.
10. Non-recurring Compensation Expense
The $2,000,000 non-recurring compensation expense represents employment
incentives paid to the two shareholders of Bash in connection with the signing
of employment agreements with the Company.
11. Treasury Rate Lock
On October 27, 1997 the Company entered into a Treasury Rate Lock agreement
("T-Lock") with Bankers Trust Company (the "Counterparty") to hedge against the
impact of rising interest rates on the 10 year Treasury Note. The T-Lock has a
notional amount of $100,000,000. On December 15, 1997, ("Settle Date"), the rate
on the 10 year Treasury Note ("Reference Security") is compared to the
predetermined Lock Rate (5.863%). If the reference rate is above the Lock Rate,
the Counterparty will make a payment to the Company equal to the present value
of the difference between the reference rate and the Lock Rate to the maturity
of the reference security. If the reference rate is below the Lock Rate, the
Company will make a payment to the Counterparty equal to the present value
difference. On December 5, 1997, the Company elected to terminate the T-Lock and
received payment of $425,000 from the Counterparty.
12. Legal Proceedings
The Company from time to time is involved in litigation arising in the
ordinary course of business. The Company does not believe that any such
litigation will, individually or in the aggregate, have a material adverse
effect on its business, results of operations or financial condition. The
Company, together with other companies involved in the live entertainment
production EFX!(TM), was sued by Michael Crawford, the former star of EFX!(TM),
with an action related to personal injury claims. The Company has denied
liability and continues to vigorously defend such action. The Company believes
it has meritorious defenses to such actions. Although there can be no assurance
as to the outcome of any litigation, the Company does not believe it would have
a material adverse effect on the Company's business, results of operations or
financial condition.
In addition, the Company has recently filed an action in Federal district
court for the Southern District of New York seeking compensatory and punitive
damages against Stonebridge Partners Equity Fund, L.P. of White Plains New York,
Four Star Associates, L.P., and certain affiliated individuals related to
breach of contract and good faith and securities fraud in connection with the
Company's proposed acquisition of Four Star Holdings, Inc. The action seeks
specific performance and compensatory and punitive damages.
13. Events Subsequent to the Date of Independent Auditors' Report ("Unaudited")
Debt Offering
On December 24, 1997, the Company issued $100,000,000 of 11.5% Senior
Subordinated Notes due 2008 (the "Notes"). Proceeds from the offering were used
(i) to repay indebtedness under the Credit Facility, (ii) to fund the cash
portion of the purchase price for the acquisition of Pro-Mix and (iii) for
working capital requirements and other general corporate purposes.
The Notes are jointly and severally guaranteed by the Company's
subsidiaries, three of which are wholly-owned and the other in which the Company
owns 99% of the outstanding membership interests. These subsidiaries have no
material assets, liabilities or operations.
Credit Facility
The Credit Facility was amended to decrease the principal amount under such
facility to $100,000,000.
F-16
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C. NOTES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information as of September 30, 1997 and for the Nine Months ended
September 30, 1996 and 1997 is Unaudited)
Pro-Mix Acquisition
On January 2, 1998, the Company acquired substantially all of the assets
and assumed certain liabilities of Pro-Mix, Inc., a provider of sound equipment
and acoustical and sound design consulting services primarily to the live
theater market segment. The purchase price was approximately $9,800,000,
including a $1,500,000 contingent payment based primarily upon earnings and the
issuance of 79,179 of the Company's Preferred Units with an agreed value of
51,500,000. Such purchase price is not final pending an appraisal of the
Preferred Units.
F-17
<PAGE>
Report of Independent Auditors
To The Board of Directors
Bash Theatrical Lighting, Inc.
We have audited the accompanying combined balance sheet of Bash Theatrical
Lighting, Inc. and affiliated companies (the "Company") as of December 31, 1996,
and the related combined statements of income and retained earnings and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the Company
as of December 31, 1996, and the combined results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
New York, New York
September 19, 1997
F-18
<PAGE>
BASH THEATRICAL LIGHTING, INC. AND AFFILIATES
COMBINED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
-------- --------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ........................................... $ 719 $ 718
Accounts receivable, net of allowances of $55 in 1996 and $73 in 1997 2,160 2,865
Inventories ......................................................... 863 1,015
Prepaid expenses and other current assets ........................... 116 111
-------- --------
Total current assets .................................................. 3,858 4,709
Property and equipment--net ........................................... 7,784 8,350
Goodwill--net of accumulated amortization of $3 in 1996 and $4 in 1997 22 23
Due from shareholder .................................................. 271 --
Other assets .......................................................... 34 17
-------- --------
Total assets .......................................................... $ 11,969 $ 13,099
======== ========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable .................................................... $ 1,275 $ 2,354
Accrued expenses .................................................... 83 299
Line of credit--bank ................................................ 285 --
Current portion of long-term debt ................................... 995 866
Deferred revenue .................................................... 682 --
-------- --------
Total current liabilities ............................................. 3,320 3,519
Long-term debt ........................................................ 1,113 787
Commitments
Shareholders' equity:
Capital stock ....................................................... 94 94
Retained earnings ................................................... 7,485 8,742
Treasury stock, at cost ............................................. (43) (43)
-------- --------
Total shareholders' equity ............................................ 7,536 8,793
-------- --------
Total liabilities and shareholders' equity ............................ $ 11,969 $ 13,099
======== ========
</TABLE>
See accompanying notes.
F-19
<PAGE>
BASH THEATRICAL LIGHTING, INC. AND AFFILIATES
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
(In thousands)
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30,
------------ --------------------
1996 1996 1997
-------- -------- --------
(unaudited)
<S> <C> <C> <C>
Revenues .......................................................... $ 25,408 $ 10,575 $ 17,632
Cost of sales (including depreciation expense of $2,670 in 1996
and $795 and $1,252 in the six months ended June 30, 1996 and
1997, respectively) ............................................. 12,935 4,797 9,411
-------- -------- --------
Gross profit ...................................................... 12,473 5,778 8,221
Selling, general and administrative expenses ...................... 10,932 4,186 5,172
Other depreciation and amortization ............................... 147 75 115
-------- -------- --------
Operating profit .................................................. 1,394 1,517 2,934
Interest expense .................................................. 304 171 111
Interest (income) ................................................. (9) (7) (6)
-------- -------- --------
Income before income taxes ........................................ 1,099 1,353 2,829
Provision for income taxes ........................................ 99 154 --
-------- -------- --------
Net income ........................................................ 1,000 1,199 2,829
Retained earnings--beginning of period ............................ 6,750 6,750 7,485
Less distributions to shareholders ................................ (265) (265) (1,572)
-------- -------- --------
Retained earnings--end of period .................................. $ 7,485 $ 7,684 $ 8,742
======== ======== ========
</TABLE>
See accompanying notes.
F-20
<PAGE>
BASH THEATRICAL LIGHTING, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30,
------------ ------------------
1996 1996 1997
------- ------- -------
(unaudited)
<S> <C> <C> <C>
Operating activities
Net income ......................................... $ 1,000 $ 1,199 $ 2,829
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for bad debts .......................... 150 60 115
Depreciation and amortization .................... 2,817 870 1,367
Changes in operating assets and liabilities:
Accounts receivable ........................... (19) (138) (821)
Inventories ................................... (178) (11) (152)
Prepaid expenses and other current assets ..... 12 (98) 5
Other assets .................................. 114 9 17
Accounts payable .............................. (43) 18 1,079
Accrued expenses .............................. (88) 19 216
Deferred revenue .............................. 682 -- (682)
------- ------- -------
Net cash provided by operating activities .......... 4,447 1,928 3,973
------- ------- -------
Investing activities
Purchases of property and equipment, net ........... (2,406) (1,020) (1,933)
Due from shareholder ............................... (238) 33 271
------- ------- -------
Net cash used in investing activities .............. (2,644) (987) (1,662)
------- ------- -------
Financing activities
Repayments of long-term debt ....................... (1,344) (607) (455)
Net borrowings under line of credit ................ 185 (26) (285)
Distributions paid to shareholders ................. (515) (315) (1,572)
------- ------- -------
Net cash used in financing activities .............. (1,674) (948) (2,312)
------- ------- -------
Net increase (decrease) in cash and cash equivalents 129 (7) (1)
Cash and cash equivalents--beginning of period ..... 590 590 719
------- ------- -------
Cash and cash equivalents--end of period ........... $ 719 $ 583 $ 718
======= ======= =======
</TABLE>
See accompanying notes.
F-21
<PAGE>
BASH THEATRICAL LIGHTING, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
(Information as of June 30, 1997 and for the Six Months ended
June 30, 1996 and 1997 is Unaudited)
1. Summary of Significant Accounting Policies
Organization and Basis of Combination
The combined financial statements include the accounts of Bash Theatrical
Lighting, Inc. and its affiliated companies; Bash Theatrical Lighting,
Inc.--West Coast, Bash Exposition Services, Inc., Bash Lighting Services, Inc.
and Bash Lighting Services--Mid-Atlantic, Inc., collectively the "Company." All
significant intercompany balances and transactions have been eliminated in
combination.
On August 15, 1997, the Company sold substantially all of its net assets to
Production Resource Group, L.L.C. The accompanying financial statements do not
give effect to the sale.
The Company is in the business of renting, selling and installing lighting
systems and related products to the live entertainment, corporate events and
themed entertainment markets. Its operations are located in; (i) North Bergen,
New Jersey, (ii) Las Vegas, Nevada, (iii) Orlando, Florida, and (iv) Baltimore,
Maryland.
Cash and Cash Equivalents
All highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents. At December 31, 1996,
substantially all of the Company's cash and cash equivalents were held in four
financial institutions.
Supplementary Cash Flow Information
Interest paid amounted to approximately $305,000 and income taxes paid
amounted to approximately $266,000 during the year ended December 31, 1996.
Inventories
Inventories consist of lighting products and supplies held for sale and are
stated at the lower of cost or market. Cost for such inventory is determined
using the first-in, first-out method.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets, which
range from three to 39 years. Lighting systems and other rental equipment is
included in property and equipment and is being depreciated by the straight-line
method over five years.
Goodwill
Goodwill represents the excess of cost of assets acquired over the fair
market value of such assets and is being amortized using the straight-line
method over 15 years.
Income Taxes
The Company, with the consent of its shareholders, has elected to be taxed
as an S Corporation pursuant to the Internal Revenue Code and certain state tax
laws. As such, the Company has not been subject to federal and certain state
income taxes because the shareholders have consented to include the Company's
taxable income or loss in their individual income tax returns. Income taxes
represents certain state and local corporate income taxes.
F-22
<PAGE>
The Company provides for income taxes pursuant to SFAS No. 109, "Accounting
for Income Taxes." There are no significant temporary differences as of December
31, 1996.
F-23
<PAGE>
BASH THEATRICAL LIGHTING, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
(Information as of June 30, 1997 and for the Six Months ended
June 30, 1996 and 1997 is Unaudited)
1. Summary of Significant Accounting Policies--(Continued)
Revenue Recognition and Deferred Revenue
Revenue from the rental of lighting systems and related products is
recognized ratably over the lives of the rental contracts. Revenue from the
sales of lighting equipment and supplies is recognized when the buyer takes
possession of the items.
Installation sales revenue is recognized generally based on the percentage
of total costs incurred to date to total estimated costs. Management reviews
estimated total project costs on individual projects and makes adjustments
accordingly. Losses expected to be incurred on projects in progress are charged
to income as soon as such losses are known. Amounts received in advance on
installation sales which exceed revenue recognized to date are recorded as
deferred revenue and recognized when earned.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.
Impairment of Long-Lived Assets
Long-lived assets to be held and used are reviewed for impairment whenever
events or changes of circumstances indicate that the related carrying amount may
not be recoverable. When required, impairment losses on assets to be held and
used are recognized based on the excess of the asset's carrying amount over its
fair value. Long-lived assets to be disposed of are reported at the lower of
their carrying amount or fair value less disposal costs.
Unaudited Information
The unaudited financial statements at June 30, 1997 and for the six months
ended June 30, 1996 and 1997 reflect adjustments, all of which are of a normal
recurring nature, which are, in the opinion of management, necessary to a fair
presentation. The results of the interim periods are not necessarily indicative
of full year results.
2. Property and Equipment
The following is a summary of property and equipment at December 31, 1996
(in thousands):
Land, building and building improvements ........................ $ 1,212
Rental equipment, principally lighting equipment ................ 16,309
Furniture, fixtures and office equipment ........................ 126
Leasehold improvements .......................................... 79
Transportation equipment ........................................ 239
-------
17,965
Less accumulated depreciation and amortization .................. 10,181
-------
Property and equipment--net ..................................... $ 7,784
=======
F-24
<PAGE>
BASH THEATRICAL LIGHTING, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
(Information as of June 30, 1997 and for the Six Months ended
June 30, 1996 and 1997 is Unaudited)
3. Line of Credit--Bank
The Company entered into a credit agreement ("Credit Agreement") which
provides for borrowings of up to $1,000,000. Borrowings under the Credit
Agreement bear interest at 8.25%. The Credit Agreement expired on May 31, 1997.
4. Long-Term Debt
Long-term debt consisted of the following at December 31, 1996 (in
thousands):
Notes payable ............................................. $1,775
Mortgage payable .......................................... 243
Other ..................................................... 90
------
2,108
Less current portion ...................................... 995
------
Long-term debt ............................................ $1,113
======
Notes Payable
The Company entered into various promissory notes with a bank with
aggregate borrowings of $4,500,000 expiring between March 1998 and August 2000.
Each note is for a period of 60 months with principal paid in equal monthly
installments. Interest is paid monthly on the outstanding balance and is based
on various rates including fixed rates ranging from 7.75% to 9.70% per annum and
variable rates at the prime rate plus 0.25% per annum.
Mortgage
The Company has a mortgage payable, which is collateralized by certain of
its properties. The mortgage requires monthly payments of both principal and
interest at 6.44%. The mortgage matures in December 2003.
Current maturities of long-term debt as of December 31, 1996 are
approximately as follows (in thousands):
1997 ................................................... $ 995
1998 ................................................... 586
1999 ................................................... 274
2000 ................................................... 151
2001 ................................................... 35
Thereafter ............................................. 67
------
$2,108
======
5. Stock Options
The Company has granted several key employees stock options exercisable on
the earlier of August 1999 or the occurrence of a major transaction defined as
the public offering of the Company's shares, a sale of substantially all the
assets of the Company, or a merger or consolidation of the Company.
The shares held in treasury were purchased by the Company from a former
shareholder and have been set aside for exercise of the aforementioned options.
In conjunction with the sale of the Company's assets in 1997 (see Note 1), such
options were terminated in exchange for a cash settlement of approximately
$862,000 plus an additional amount not to exceed $78,000, as defined in the
termination agreement.
F-25
<PAGE>
BASH THEATRICAL LIGHTING, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
(Information as of June 30, 1997 and for the Six Months ended
June 30, 1996 and 1997 is Unaudited)
6. Capital Stock
The common stock of each of the individual affiliated companies comprising
the Company as of December 31, 1996 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Common Treasury
Stock Stock
----- -----
<S> <C> <C>
Bash Theatrical Lighting, Inc.
100,000 shares of no par value common stock authorized and issued; 80,000 shares
outstanding; 20,000 shares held in treasury ....................................................... $ 15 $ (5)
Bash Lighting Services, Inc.
200 shares of no par value common stock authorized and issued; 100 shares
outstanding; 100 shares held in treasury ......................................................... 75 (38)
Bash Exposition Services, Inc.
200 shares of no par value common stock authorized; 100 shares issued and outstanding ................ 2 --
Bash Theatrical Lighting, Inc.--West Coast
200 shares of no par value common stock authorized, issued and outstanding ........................... 2 --
Bash Lighting Services--Mid-Atlantic, Inc.
200 shares of no par value common stock authorized; 100 shares issued and outstanding ................ -- --
---- ----
$ 94 $(43)
==== ====
</TABLE>
7. Benefit Plans
The Company is a party to a collective bargaining agreement expiring on
December 31, 1998. The terms of this agreement require contributions by the
Company to a union pension fund. Contributions to the pension fund totaled
approximately $92,000 for the year ended December 31, 1996.
The Company has a defined contribution plan covering all eligible
employees, which qualifies under section 401(k) of the Internal Revenue Code.
The Company's 401(k) plan provides that eligible employees may make
contributions subject to Internal Revenue Service limitations. The Company
contributes an amount equal to 50% of each employee's contributions up to 4% of
an eligible employee's compensation. Such contributions aggregated approximately
$64,000 for the year ended December 31, 1996.
8. Commitments
Operating Leases
The Company leases certain property and equipment under leases that expire
at various dates through 2001. As of December 31, 1996, future minimum lease
payments under noncancelable leases are as follows (in thousands):
1997 ................................................... $366
1998 ................................................... 279
1999 ................................................... 119
2000 ................................................... 107
2001 ................................................... 26
----
$897
====
Rent expense was approximately $399,000 for the year ended December 31,
1996.
F-26
<PAGE>
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the Exchange Offer covered by this Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under circumstances, create any
implication that there has been no change in the affairs of the Company since
the dates as of which information is given in this Prospectus. This Prospectus
does not constitute an offer or solicitation is not authorized or in which the
person making such offer of solicitation is not qualified to do so or to any
person to whom it is unlawful to make such offer of solicitations.
___________________________________
Until _______, 1998 (one year after the date of this Exchange Offer) all Dealers
effecting transactions in the New Notes, whether or not participating in this
Exchange Offer, may be required to deliver a Prospectus.
All tendered Old Notes, executed Letters of Transmittal and other related
documents should be directed to the Exchange Agent. Questions and requests for
assistance and request for additional copies of the Prospectus, the Letter of
Transmittal and other related documents should be addressed to the Exchange
Agent as follows:
The Exchange Agent for thge Exchange Offer is:
FIRST UNION NATIONAL BANK
Corporate Trust Operations
1525 West W.T. Harris Blvd.
Charlotte, NC 28288
Facsimile Transmissions
(Eligible Institutions Only)
(704) 590-7628
To confirm by telephone
or for information call:
(704) 590-7408
(Originals of all documents submitted by facsimile should be sent promptly by
hand, overnight courier, or registered or certified mail.)
OFFER TO EXCHANGE ALL OUTSTANDING
11.50% Senior Subordinated
Notes Due 2008
($100,000,000 Principal Amount)
for
11.50% Senior Subordinated
Notes Due 2007
Production Resource Group, L.L.C.
PRG Finance Corporation
----------------------------------
Prospectus
----------------------------------
Dated ___________________
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Reference is made to Section 18-108 ("Section 18-108") of the Delaware
Limited Liability Company Act which provides for indemnification of members and
managers in certain circumstances and Section 145 ("Section 145") of the General
Corporation Law of the State of Delaware (the "DGCL") which provides for
indemnification of directors and officers in certain circumstances.
The Company's Operating Agreement provides that no Covered Person (as
defined therein) shall be obligated personally for any debt, obligation or
liability of the Company solely by reason of being a Covered Person. In
addition, the Operating Agreement provides that a Covered Person shall not be
personally liable to the Company for acts taken on behalf of the Company except
for liability for any loss damage or claim incurred by reason of such Covered
Person's gross negligence or willful misconduct. The Operating Agreement
provides that the Company shall indemnify any Covered Person to the full extent
permitted by law, except that no Covered Person will be entitled to
indemnification in respect of any loss, damage or claim incurred by such Covered
Person by reason of gross negligence or willful misconduct with respect to such
acts or omissions.
Finance Corp.'s Bylaws provide that the Company shall indemnify its
directors and officers to the full extent permitted by law. Further, Finance
Corp. is empowered by Section 145 of the DGCL, subject to the procedures and
limitations stated therein, to indemnify any person against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in the defense of any threatened, pending or
competed action, suit or proceeding in which such person is made a party by
reason of his or her being or having been a director or officer of the Company.
The statute provides that indemnification pursuant to its provisions is not
exclusive of other rights of indemnification to which a person may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise.
The Company has entered into agreements with certain managers and officers
that require the Company to indemnity such persons against expenses, judgments,
fines, settlements and other amounts to the fullest extent permitted by law
incurred in connection with any proceeding to which any such person may be made
a party by reason of the fact that such person is or was a manager or officer of
the Company or any of its affiliated enterprises, provided such person acted
honestly and in good faith with a view to the best interests of the corporation.
The Company is in the process of procuring directors', officers' and
managers' liability insurance policies to insure directors, officers and
managers of the Company and its subsidiaries.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits:
Exhibit
Number Description
------- -----------
1.1 Purchase Agreement, dated as of December 19, 1997, by and among the
Issuers, Finance Corp., the Guarantors and the Initial Purchasers.
3.1 Certificate of Formation of the Company
3.2 Second Amended and Restated Limited Liability Company Agreement of the
Company
3.3 Certificate of Incorporation of Finance Corp.
3.4 Bylaws of Finance Corp.
II-1
<PAGE>
4.1 Registration Rights Agreements, dated December 24, 1997, among the
Issuers, the Guarantors and the Initial Purchasers
4.2 Indenture, dated December 24, 1997 relating to $100,000,000 aggregate
principal amount 11% Senior Subordinated Notes due 2008 between the
Issuers and First Union National Bank, as trustee, including the Form
of Note
5.1 Opinion of Morrison & Foerster LLP*
10.1 Acquistion Agreement dated as of July 3, 1997 among the Company and
Bash Theatrical Lighting, Inc. Bash Theatrical Lighting Services,
Inc., Bash Lighting Services, Inc., Bash Lighting Services
Mid-Atlantic, Inc., Bash Exposition Services, Inc. and Donald Stern
and Robert Cannon.
10.2 Employment Agreement dated as of January 1, 1996 between Jeremiah J.
Harris and the Company.
10.3 Employment Agreement dated as of June 6, 1997 between Kenneth L.
Shearer and the Company.*
10.4 Employment Agreement dated as of June 7, 1997 between Bradley G.
Miller and the Company.
10.5 Employment Agreement dated as of August 6, 1997 between Robert A.
Manners and the Company.*
10.6 Agreement of Lease dated September 11, 1997 between Danis Properties
Limited Partnership and the Company.*
10.7 Credit Agreement, dated as of July 31, 1997, by and among the Company,
the lenders party thereto and the Bank of New York, as agent.*
10.8 First Amendment to Credit Agreement, dated as of December 12, 1997, by
and among the Company, the lenders party thereto and the Bank of New
York, as agent.*
12.1 Calculation of Ratio of Earnings to Fixed Charges
21.1 Subsidiaries of the Company
23.1 Consent of Ernst & Young LLP
23.2 Consent of Morrison & Foerster LLP (Included in Exhibit 5.1)*
24 Powers of Attorney (included in Part II to the Registration Statement)
25.1 Statement Regarding Eligibility of Trustee
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery
- ----------
*To be filed by amendment
(b) Financial Statement Schedule:
II - Valuation and Qualifying Accounts
II-2
<PAGE>
Item 22. Undertakings
(a) The undersigned hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrants's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, were
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described in Item 20 above, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that tie shall be deemed to
be the initial bona fide offering thereof.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved herein, that was not the subject
of and included in the Registration Statement when it became
effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York on February 11, 1998.
PRODUCTION RESOURCE GROUP, L.L.C.
By: /s/ Jeremiah J. Harris
----------------------
Jeremiah J. Harris
Title: Chief Executive Officer and sole Manager of the Board of Managers
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert A. Manners, and each of them, his
attorneys-in-fact, each with the power of substitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming that
all such attorneys-in-fact and agents or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons and in the capacities
indicated on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
PRODUCTION RESOURCE GROUP, L.L.C.:
By: /s/ Jeremiah J. Harris Chief Executive Officer, sole Manager of the Board of February 11, 1998
---------------------- Managers (Principal Executive Officer)
Jeremiah J. Harris
By: /s/ Bradley G. Miller Executive Vice President, Chief Operating and February 11, 1998
--------------------- Financial Officer and Director (Principal Financial
Bradley G. Miller Officer)
By: /s/ Robert A. Manners Senior Vice President and General Counsel (Principal February 11, 1998
--------------------- Executive Officer)
Robert A. Manners
By: /s/ James M. Mahoney Corporate Controller (Principal Accounting Officer February 11, 1998
--------------------
James M. Mahoney
</TABLE>
II-4
<PAGE>
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York on February 11, 1998.
PRG FINANCE CORPORATON
By: /s/ Jeremiah J. Harris
-----------------------
Jeremiah J. Harris
Title: Chairman, Chief Executive Officer and President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert A. Manners, and each of them, his
attorneys-in-fact, each with the power of substitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming that
all such attorneys-in-fact and agents or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons and in the capacities
indicated on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
PRG FINANCE CORPORATION:
By: /s/ Jeremiah J. Harris Chairman, Chief Executive Officer, President and February 11, 1998
---------------------- Director (Principal Executive Officer)
Jeremiah J. Harris
By: /s/ Bradley G. Miller Vice President and Director (Principal Financial February 11, 1998
--------------------- Officer and Principal Accounting Officer)
Bradley G. Miller
By: /s/ Robert A. Manners Vice President and Director (Principal Executive February 11, 1998
--------------------- Officer)
Robert A. Manners
</TABLE>
II-5
<PAGE>
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York on February 11, 1998.
PRG PLANNING & DEVELOPMENT, L.L.C.
By: /s/ Jeremiah J. Harris
----------------------
Jeremiah J. Harris
Title: Chief Executive Officer and Chairman of sole Member
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert A. Manners, and each of them, his
attorneys-in-fact, each with the power of substitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming that
all such attorneys-in-fact and agents or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons and in the capacities
indicated on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
PRG PLANNING & DEVELOPMENT LLC:
By: /s/ Jeremiah J. Harris Chief Executive Officer (Principal Executive Officer) February 11, 1998
----------------------
Jeremiah J. Harris
By: Production Resource Group,
L.L.C., sole member Sole Member February 11, 1998
By: /s/ Jeremiah J. Harris
----------------------
Jeremiah J. Harris,
Chairman
By: /s/ Kevin J. Baxley President (Principal Executive Officer) February 11, 1998
-------------------
Kevin J. Baxley
By: /s/ Bradley G. Miller Vice President (Principal Financial Officer) February 11, 1998
---------------------
Bradley G. Miller
By: /s/ Robert A. Manners Vice President (Principal Executive Officer) February 11, 1998
---------------------
Robert A. Manners
</TABLE>
II-6
<PAGE>
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York on February 11, 1998.
ECTS, A SCENIC TECHNOLOGY COMPANY, INC.
By: /s/ Jeremiah J. Harris
----------------------
Jeremiah J. Harris
Title: President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert A. Manners, and each of them, his
attorneys-in-fact, each with the power of substitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming that
all such attorneys-in-fact and agents or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons and in the capacities
indicated on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
ECTS, A SCENIC TECHNOLOGY COMPANY, INC.:
By: /s/ Jeremiah J. Harris President and Director (Principal Executive Officer) February 11, 1998
----------------------
Jeremiah J. Harris
By: /s/ Kevin J. Baxley Treasurer and Director (Principal Accounting Officer) February 11, 1998
-------------------
Kevin J. Baxley
By: /s/ Bradley G. Miller Vice President (Principal Financial Officer) February 11, 1998
---------------------
Bradley G. Miller
By: /s/ Robert A. Manners Vice President (Principal Executive Officer) February 11, 1998
---------------------
Robert A. Manners
By: /s/ William Ennis Director February 11, 1998
-----------------
William Ennis
</TABLE>
II-7
<PAGE>
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York on February 11, 1998.
SHOWPAY, L.L.C.
By: /s/ Jeremiah J. Harris
----------------------
Jeremiah J. Harris
Title: President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert A. Manners, and each of them, his
attorneys-in-fact, each with the power of substitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming that
all such attorneys-in-fact and agents or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons and in the capacities
indicated on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
SHOWPAY, L.L.C..:
By: /s/ Jeremiah J. Harris President (Principal Executive Officer) February 11, 1998
----------------------
Jeremiah J. Harris
By: Production Resource Group,
L.L.C., sole member Sole Member February 11, 1998
By: /s/ Jeremiah J. Harris
----------------------
Jeremiah J. Harris, Chairman
By: /s/ Bradley G. Miller Vice President (Principal Financial Officer and February 11, 1998
--------------------- Principal Accounting Officer)
Bradley G. Miller
By: /s/ Robert A. Manners Vice President (Principal Executive Officer) February 11, 1998
---------------------
Robert A. Manners
</TABLE>
II-8
<PAGE>
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York on February 11, 1998.
ATTRACTION MANAGEMENT LLC
By: /s/ Jeremiah J. Harris
----------------------
Jeremiah J. Harris
Title: President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert A. Manners, and each of them, his
attorneys-in-fact, each with the power of substitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming that
all such attorneys-in-fact and agents or any of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons and in the capacities
indicated on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
ATTRACTION MANAGEMENT LLC:
By: /s/ Jeremiah J. Harris President and Chairman of Majority Member (Principal February 11, 1998
---------------------- Executive Officer)
Jeremiah J. Harris
By: Production Resource Group,
L.L.C., majority member Majority Member February 11, 1998
By: /s/ Jeremiah J. Harris
----------------------
Jeremiah J. Harris, Chairman
By: /s/ Bradley G. Miller Vice President (Principal Financial Officer and February 11, 1998
--------------------- Principal Accounting Officer)
Bradley G. Miller
By: /s/ Robert A. Manners Vice President (Principal Executive Officer) February 11, 1998
---------------------
Robert A. Manners
</TABLE>
II-9
<PAGE>
Report of Independent Auditors on Schedule
Members
Production Resource Group, L.L.C.
We have audited the consolidated balance sheets of Production Resource Group,
L.L.C. as of December 31, 1995 and 1996, and the related consolidated statements
of operations and members' equity and cash flows for each of the three years in
the period ended December 31, 1996, and have issued our report thereon dated
April 4, 1997 (included elsewhere in this Registration Statement). Our audits
also included the financial statement schedule listed in Item 21(b) of this
Registration Statement. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein for
the periods stated above.
ERNST & YOUNG LLP
New York, New York
April 4, 1997
S-1
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
PRODUCTION RESOURCE GROUP, L.L.C.
(Dollar in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------------------------- ---------------- ----------------
COL. A COL. B COL. C COL. D COL. E
- -------------------------------------------------------------- ------------------------------- ---------------- ----------------
Additions
-------------------------------
Balance at Charged to Charged to
Beginning of Costs and Other Accounts Deductions- Balance at End
Description Period Expenses - Describe Describe of Period
- -------------------------------------------------------------- -------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
Reserve and allowances deducted from
asset accounts:
Allowance for uncollectible accounts $100 $311 $(88)(1) $323
YEAR ENDED DECEMBER 31, 1995:
Reserve and allowances deducted from
asset accounts:
Allowance for uncollectible accounts $136 - ($36)(1) $100
YEAR ENDED DECEMBER 31, 1994:
Reserve and allowances deducted from
asset accounts:
Allowance for uncollectible accounts $21 $364 ($249)(1) $136
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
S-2
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
1.1 Purchase Agreement, dated as of December 19, 1997, by and among the
Issuers, Finance Corp., the Guarantors and the Initial Purchasers.
3.1 Certificate of Formation of the Company
3.2 Second Amended and Restated Limited Liability Company Agreement of the
Company
3.3 Certificate of Incorporation of Finance Corp.
3.4 Bylaws of Finance Corp.
4.1 Registration Rights Agreements, dated December 24, 1997, among the
Issuers, the Guarantors and the Initial Purchasers
4.2 Indenture, dated December 24, 1997 relating to $100,000,000 aggregate
principal amount 11% Senior Subordinated Notes due 2008 between the
Issuers and First Union National Bank, as trustee, including the Form
of Note
5.1 Opinion of Morrison & Foerster LLP*
10.1 Acquistion Agreement among the Company and Bash Theatrical Lighting,
Inc. Bash Theatrical Lighting Services, Inc., Bash Lighting Services,
Inc., Bash Lighting Services Mid-Atlantic, Inc., Bash Exposition
Services, Inc. and Donald Stern and Robert Cannon.
10.2 Employment Agreement dated as of January 1, 1996 between Jeremiah J.
Harris and the Company.
10.3 Employment Agreement dated as of June 6, 1997 between Kenneth L.
Shearer and the Company.*
10.4 Employment Agreement dated as of June 7, 1997 between Bradley G.
Miller and the Company.
10.5 Employment Agreement dated as of August 6, 1997 between Robert A.
Manners and the Company.*
10.6 Agreement of Lease dated September 11, 1997 between Danis Properties
Limited Partnership and the Company.
10.7 Credit Agreement, dated as of July 31, 1997, by and among the Company,
the lenders party thereto and the Bank of New York, as agent.*
10.8 First Amendment to Credit Agreement, dated as of December 12, 1997, by
and among the Company, the lenders party thereto and the Bank of New
York, as agent.*
12.1 Calculation of Ratio of Earnings to Fixed Charges
21.1 Subsidiaries of the Company
23.1 Consent of Ernst & Young LLP
II-10
<PAGE>
23.2 Consent of Morrison & Foerster LLP (Included in Exhibit 5.1)*
24 Powers of Attorney (included in Part II to the Registration Statement)
25.1 Statement Regarding Eligibility of Trustee
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery
- ----------
*To be filed by amendment
II-11
<PAGE>
EXHIBIT 1.1
PRODUCTION RESOURCE GROUP, L.L.C
PRG FINANCE CORPORATION
$100,000,000
11 1/2% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
------------------
December 19, 1997
New York, New York
BEAR, STEARNS & CO. INC.
BT ALEX. BROWN INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
BNY CAPITAL MARKETS, INC.
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, NY 10167
Ladies & Gentlemen:
Production Resource Group, L.L.C, a Delaware limited liability company (the
"Company"), and PRG Finance Corporation, a Delaware corporation ("Finance" and,
together with the Company, the "Issuers"), as joint and several obligors,
propose to issue and sell to Bear, Stearns & Co. Inc., BT Alex. Brown
Incorporated, Morgan Stanley & Co. Incorporated and BNY Capital Markets, Inc.
(collectively, the "Initial Purchasers") $100,000,000 in aggregate principal
amount of 11 1/2% Series A Senior Subordinated Notes due 2007 (the "Series A
Notes"), subject to the terms and conditions set forth herein. The Series A
Notes will be issued pursuant to an indenture (the "Indenture"), to be dated the
Closing Date (as defined), among the Issuers, the Guarantors (as defined) and
First Union National Bank, as trustee (the "Trustee"). The Notes (as defined)
will be fully and unconditionally guaranteed (the "Guarantees") as to payment of
principal, interest, liquidated damages and premium, if any, on an unsecured
senior subordinated basis, jointly and severally, by each entity listed on
Exhibit A hereto (collectively, the "Guarantors"). Capitalized terms used herein
and not otherwise defined shall have the meanings assigned to such terms in the
Indenture.
In connection with the offering of the Series A Notes, the Company will
transfer certain real estate and the related mortgage debt obligations to a
member of the Company as payment for redemption of such member's equity
interests in the Company. Such member will subsequently lease such real estate
back to the Company. The transfer of real estate and the subsequent lease back
is referred to herein as the "Real Estate Transaction."
1. Issuance of Securities. The Issuers propose, upon the terms and subject
to the conditions set forth herein, to issue and sell to the Initial Purchasers
an aggregate of $100,000,000 in principal amount of Series A Notes. The Series A
Notes and the Series B Notes (as defined) issuable in exchange therefor are
collectively referred to herein as the "Notes."
1
<PAGE>
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act of 1933,
as amended (the "Act"), the Series A Notes (and all securities issued in
exchange therefor or in substitution thereof) shall bear the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) OR (C) IT IS
NOT A U.S. PERSON AND IS NOT ACQUIRING THIS SECURITY FOR THE
ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION
S UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE ISSUERS THAT (A) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT), IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUERS SO
REQUEST), (2) TO THE ISSUERS, (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION
AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY
OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
2. Offering. The Series A Notes will be offered and sold to the Initial
Purchasers pursuant to an exemption from the registration requirements under the
Act. The Issuers have prepared a preliminary offering memorandum, dated December
3, 1997 (the "Preliminary Offering Memorandum"), and a final offering
memorandum, dated December 19, 1997 (the "Offering Memorandum"), relating to the
Company, its subsidiaries and the Series A Notes.
2
<PAGE>
The Initial Purchasers have advised the Issuers that the Initial Purchasers
will make offers (the "Exempt Resales") of the Series A Notes on the terms set
forth in the Offering Memorandum, as amended or supplemented, solely to (i)
persons whom the Initial Purchasers reasonably believe to be "qualified
institutional buyers," as defined in Rule 144A under the Act ("QIBs") and (ii)
non-U.S. persons outside the United States in reliance upon Regulation S
("Regulation S") under the Act (each, a "Reg S Investor"). The QIBs and Reg S
Investors are collectively referred to herein as the "Eligible Purchasers." The
Initial Purchasers will offer the Series A Notes to such Eligible Purchasers
initially at a price equal to 100% of the principal amount thereof. Such price
may be changed at any time without notice.
Holders (including subsequent transferees) of the Series A Notes will have
the registration rights set forth in the registration rights agreement relating
thereto (the "Registration Rights Agreement"), to be dated the Closing Date, for
so long as such Series A Notes constitute "Transfer Restricted Securities" (as
defined in the Registration Rights Agreement). Pursuant to the Registration
Rights Agreement, the Issuers and the Guarantors will agree to file with the
Securities and Exchange Commission (the "Commission"), under the circumstances
set forth therein, (i) a registration statement under the Act (the "Exchange
Offer Registration Statement") relating to the 11 1/2% Series B Notes due 2007
(the "Series B Notes") to be offered in exchange for the Series A Notes (the
"Exchange Offer") and (ii) a shelf registration statement pursuant to Rule 415
under the Act (the "Shelf Registration Statement" and, together with the
Exchange Offer Registration Statement, the "Registration Statements") relating
to the resale by certain holders of the Series A Notes, and to use their best
efforts to cause such Registration Statements to be declared effective and to
consummate the Exchange Offer. This Agreement, the Notes, the Guarantees, the
Indenture, the Registration Rights Agreement and the Amended Credit Facility (as
defined in the Offering Memorandum) are hereinafter referred to collectively as
the "Operative Documents."
3. Purchase, Sale and Delivery. (a) On the basis of the representations,
warranties and covenants contained in this Agreement, and subject to its terms
and conditions, the Issuers agree to issue and sell to the Initial Purchasers,
and the Initial Purchasers agree to purchase from the Issuers, the principal
amount of Series A Notes set forth opposite its name on Schedule I hereto. The
purchase price for the Series A Notes will be $970 per $1,000 principal amount
Series A Note.
(b) Delivery of the Series A Notes shall be made, against payment of the
purchase price therefor, at the offices of Latham & Watkins, New York, New York
or such other location as may be mutually acceptable. Such delivery and payment
shall be made at 9:00 a.m., New York City time, on December 24, 1997 or at such
other time as shall be agreed upon by the Initial Purchasers and the Issuers.
The time and date of such delivery and payment are herein called the "Closing
Date."
(c) On the Closing Date, one or more Series A Notes in definitive form,
registered in the name of Cede & Co., as nominee of The Depository Trust Company
("DTC"), having an aggregate amount corresponding to the aggregate amount of the
Series A Notes sold pursuant to Exempt Resales to Eligible Purchasers (the
"Global Notes") shall be delivered by the Issuers to the Initial Purchasers (or
as the Initial Purchasers direct), against payment by the Initial Purchasers of
the purchase price therefor, by wire transfer of same day funds, to an account
designated by the Issuers, provided that the Issuers shall give at least two
business days' prior written notice to the Initial Purchasers of the information
required to effect such wire transfer. The Global Notes shall be made available
to the Initial Purchasers for inspection not later than 9:30 a.m. on the
business day immediately preceding the Closing Date.
4. Agreements of the Issuers and the Guarantors. The Issuers and the
Guarantors, jointly
3
<PAGE>
and severally, covenant and agree with the Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested by the
Initial Purchasers, confirm such advice in writing, (i) of the issuance by
any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Notes for offering or
sale in any jurisdiction, or the initiation of any proceeding for such
purpose by any state securities commission or other regulatory authority
and (ii) of the happening of any event that makes any statement of a
material fact made in the Preliminary Offering Memorandum or the Offering
Memorandum untrue or that requires the addition of any material fact in the
Preliminary Offering Memorandum or the Offering Memorandum necessary in
order to make the statements therein, in the light of the circumstances
under which they are made, not misleading. The Issuers and the Guarantors
shall use their reasonable best efforts to prevent the issuance of any stop
order or order suspending the qualification or exemption of any Notes under
any state securities or Blue Sky laws and, if at any time any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption of any Notes or Guarantees of
Notes under any state securities or Blue Sky laws, the Issuers and the
Guarantors shall use their reasonable best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons identified by
the Initial Purchasers to the Issuers, without charge, as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as the Initial Purchasers may reasonably
request. The Issuers and the Guarantors consent to the use of the
Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments and supplements thereto required pursuant hereto, by the Initial
Purchasers in connection with Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering Memorandum or
the Offering Memorandum prior to the Closing Date unless the Initial
Purchasers shall previously have been advised thereof and shall not have
objected thereto in writing within a reasonable time after being furnished
a copy thereof. The Issuers and the Guarantors shall promptly prepare, upon
the Initial Purchasers' request, any amendment or supplement to the
Preliminary Offering Memorandum or the Offering Memorandum that may be
necessary or advisable in connection with Exempt Resales.
(d) If, after the date hereof and prior to consummation of any Exempt
Resale, any event shall occur as a result of which, in the judgment of the
Issuers and the Guarantors or in the reasonable opinion of counsel for the
Issuers and the Guarantors or counsel for the Initial Purchasers, it
becomes necessary or advisable to amend or supplement the Preliminary
Offering Memorandum or the Offering Memorandum in order to make the
statements therein, in the light of the circumstances when such Offering
Memorandum is delivered to an Eligible Purchaser which is a prospective
purchaser, not misleading, or if it is necessary or advisable to amend or
supplement the Preliminary Offering Memorandum or the Offering Memorandum
to comply with applicable law, (i) to notify the Initial Purchasers and
(ii) forthwith to prepare an appropriate amendment or supplement to such
Preliminary Offering Memorandum or Offering Memorandum so that the
statements therein as so amended or supplemented will not, in the light of
the circumstances when it is so delivered, be misleading, or so that such
Preliminary Offering Memorandum or Offering Memorandum will comply with
applicable law.
4
<PAGE>
(e) To cooperate with the Initial Purchasers and counsel for the
Initial Purchasers in connection with the qualification or registration of
the Series A Notes under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchasers may reasonably request and to
continue such qualification in effect so long as required for the Exempt
Resales; provided, however, that none of the Issuers or the Guarantors
shall be required in connection therewith to register or qualify as a
foreign corporation where it is not now so qualified or to take any action
that would subject it to taxation or service of process.
(f) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement becomes effective or is terminated, to pay
all costs, expenses, fees and taxes incident to the performance of the
obligations of the Issuers and the Guarantors hereunder, including in
connection with: (i) the preparation, printing, filing and distribution of
the Preliminary Offering Memorandum and the Offering Memorandum (including,
without limitation, financial statements) and all amendments and
supplements thereto required pursuant hereto, (ii) the preparation
(including, without limitation, duplication costs) and delivery of all
agreements, correspondence and all other documents prepared and delivered
in connection herewith and with the Exempt Resales, (iii) the issuance,
transfer and delivery of the Series A Notes and the Guarantees to the
Initial Purchasers, (iv) the qualification or registration of the Notes and
the Guarantees for offer and sale under the securities or Blue Sky laws of
the several states (including, without limitation, the cost of printing and
mailing a preliminary and final Blue Sky Memorandum and the reasonable fees
and disbursements of counsel for the Initial Purchasers relating thereto,
which fees and disbursements shall in no event exceed $7,000 in the
aggregate), (v) furnishing such copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and all amendments and supplements
thereto, as may be requested for use in connection with Exempt Resales,
(vi) the preparation of certificates for the Notes and the Guarantees
(including, without limitation, printing and engraving thereof), (vii) the
fees, disbursements and expenses of the Issuers' and the Guarantors'
counsel and accountants, (viii) all fees and expenses (including fees and
expenses of counsel) of the Issuers in connection with the approval of the
Notes by DTC for "book-entry" transfer, (ix) rating the Notes by rating
agencies, (x) the reasonable fees and expenses of the Trustee and its
counsel, (xi) the performance by the Issuers and the Guarantors of their
other obligations under this Agreement and the other Operative Documents
and (xii) "roadshow" travel and other expenses incurred by the Issuers in
connection with the marketing and sale of the Notes; provided that the
Issuers and the Guarantors shall pay one-half of all the costs, expenses,
fees and taxes related to "roadshow" travel in a private airplane.
Notwithstanding the foregoing, except in the case of clause (iv), the
Issuers and the Guarantors shall not be obligated to pay costs, expenses,
fees and taxes of the Initial Purchasers and their counsel.
(g) To use the proceeds from the sale of the Series A Notes in the
manner described in the Offering Memorandum under the caption "Use of
Proceeds."
(h) Not to voluntarily claim, and to resist actively any attempts to
claim, the benefit of any usury laws against the holders of any Notes.
(i) To do and perform in all material respects all things required to
be done and performed under this Agreement by them prior to or after the
Closing Date and to satisfy in all material respects all conditions
precedent on their part to the delivery of the Series A Notes and
5
<PAGE>
the Guarantees.
(j) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Series A Notes in a manner that would
require the registration under the Act of the sale to the Initial
Purchasers or the Eligible Purchasers of the Series A Notes or to take any
other action that would result in the Exempt Resales not being exempt from
registration under the Act.
(k) For so long as any of the Notes remain outstanding and during any
period in which the Issuers and the Guarantors are not subject to Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to make available to any holder or beneficial owner of
Series A Notes in connection with any sale thereof and any prospective
purchaser of such Notes from such holder or beneficial owner, upon request
of such holder, the information required by Rule 144A(d)(4) under the Act.
(l) To use their best efforts to cause the Exchange Offer to be made
in the appropriate form to permit registered Series B Notes to be offered
in exchange for the Series A Notes and to comply with all applicable
federal and state securities laws in connection with the Exchange Offer.
(m) To comply in all material respects with all of their agreements
set forth in the Registration Rights Agreement and all agreements set forth
in the representation letters of the Issuers to DTC relating to the
approval of the Notes by DTC for "book-entry" transfer.
(n) To effect the inclusion of the Notes in PORTAL and to obtain
approval of the Series A Notes by DTC for "book-entry" transfer.
(o) During a period of five years following the Closing Date, to
deliver without charge to the Initial Purchasers, as they may reasonably
request, promptly upon their becoming available, copies of (i) all reports
or other publicly available information that such Issuer shall mail or
otherwise make available to its securityholders generally and (ii) all
reports, financial statements and proxy or information statements filed by
such Issuer with the Commission or any national securities exchange and
such other publicly available information concerning such Issuer or any of
its subsidiaries, including without limitation, press releases.
(p) Prior to the Closing Date, to furnish to the Initial Purchasers,
as soon as they have been prepared in the ordinary course by any of the
Issuers and the Guarantors, copies of any unaudited quarterly interim
financial statements for any period subsequent to the periods covered by
the financial statements appearing in the Offering Memorandum.
(q) Not to take, directly or indirectly, any action designed to, or
that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of either of the Issuers or any
of the Guarantors to facilitate the sale or resale of the Notes. Except as
permitted by the Act, none of the Issuers or the Guarantors will distribute
any (i) preliminary offering memorandum, including, without limitation, the
Preliminary Offering Memorandum, (ii) offering memorandum, including,
without limitation, the Offering Memorandum, or (iii) other offering
material in connection with the offering and sale of the Notes.
(r) At such time that the Company makes a distribution to its members
pursuant to clause
6
<PAGE>
(ix) under the caption "Description of Notes--Certain Covenants--Restricted
Payments" contained in the Offering Memorandum, the Company shall deliver
an officers' certificate to the Trustee, in form and substance satisfactory
to the Trustee, as to the solvency of the Company following such
distribution.
(s) To use their best efforts to do and perform all things required or
necessary to be done and performed under this Agreement prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the
Series A Notes and the Guarantees.
5. Representations and Warranties. (a) The Issuers and the Guarantors,
jointly and severally, represent and warrant to the Initial Purchasers that:
(i) The Preliminary Offering Memorandum as of its date does not, and
the Offering Memorandum as of its date and as of the Closing Date does not
and will not, and any supplement or amendment thereto will not, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties contained in
this paragraph shall not apply to statements in or omissions from the
Preliminary Offering Memorandum and the Offering Memorandum (or any
supplement or amendment thereto) made in reliance upon and in conformity
with information relating to the Initial Purchasers furnished to the
Issuers in writing by the Initial Purchasers expressly for use therein. No
stop order preventing the use of the Preliminary Offering Memorandum or the
Offering Memorandum, or any amendment or supplement thereto, or any order
asserting that any of the transactions contemplated by this Agreement are
subject to the registration requirements of the Act, has been issued.
(ii) The Company (A) is a Delaware limited liability company duly
formed, validly existing and in good standing under the laws of Delaware,
(B) has all requisite power and authority to carry on its business as it is
currently being conducted and to own, lease and operate its properties, and
(C) is duly qualified and is in good standing as a foreign limited
liability company, authorized to do business in each jurisdiction in which
the nature of its business or its ownership or leasing of property requires
such qualification except where the failure to be so qualified could not
reasonably be expected to (x) result, individually or in the aggregate, in
a material adverse effect on the properties, business, results of
operations, condition (financial or otherwise) or affairs of the Company
and its subsidiaries, taken as a whole, (y) interfere with or adversely
affect the issuance or marketability of the Notes or the issuance of the
Guarantees pursuant hereto or (z) in any manner draw into question the
validity of this Agreement or any other Operative Document or the
transactions described in the Offering Memorandum under the caption "Use of
Proceeds" (any of the events set forth in clauses (x), (y) or (z), a
"Material Adverse Effect").
(iii) Each of the Company's subsidiaries (A) is a corporation or
limited liability company, as applicable, duly formed, validly existing and
in good standing under the laws of its jurisdiction of organization, (B)
has all requisite power and authority to carry on its business as it is
currently being conducted and as described in the Offering Memorandum and
to own, lease and operate its properties, and (C) is duly qualified and in
good standing as a foreign corporation or limited liability company, as
applicable, authorized to do business in each jurisdiction in which the
nature
7
<PAGE>
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified could not
reasonably be expected to have a Material Adverse Effect.
(iv) The Company has no material subsidiaries other than Finance and
the Guarantors.
(v) All of the outstanding capital stock of each material subsidiary
of the Company other than PRG Planning and Development Group, L.L.C. is
owned, directly or indirectly, by the Company and 99% of the outstanding
capital stock of PRG Planning and Development Group, L.L.C. is owned,
directly or indirectly, by the Company, in each case, free and clear of any
security interest, claim, lien, limitation on voting rights or encumbrance,
except for any such security interest, claim, lien, limitation on voting
rights or encumbrance pursuant to the Amended Credit Facility; and all such
securities have been duly authorized, validly issued, and are fully paid
and nonassessable and were not issued in violation of any preemptive or
similar rights.
(vi) There are not currently any outstanding subscriptions, rights,
warrants, calls, commitments of sale or options to acquire, or instruments
convertible into or exchangeable for, any capital stock or other equity
interest of the Company's subsidiaries.
(vii) When the Series A Notes and the Guarantees are issued and
delivered pursuant to this Agreement, no Series A Note or Guarantee will be
of the same class (within the meaning of Rule 144A under the Act) as
securities of either of the Issuers or of any of the Guarantors that are
listed on a national securities exchange registered under Section 6 of the
Exchange Act or that are quoted in a United States automated inter-dealer
quotation system.
(viii) Each of the Issuers and the Guarantors has all requisite
corporate or limited liability company power and authority, as applicable,
to execute, deliver and perform its obligations under this Agreement and
each of the other Operative Documents to which it is a party and to
consummate the transactions contemplated hereby and thereby, including,
without limitation, the corporate or limited liability company power and
authority, as applicable, to issue, sell and deliver the Notes and to issue
and deliver the Guarantees as provided herein and therein.
(ix) This Agreement has been duly and validly authorized, executed and
delivered by each of the Issuers and the Guarantors and is the legal, valid
and binding agreement of each of the Issuers and the Guarantors,
enforceable against each of them in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject to
general principles of equity.
(x) The Indenture has been duly and validly authorized by each of the
Issuers and the Guarantors and, when duly executed and delivered by each of
the Issuers and the Guarantors, will be the legal, valid and binding
obligation of each of them, enforceable against each of them in accordance
with its terms, (A) subject to (1) applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization or similar laws affecting the rights
of creditors generally and (2) general principles of equity and (B) except
to the extent that the waiver contained in Section 4.06 of the Indenture
may be deemed enforceable. On the Closing Date, the Indenture will conform
in all material respects to the requirements of the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), and the rules and regulations
of the Commission applicable to an indenture which is qualified thereunder.
The Offering Memorandum contains a summary of the terms of the Indenture,
which is accurate in all material respects.
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(xi) The Registration Rights Agreement has been duly and validly
authorized by each of the Issuers and the Guarantors and, when duly
executed and delivered by each of the Issuers and the Guarantors, will be
the legal, valid and binding obligation of each of the Issuers and the
Guarantors, enforceable against each of them in accordance with its terms,
(A) subject to (1) applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of
creditors generally and (2) general principles of equity and (B) except to
the extent that the enforceability of indemnification and contribution
provisions may be limited by Federal and state securities laws and the
policies underlying such laws. The Offering Memorandum contains a summary
of the terms of the Registration Rights Agreement, which is accurate in all
material respects.
(xii) The Amended Credit Facility has been duly and validly authorized
by each of the Company and its subsidiaries party thereto and, when duly
executed and delivered by each of the Company and such subsidiaries, will
be the legal, valid and binding obligation of each of the Company and such
subsidiaries, enforceable against each of them in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization or similar laws affecting the rights of creditors generally
and subject to general principles of equity. The Offering Memorandum
contains a summary of the terms of the Amended Credit Facility, which is
accurate in all material respects.
(xiii) The Series A Notes have been duly and validly authorized by
each of the Issuers for issuance and sale to the Initial Purchasers
pursuant to this Agreement and, when issued and authenticated in accordance
with the terms of the Indenture and delivered against payment therefor in
accordance with the terms hereof and thereof, will be the legal, valid and
binding obligations of each of the Issuers, enforceable against each of
them in accordance with their terms and entitled to the benefits of the
Indenture, (A) subject to (1) applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of
creditors generally and (2) general principles of equity and (B) except to
the extent that the waiver contained in Section 4.06 of the Indenture may
be deemed enforceable. The Offering Memorandum contains a summary of the
terms of the Notes, which is accurate in all material respects.
(xiv) The Series B Notes have been duly and validly authorized for
issuance by each of the Issuers and, when issued and authenticated in
accordance with the terms of the Exchange Offer and the Indenture, will be
the legal, valid and binding obligations of the each of Issuers,
enforceable against each of them in accordance with their terms and
entitled to the benefits of the Indenture, (A) subject to (1) applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar
laws affecting the rights of creditors generally and (2) general principles
of equity and (B) except to the extent that the waiver contained in Section
4.06 of the Indenture may be deemed enforceable.
(xv) The Guarantees of the Series A Notes have been duly and validly
authorized by each of the Guarantors and, when executed and delivered in
accordance with the terms of the Indenture and when the Series A Notes have
been issued and authenticated in accordance with the terms of the Indenture
and delivered against payment therefor in accordance with the terms hereof
and thereof, will be the legal, valid and binding obligations of each of
the Guarantors, enforceable against each of them in accordance with their
terms and entitled to the benefits of the Indenture,
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<PAGE>
(A) subject to (1) applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the rights of
creditors generally and (2) general principles of equity and (B) except to
the extent that the enforceability of indemnification and contribution
provisions may be limited by Federal and state securities laws and the
policies underlying such laws. The Offering Memorandum contains a summary
of the terms of the Guarantees, which is accurate in all material respects.
(xvi) The Guarantees of the Series B Notes have been duly and validly
authorized by each of the Guarantors and, when executed and delivered in
accordance with the terms of the Indenture and when the Series B Notes have
been issued and authenticated in accordance with the terms of the Exchange
Offer and the Indenture, will be the legal, valid and binding obligations
of each of the Guarantors, enforceable against each of them in accordance
with their terms and entitled to the benefits of the Indenture, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
similar laws affecting the rights of creditors generally and subject to
general principles of equity.
(xvii) The industry and market-related data included in the Offering
Memorandum are based on or derived from sources which the Company believes
to be reliable and accurate in all material respects.
(xviii) Each of the Company and its subsidiaries is not (A) in
violation of its charter or bylaws or other organizational documents, as
applicable, (B) in default in the performance of any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to
which it is a party or by which it is bound or to which any of its
properties is subject, which default, singly or in the aggregate, could
reasonably be expected to have a Material Adverse Effect or (C) in
violation of any local, state, federal or foreign law, statute, ordinance,
rule, regulation, requirement, judgment or court decree (including, without
limitation, environmental laws, statutes, ordinances, rules, regulations,
judgments or court decrees) applicable to it or any of its subsidiaries or
any of its or their assets or properties (whether owned or leased), which
violation, singly or in the aggregate, could reasonably be expected to have
a Material Adverse Effect. To the best knowledge of the Issuers and the
Guarantors, there exists no condition that, with notice, the passage of
time or otherwise, would constitute a default under (x) any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement or
instrument to which it is a party or by which it is bound or to which any
of its properties is subject, which default could reasonably be expected to
have a Material Adverse Effect or (y) its charter or bylaws or other
organizational documents, as applicable.
(xix) None of (A) the execution, delivery or performance by either of
the Issuers or any of the Guarantors of this Agreement or any of the other
Operative Documents to which it is a party, (B) the consummation of the
Real Estate Transaction, (C) the issuance and sale of the Notes and the
issuance of the Guarantees and (D) consummation by the Issuers of the
transactions described in the Offering Memorandum under the caption "Use of
Proceeds," violates, conflicts with or constitutes a breach of any of the
terms or provisions of, conflicts with or constitutes a breach of any of
the terms or provisions of, or a default under (or an event that with
notice or the lapse of time, or both, would constitute a default), or
require consent under, or result in the imposition of a lien or encumbrance
on any properties of the Company or any of its subsidiaries, or an
acceleration of any indebtedness of the Company or any of its subsidiaries
pursuant to, (1) the charter or bylaws or other organizational documents,
as applicable, of the Company or any of
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its subsidiaries, (2) any bond, debenture, note, indenture, mortgage, deed
of trust or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which any of them or their property is or
may be bound, which violation, conflict, breach, default, lien,
encumbrance, acceleration or failure, singly or in the aggregate, could
reasonably be expected to have a Material Adverse Effect (3) any statute,
rule or regulation applicable to the Company or any of its subsidiaries or
any of their assets or properties, which violation, conflict, breach,
default, lien, encumbrance, acceleration or failure, singly or in the
aggregate, could reasonably be expected to have a Material Adverse Effect
or (4) any judgment, order or decree of any court or governmental agency or
authority having jurisdiction over the Company or any of its subsidiaries
or any of their assets or properties, which violation, conflict, breach,
default, lien, encumbrance, acceleration or failure, singly or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
No consent, approval, authorization or order of, or filing, registration,
qualification, license or permit of or with, (A) any court or governmental
agency, body or administrative agency or (B) any other person is required
for (1) the execution, delivery and performance by either of the Issuers or
any of the Guarantors of this Agreement or any of the other Operative
Documents to which it is a party, (2) the Real Estate Transaction or (3)
the issuance and sale of the Notes and the issuance of the Guarantees and
the transactions contemplated hereby and thereby, except such may be
required (A) in connection with the registration under the Act of the
Series B Notes and the guarantees thereof under the Registration Rights
Agreement (including any filing with the National Association of Securities
Dealers), (B) in order to qualify the Indenture under the Trust Indenture
Act or (C) by state securities or "blue sky" laws in connection with the
offer and sale of the Notes and the guarantees thereof or the registration
pursuant to the Registration Rights Agreement and except such as have been
or will be obtained and made on or prior to the Closing Date.
(xx) There is (A) no action, suit, investigation or proceeding before
or by any court, arbitrator or governmental agency, body or official,
domestic or foreign, now pending or, to the best knowledge of the Issuers
and the Guarantors, threatened to which the Company or any of its
subsidiaries is or may be a party or to which the business or property of
the Company or any of its subsidiaries, is or may be subject, (B) no
statute, rule, regulation or order that has been enacted, adopted or issued
by any governmental agency or, to the best knowledge of the Issuers and the
Guarantors, that has been proposed by any governmental body and (C) no
injunction, restraining order or order of any nature by a federal or state
court or foreign court of competent jurisdiction to which the Company or
any of its subsidiaries is or may be subject or to which the business,
assets or property of the Company or any of its subsidiaries is or may be
subject, that, in the case of clauses (A), (B) and (C) above, (1) is
required to be disclosed in the Preliminary Offering Memorandum and the
Offering Memorandum and that is not so disclosed, or (2) could reasonably
be expected to result in a Material Adverse Effect.
(xxi) No action has been taken and, to the best knowledge of the
Issuers and the Guarantors, no statute, rule, regulation or order has been
enacted, adopted or issued by any governmental agency that prevents the
issuance of the Notes or the Guarantees or prevents or suspends the use of
the Offering Memorandum; no injunction, restraining order or order of any
nature by a federal or state court of competent jurisdiction has been
issued that prevents the issuance of the Notes or the Guarantees or
prevents or suspends the sale of the Notes in any jurisdiction referred to
in Section 4(e) hereof; and every request received by the Issuers of any
securities authority or agency of any jurisdiction for additional
information has been complied
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with in all material respects.
(xxii) The Issuers have delivered to the Initial Purchasers true and
correct copies of all documents and agreements related to the Real Estate
Transaction and the Amended Credit Facility, including all amendments,
alterations, modifications or waivers thereto and all exhibits or schedules
thereto.
(xxiii) There is (A) no significant unfair labor practice complaint
pending against the Company or any of its subsidiaries nor, to the best
knowledge of the Issuers and the Guarantors, threatened against any of
them, before the National Labor Relations Board, any state or local labor
relations board or any foreign labor relations board, and no significant
grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is so pending against the Company or any of
its subsidiaries or, to the best knowledge of the Issuers and the
Guarantors, threatened against any of them, (B) no significant strike,
labor dispute, slowdown or stoppage pending against the Company or any of
its subsidiaries nor, to the best knowledge of the Issuers and the
Guarantors, threatened against the Company or any of its subsidiaries and
(C) to the best knowledge of the Issuers and the Guarantors, no union
representation question existing with respect to the employees of the
Company or any of its subsidiaries. To the best knowledge of the Issuers
and the Guarantors, no collective bargaining organizing activities are
taking place with respect to the Company or any of its subsidiaries. None
of the Company or any of its subsidiaries has violated (A) any federal,
state or local law or foreign law relating to discrimination in hiring,
promotion or pay of employees, (B) any applicable wage or hour laws or (C)
any provision of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the rules and regulations thereunder, except those
violations that could not reasonably be expected to have a Material Adverse
Effect.
(xxiv) None of the Company or any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), which violation could reasonably be expected to have a Material
Adverse Effect.
(xxv) There is no alleged liability, or to the best knowledge of the
Issuers and the Guarantors, potential liability (including, without
limitation, alleged or potential liability or investigatory costs, cleanup
costs, governmental response costs, natural resource damages, property
damages, personal injuries or penalties) of the Company or any of its
subsidiaries arising out of, based on or resulting from (A) the presence or
release into the environment of any Hazardous Material (as defined) at any
location leased or owned by the Company or such subsidiary, as the case may
be, or (B) any violation or alleged violation of any Environmental Law,
which alleged or potential liability is required to be disclosed in the
Offering Memorandum, other than as disclosed therein, or could reasonably
be expected to have a Material Adverse Effect. The term "Hazardous
Material" means (i) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, (ii) any "hazardous waste" as defined by the Resource
Conservation and Recovery Act, as amended, (iii) any petroleum or petroleum
product, (iv) any polychlorinated biphenyl and (v) any pollutant or
contaminant or hazardous, dangerous or toxic chemical, material, waste or
substance regulated under or within the meaning of any other law relating
to protection of human health or the environment or imposing liability or
standards of conduct concerning any such chemical
12
<PAGE>
material, waste or substance.
(xxvi) Each of the Company and its subsidiaries has and, after giving
effect to the Real Estate Transaction, will have such permits, licenses,
franchises and authorizations of governmental or regulatory authorities
("permits"), including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease and operate their
respective properties and to conduct their businesses except where the
failure to have such permits could not reasonably be expected to have a
Material Adverse Effect; each of the Company and its subsidiaries has
fulfilled and performed all of its obligations with respect to such permits
and no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or results in any other
impairment of the rights of the holder of any such permit, except where
such failure to fulfill or perform, or such revocation, termination or
impairment could not reasonably be expected to have a Material Adverse
Effect; and such permits contain no restrictions that could reasonably be
expected to be more burdensome to the Company or such subsidiary, as the
case may be.
(xxvii) Each of the Company and its subsidiaries has and, after giving
effect to the Real Estate Transaction, will have (A) good and marketable
title to all of the properties and assets described in the Offering
Memorandum as owned by it, free and clear of all liens, charges,
encumbrances and restrictions (except for Permitted Liens (as defined in
the Indenture) and taxes not yet payable), (B) peaceful and undisturbed
possession under all material leases to which any of them is a party as
lessee and each of which lease is valid and binding and no default exists
thereunder, except for defaults that could not reasonably be expected to
have a Material Adverse Effect, (C) all material licenses, certificates,
permits, authorizations, approvals, franchises and other rights from, and
has made all declarations and filings with, all federal, state and local
authorities, all self-regulatory authorities and all courts and other
tribunals (each, an "Authorization") necessary to engage in the business
conducted by any of them in the manner described in the Offering Memorandum
and (D) received no notice that any governmental body or agency is
considering limiting, suspending or revoking any such Authorization. All
such Authorizations are and, after giving effect to the Real Estate
Transaction, will be valid and in full force and effect and each of the
Company and its subsidiaries is in compliance in all material respects with
the terms and conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities having jurisdiction with respect
thereto. All material leases to which the Company or any of its
subsidiaries is a party are valid and binding and no default by the Company
or such subsidiary, as the case may be, has occurred and is continuing
thereunder and, to the best knowledge of the Issuers and the Guarantors, no
material defaults by the landlord are existing under any such lease, except
those defaults that could not reasonably be expected to have a Material
Adverse Effect.
(xxviii) Each of the Company and its subsidiaries owns, possesses or
has the right to employ all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, software, systems or
procedures), trademarks, service marks and trade names, inventions,
computer programs, technical data and information (collectively, the
"Intellectual Property") presently employed by it in connection with the
businesses now operated by it or that are proposed to be operated by it
free and clear of and without violating any right, claimed right, charge,
encumbrance, pledge, security interest, restriction or lien of any kind of
any other person,
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and none of the Company or any of its subsidiaries has received any notice
of infringement of or conflict with asserted rights of others with respect
to any of the foregoing. To the best knowledge of the Issuers and the
Guarantors, the use of the Intellectual Property in connection with the
business and operations of the Company or any of its subsidiaries does not
infringe on the rights of any person, except as could not reasonably be
expected to have a Material Adverse Effect.
(xxix) All material tax returns required to be filed by the Company or
any of its subsidiaries in all jurisdictions have been so filed. All taxes,
including withholding taxes, penalties and interest, assessments, fees and
other charges shown on such returns as due from such entities that are due
and payable have been paid, other than those being contested in good faith
and for which adequate reserves have been provided or those currently
payable without penalty or interest. To the knowledge of the Issuers and
the Guarantors, there are no material proposed additional tax assessments
against the Company or any of its subsidiaries, or the assets or property
of the Company or any of its subsidiaries, except those tax assessments for
which adequate reserves have been established.
(xxx) None of the Company or any of its subsidiaries is an "investment
company" or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended (the "Investment
Company Act").
(xxxi) There are no holders of securities of the Company or any of its
subsidiaries who, by reason of the execution by the Issuers and the
Guarantors of this Agreement or any other Operative Document or the
consummation by the Issuers and the Guarantors of the transactions
contemplated hereby and thereby, have the right to request or demand that
the Company or any of its subsidiaries register under the Act or analogous
foreign laws and regulations securities held by them other than pursuant to
the Registration Rights Agreement and other than as described in the
Offering Memorandum.
(xxxii) Each of the Company and its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance
that: (A) transactions are executed in accordance with management's general
or specific authorizations; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(C) access to assets is permitted only in accordance with management's
general or specific authorization; and (D) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect thereto.
(xxxiii) Each of the Company and its subsidiaries maintains insurance
covering its properties, operations, personnel and businesses, insuring
against such losses and risks as are consistent with industry practice to
protect the Company and its subsidiaries and their respective businesses.
None of the Company or any of its subsidiaries has received notice from any
insurer or agent of such insurer that substantial capital improvements or
other expenditures will have to be made in order to continue such
insurance.
(xxxiv) None of the Company or any of its subsidiaries has (A) taken,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the price
of any security of the Company or any of its subsidiaries to facilitate the
sale or resale of the Notes or (B) since the date of the Preliminary
Offering
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Memorandum (1) sold, bid for, purchased or paid any person (other than the
Initial Purchasers pursuant to the terms herein) any compensation for
soliciting purchases of the Notes or (2) paid or agreed to pay to any
person any compensation for soliciting another to purchase any other
securities of the Company or any of its subsidiaries.
(xxxv) No registration under the Act of the Series A Notes is required
for the sale of the Series A Notes to the Initial Purchasers as
contemplated hereby or for the Exempt Resales assuming (A) that the
purchasers who buy the Series A Notes in the Exempt Resales are Eligible
Purchasers and (B) the accuracy of the Initial Purchasers' representations
regarding the absence of general solicitation in connection with the sale
of Series A Notes to the Initial Purchasers and the Exempt Resales
contained herein. No form of general solicitation or general advertising
(as defined in Regulation D under the Act) was used by either of the
Issuers, any of the Guarantors or any of their respective representatives
(other than the Initial Purchasers, as to which the Issuers and the
Guarantors make no representation or warranty) in connection with the offer
and sale of any of the Series A Notes or in connection with Exempt Resales,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising. No securities
of the same class as the Notes or the Guarantees have been issued and sold
by the Company or any of its subsidiaries within the six-month period
immediately prior to the date hereof.
(xxxvi) The execution and delivery of this Agreement, the other
Operative Documents and the sale of the Series A Notes to be purchased by
Eligible Purchasers will not involve any prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue
Code of 1986. The representation made by the Issuers and the Guarantors in
the preceding sentence is made in reliance upon and subject to the accuracy
of, and compliance with, the representations and covenants made or deemed
made by Eligible Purchasers as set forth in the Offering Memorandum under
the caption "Notice to Investors."
(xxxvii) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, and each amendment or supplement thereto, as of
its date, contains the information specified in, and meets the requirements
of, Rule 144A(d)(4) under the Act.
(xxxviii) Prior to the effectiveness of any Registration Statement,
the Indenture is not required to be qualified under the Trust Indenture
Act.
(xxxix) None of the Issuers, the Guarantors or any of their respective
affiliates or any person acting on its or their behalf (other than the
Initial Purchasers, as to whom the Issuers and the Guarantors make no
representation) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S with respect to the Series A Notes or
the Guarantees.
(xl) The Issuers have not taken, or omitted to take any action to
cause the Series A Notes offered and sold in reliance on Regulation S to be
offered and sold in transactions other than in offshore transactions.
(xli) The sale of the Series A Notes pursuant to Regulation S is not
part of a plan or scheme to evade the registration provisions of the Act.
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(xlii) The Issuers, the Guarantors and their respective affiliates and
all persons acting on their behalf (other than the Initial Purchasers, as
to whom the Issuers and the Guarantors make no representation) have
complied with and will comply with the offering restrictions requirements
of Regulation S applicable to them and their activities in connection with
the offering of the Series A Notes outside the United States and, in
connection therewith, the Preliminary Offering Memorandum and the Offering
Memorandum contains or will contain the disclosure required by Rule 902(h).
(xliii) The Series A Notes sold in reliance on Regulation S will be
represented upon issuance by a temporary global security that may not be
exchanged for definitive securities until the expiration of the 40-day
restricted period referred to in Rule 903(c)(3) of the Act and only upon
certification of beneficial ownership of such Series A Notes by non-U.S.
persons or U.S. persons who purchased such Series A Notes in transactions
that were exempt from the registration requirements of the Act.
(xliv) Subsequent to the respective dates as of which information is
given in the Offering Memorandum and up to the Closing Date, except as
described in the Offering Memorandum, (A) none of the Company or any of its
subsidiaries has incurred any liabilities or obligations, direct or
contingent, which are or, after giving effect to the Real Estate
Transaction, will be material, individually or in the aggregate, to the
Company and its subsidiaries, taken as a whole, nor entered into any
transaction not in the ordinary course of business, (B) there has not been
any change or development which, singly or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect and (C) there
has been no dividend or distribution of any kind declared, paid or made by
the Issuers on any class of their capital stock.
(xlv) None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Notes, the issuance of the
Guarantees, the application of the proceeds from the issuance and sale of
the Notes and the consummation of the transactions contemplated thereby as
set forth in the Offering Memorandum, will violate Regulations G, T, U or X
promulgated by the Board of Governors of the Federal Reserve System or
analogous applicable foreign laws and regulations.
(xlvi) The accountants who have certified or will certify the
financial statements included or to be included as part of the Offering
Memorandum are independent accountants as required by the Act. The
historical financial statements, together with related schedules and notes
thereto, comply as to form in all material respects with the requirements
applicable to registration statements on Form S-1 under the Act and present
fairly in all material respects the financial position and results of
operations of the Company and its subsidiaries and Bash Theatrical
Lighting, Inc. and its affiliates ("Bash") at the dates and for the periods
indicated. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods presented. The pro forma financial statements
included in the Offering Memorandum have been prepared on a basis
consistent with (i) such historical statements of the Company and Bash and
(ii) the historical financial statements of Design Dynamics, Inc. ("Design
Dynamics") and Pro-Mix Inc. ("Pro-Mix"), except for the pro forma
adjustments specified therein, and give effect to assumptions made on a
reasonable basis and present fairly in all material respects the historical
and proposed transactions contemplated by this Agreement and the other
Operative Documents; and such pro forma financial statements
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comply as to form in all material respects with the requirements applicable
to pro forma financial statements included in registration statements on
Form S-1 under the Act, except as expressly stated therein. The other
financial and statistical information and data included in the Offering
Memorandum derived from the historical and pro forma financial statements,
are accurately presented in all material respects and prepared on a basis
consistent with the financial statements, historical and pro forma,
included in the Offering Memorandum and the books and records of the
Company and its subsidiaries.
(xlvii) None of the Issuers or any of the Guarantors intends to, nor
does it believe that it will, incur debts beyond its ability to pay such
debts as they mature. The present fair saleable value of the assets of each
of the Issuers and the Guarantors exceeds the amount that will be required
to be paid on or in respect of its existing debts and other liabilities
(including contingent liabilities) as they become absolute and matured. The
assets of each of the Issuers and the Guarantors do not constitute
unreasonably small capital to carry out its business as conducted or as
proposed to be conducted. Upon the issuance of the Notes and consummation
of the Real Estate Transaction, the present fair saleable value of the
assets of each of the Issuers and the Guarantors will exceed the amount
that will be required to be paid on or in respect of its existing debts and
other liabilities (including contingent liabilities) as they become
absolute and matured. Upon the issuance of the Notes and the consummation
of the Real Estate Transaction, the assets of each of the Issuers and the
Guarantors will not constitute unreasonably small capital to carry out its
business as now conducted, including the capital needs of each of the
Issuers and the Guarantors, taking into account the projected capital
requirements and capital availability.
(xlviii) Except pursuant to this Agreement, there are no contracts,
agreements or understandings between the Company and its subsidiaries and
any other person that would give rise to a valid claim against the Company
or any of its subsidiaries or the Initial Purchasers for a brokerage
commission, finder's fee or like payment in connection with the issuance,
purchase and sale of the Notes or the issuance of the Guarantees.
(xlix) There exist no conditions that would constitute a default (or
an event which with notice or the lapse of time, or both, would constitute
a default) under any of the Operative Documents.
(l) Each certificate signed by any officer of the Issuers or any of
the Guarantors and delivered to the Initial Purchasers or counsel for the
Initial Purchasers shall be deemed to be a representation and warranty by
such Issuer or such Guarantor, as the case may be, to the Initial
Purchasers as to the matters covered thereby.
The Issuers and the Guarantors acknowledge that the Initial Purchasers and,
for purposes of the opinions to be delivered to the Initial Purchasers pursuant
to Section 8 hereof, counsel for the Issuers and the Guarantors and counsel for
the Initial Purchasers, will rely upon the accuracy and truth of the foregoing
representations and hereby consent to such reliance.
(b) Each of the Initial Purchasers, severally and not jointly, represents,
warrants and covenants to the Issuers and agrees that:
(i) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and
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business matters as are necessary in order to evaluate the merits and risks
of an investment in the Series A Notes.
(ii) Such Initial Purchaser (A) is not acquiring the Series A Notes
with a view to any distribution thereof that would violate the Act or the
securities laws of any state of the United States or any other applicable
jurisdiction and (B) will be reoffering and reselling the Series A Notes
only to QIBs in reliance on the exemption from the registration
requirements of the Act provided by Rule 144A.
(iii) No form of general solicitation or general advertising (within
the meaning of Regulation D under the Act) has been or will be used by such
Initial Purchaser or any of its representatives in connection with the
offer and sale of any of the Series A Notes, including, but not limited to,
articles, notices or other communications published in any newspaper,
magazine, or similar medium or broadcast over television or radio, or any
seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
(iv) Each of the Initial Purchasers agrees that, in connection with
the Exempt Resales, it will solicit offers to buy the Series A Notes only
from, and will offer to sell the Series A Notes only to, Eligible
Purchasers. Each of the Initial Purchasers further (A) agrees that it will
offer to sell the Series A Notes only to, and will solicit offers to buy
the Series A Notes only from (1) Eligible Purchasers that the Initial
Purchasers reasonably believe are QIBs and (2) Reg S Investors, (B)
acknowledges and agrees that, in the case of such QIBs and such Reg S
Investors, such Series A Notes will not have been registered under the Act
and may be resold, pledged or otherwise transferred by such QIBs and Reg S
Investors only (x)(I) to a person whom the seller reasonably believes is a
QIB purchasing for its own account or for the account of a QIB in a
transaction meeting the requirements of Rule 144A, (II) in an offshore
transaction (as defined in Rule 902 under the Act) meeting the requirements
of Rule 904 under the Act, (III) in a transaction meeting the requirements
of Rule 144 under the Act, (IV) to an Accredited Investor that, prior to
such transfer, furnishes the Trustee a signed letter containing certain
representations and agreements relating to the registration of transfer of
such Series A Notes and, if such transfer is in respect of an aggregate
principal amount of Series A Notes less than $250,000, an opinion of
counsel acceptable to the Issuers that such transfer is in compliance with
the Act or (V) in accordance with another exemption from the registration
requirements of the Act (and based upon an opinion of counsel if the
Issuers so request), (y) to the Issuers, (z) pursuant to an effective
registration statement under the Act and, in each case, in accordance with
any applicable securities laws of any state of the United States or any
other applicable jurisdiction and (C) acknowledges that it will, and each
subsequent holder is required to, notify any purchaser of the security
evidenced thereby of the resale restrictions set forth in (B) above.
(v) Such Initial Purchaser agrees that it has offered the Series A
Notes and will offer and sell the Series A Notes (A) as part of its
distribution at any time and (B) otherwise until 40 days after the later of
the commencement of the offering of the Series A Notes pursuant hereto and
the Closing Date, only in accordance with Rule 903 of Regulation S or
another exemption from the registration requirements of the Act. Such
Initial Purchaser agrees that, during such 40-day restricted period, it
will not cause any advertisement with respect to the Series A Notes
(including any "tombstone" advertisement") to be published in any newspaper
or periodical or posted in any public place and will not issue any circular
relating to the Series A Notes, except such advertisements as are permitted
by and include the statements required by Regulation S.
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<PAGE>
(vi) Such Initial Purchaser agrees that it has not offered or sold and
will not offer or sell the Series A Notes sold pursuant hereto in reliance
on Regulation S (A) as part of its distribution at any time and (B)
otherwise until 40 days after the later of the commencement of the offering
of the Series A Notes pursuant hereto and the Closing Date, to a U.S.
person (as defined in Rule 902 of the Act) or for the account or benefit of
a U.S. person (other than a distributor (as defined in Rule 902 of the
Act)).
(vii) Such Initial Purchaser agrees that, at or prior to confirmation
of a sale of Series A Notes by it to any distributor, dealer or person
receiving a selling concession, fee or other remuneration during the 40-day
restricted period referred to in Rule 903(c)(3) under the Act, it will send
to such distributor, dealer or person receiving a selling concession, fee
or other remuneration a confirmation or notice to substantially the
following effect:
"The Series A Notes covered hereby have not been registered under
the U.S. Securities Act of 1933, as amended (the "Securities
Act"), and may not be offered and sold within the United States
or to, or for the account or benefit of, U.S. persons (i) as part
of your distribution at any time or (ii) otherwise until 40 days
after the later of the commencement of the offering and the
Closing Date, except in either case in accordance with Regulation
S under the Act (or Rule 144A or to Accredited Investors in
transactions that are exempt from the registration requirements
of the Act), and in connection with any subsequent sale by you of
the Series A Notes covered hereby in reliance on Regulation S
during the period referred to above to any distributor, dealer or
person receiving a selling concession, fee or other remuneration,
you must deliver a notice to substantially the foregoing effect.
Terms used above have the meanings assigned to them in Regulation
S."
(viii) Such Initial Purchaser agrees that the Series A Notes offered
and sold in reliance on Regulation S will be represented upon issuance by a
global security that may not be exchanged for definitive securities until
the expiration of the 40-day restricted period referred to in Rule
903(c)(3) of the Act and only upon certification of beneficial ownership of
such Series A Notes by non-U.S. persons or U.S. persons who purchased such
Series A Notes in transactions that were exempt from the registration
requirements of the Act.
The Initial Purchasers acknowledge that the Issuers and, for purposes of
the opinions to be delivered to the Initial Purchasers pursuant to Section 8
hereof, counsel for the Issuers and the Guarantors and counsel for the Initial
Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
6. Indemnification.
(a) The Issuers and the Guarantors, jointly and severally, agree to
indemnify and hold harmless (i) each of the Initial Purchasers, (ii) each
person, if any, who controls each of the Initial Purchasers within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act and (iii) the
respective officers, directors, partners, employees, representatives and agents
of each of the Initial Purchasers or any controlling person to the fullest
extent lawful, from and against any
19
<PAGE>
and all losses, liabilities, claims, damages and expenses whatsoever (including
but not limited to reasonable attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
investigation or litigation, commenced or threatened, or any claim whatsoever,
and any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or the Offering Memorandum, or in any supplement
thereto or amendment thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the Issuers
and the Guarantors will not be liable in any such case to the extent, but only
to the extent, that any such loss, liability, claim, damage or expense arises
out of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with information relating to any Initial Purchaser furnished to the Issuers in
writing by or on behalf of such Initial Purchaser expressly for use therein;
provided, further, that such indemnity with respect to the Preliminary Offering
Memorandum shall not inure to the benefit of any Initial Purchaser (or any
persons controlling such Initial Purchaser) from whom the person asserting such
loss, claim, damage or liability purchased the Notes which are the subject
thereof if such person did not receive a copy of the Offering Memorandum (or the
Offering Memorandum as amended or supplemented) at or prior to the confirmation
of the sale of such Notes to such person (and the Offering Memorandum or any
such amended or supplemented Offering Memorandum, as applicable, shall have been
delivered by the Company to such Initial Purchaser a reasonable amount of time
prior to the mailing or delivery, as applicable, of such confirmation) and any
such untrue statement or omission or alleged untrue statement or omission of a
material fact contained in such Preliminary Offering Memorandum was corrected in
the Offering Memorandum (or the Offering Memorandum as amended or supplemented).
This indemnity agreement will be in addition to any liability which the Issuers
and the Guarantors may otherwise have, including under this Agreement.
(b) Each of the Initial Purchasers, severally and not jointly, agrees to
indemnify and hold harmless (i) the Issuers and the Guarantors, (ii) each
person, if any, who controls any of the Issuers and the Guarantors within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, and (iii)
the respective officers, advisors, directors, partners, employees,
representatives and agents of the Issuers and the Guarantors, against any
losses, liabilities, claims, damages and expenses whatsoever (including but not
limited to reasonable attorneys' fees and expenses incurred in investigating,
preparing or defending against any investigation or litigation, commenced or
threatened, or any claim whatsoever and any and all amounts paid in settlement
of any claim or litigation), joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Preliminary Offering Memorandum or the
Offering Memorandum, or in any amendment thereof or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, in each case to the extent, but only to the extent, that any such
loss, liability, claim, damage or expense arises out of or is based upon any
untrue statement
20
<PAGE>
or alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with information relating to any Initial
Purchaser furnished to the Issuers in writing by or on behalf of such Initial
Purchaser expressly for use therein; provided, however, that in no case shall
any of the Initial Purchasers be liable or responsible for any amount in excess
of the discounts and commissions received by such Initial Purchaser, as set
forth on the cover page of the Offering Memorandum. This indemnity will be in
addition to any liability which the Initial Purchasers may otherwise have,
including under this Agreement.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 6 except to the extent that it has been prejudiced
in any material respect by such failure or from any liability which it may
otherwise have). In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent it
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action, (ii) the indemnifying parties shall not have employed counsel to take
charge of the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying party or parties shall not
have the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events such fees and expenses of counsel
shall be borne by the indemnifying parties; provided, however, that the
indemnifying party under subsection (a) or (b) above shall only be liable for
the legal expenses of one counsel (in addition to any local counsel) for all
indemnified parties in each jurisdiction in which any claim or action is
brought. Anything in this subsection to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim or action
effected without its prior written consent, provided that such consent was not
unreasonably withheld.
7. Contribution. In order to provide for contribution in circumstances in
which the indemnification provided for in Section 6 is for any reason held to be
unavailable from the Issuers and the Guarantors or is insufficient to hold
harmless a party indemnified thereunder, the Issuers and the Guarantors, on the
one hand, and each Initial Purchaser, on the other hand, shall contribute to the
aggregate losses, claims, damages, liabilities and expenses of the nature
contemplated by such indemnification provision (including any reasonable
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Issuers and the Guarantors, any
contribution received by the Issuers and the Guarantors from persons, other than
the Initial Purchasers, who may also be liable for contribution, including
persons who control
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the Issuers and the Guarantors within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act) to which the Issuers, the Guarantors and the
Initial Purchasers may be subject, in such proportion as is appropriate to
reflect the relative benefits received by the Issuers and the Guarantors, on one
hand, and such Initial Purchaser, on the other hand, from the offering of the
Series A Notes or, if such allocation is not permitted by applicable law or
indemnification is not available as a result of the indemnifying party not
having received notice as provided in Section 6, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Issuers and the Guarantors, on one hand, and each
Initial Purchaser, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Issuers and the Guarantors, on one hand, and such
Initial Purchaser, on the other hand, shall be deemed to be in the same
proportion as (i) the total proceeds from the offering of Series A Notes (net of
discounts but before deducting expenses) received by the Issuers and the
Guarantors and (ii) the discounts and commissions received by such Initial
Purchaser, respectively, in each case as set forth in the table on the cover
page of the Offering Memorandum. The relative fault of the Issuers and the
Guarantors, on one hand, and of each Initial Purchaser, on the other hand, shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuers, the Guarantors
or such Initial Purchaser and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Issuers, the Guarantors and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to this Section 7 were determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to above. Notwithstanding the
provisions of this Section 7, (i) in no case shall any of the Initial Purchasers
be required to contribute any amount in excess of the amount by which the
discounts and commissions applicable to the Series A Notes purchased by such
Initial Purchaser pursuant to this Agreement exceeds the amount of any damages
which such Initial Purchaser has otherwise been required to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 7, (A)
each person, if any, who controls any of the Initial Purchasers within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and (B)
the respective officers, directors, partners, employees, representatives and
agents of each of the Initial Purchasers or any controlling person shall have
the same rights to contribution as the Initial Purchasers, and (A) each person,
if any, who controls any of the Issuers and the Guarantors within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and (B) the
respective officers, advisors, directors, partners, employees, representatives
and agents of the Issuers and the Guarantors shall have the same rights to
contribution as the Issuers and the Guarantors, subject in each case to clauses
(i) and (ii) of this Section 7. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 7, notify such party
or parties from whom contribution may be sought, but the failure to so notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
Section 7 or otherwise. No party shall be liable for contribution with respect
to any action or claim settled without its prior written consent, provided that
such written consent was not unreasonably withheld.
8. Conditions of Initial Purchasers' Obligations. The obligations of the
Initial Purchasers to purchase and pay for the Series A Notes, as provided
herein, shall be subject to the satisfaction of the following conditions:
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<PAGE>
(a) All of the representations and warranties of the Issuers and the
Guarantors contained in this Agreement shall be true and correct in all
material respects on the date hereof and on the Closing Date with the same
force and effect as if made on and as of the date hereof and the Closing
Date, respectively. Each of the Issuers and the Guarantors shall have
performed or complied in all material respects with all of the agreements
herein contained and required to be performed or complied with by it at or
prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers not later than 10:00 a.m., New York
City time, on the day following the date of this Agreement or at such later
date and time as to which the Initial Purchasers may agree, and no stop
order suspending the qualification or exemption from qualification of the
Series A Notes in any jurisdiction referred to in Section 4(e) or
preventing the use of the Offering Memorandum, or any amendment or
supplement thereto, which could reasonably be expected to have a Material
Adverse Effect shall have been issued and no proceeding for that purpose
shall have been commenced or shall be pending or threatened.
(c) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency which would, as of the Closing Date, prevent the issuance of the
Series A Notes or the Guarantees or the consummation of the Real Estate
Transaction; no action, suit or proceeding shall have been commenced and be
pending against or affecting or, to the best knowledge of the Issuers and
the Guarantors, threatened against, the Company or any of its subsidiaries
before any court or arbitrator or any governmental body, agency or official
that, if adversely determined, could reasonably be expected to result in a
Material Adverse Effect.
(d) Since the dates as of which information is given in the Offering
Memorandum, (i) there shall not have been any material adverse change, or
any development that is reasonably likely to result in a material adverse
change, in the capital stock or the long-term debt, or material increase in
the short-term debt, of the Company or any of its subsidiaries from that
set forth in the Offering Memorandum, (ii) no dividend or distribution of
any kind shall have been declared, paid or made by the Company or any of
its subsidiaries on any class of its capital stock and (iii) none of the
Company or any of its subsidiaries shall have incurred any liabilities or
obligations, direct or contingent, that are or, after giving effect to the
Real Estate Transaction, will be material, individually or in the
aggregate, to the Company and its subsidiaries, taken as a whole, and that
are required to be disclosed on a balance sheet or notes thereto in
accordance with generally accepted accounting principles and are not
disclosed on the latest balance sheet or notes thereto included in the
Offering Memorandum. Since the date hereof and since the dates as of which
information is given in the Offering Memorandum, there shall not have
occurred any material adverse change in the business, prospects, financial
condition or results of operation of the Company and its subsidiaries,
taken as a whole.
(e) The Initial Purchasers shall have received certificates, dated the
Closing Date, signed on behalf of the Issuers and the Guarantors, in form
and substance satisfactory to the Initial Purchasers, confirming, as of the
Closing Date, the matters set forth in paragraphs (a), (b), (c) and (d) of
this Section 8 and that, as of the Closing Date, the obligations of the
Issuers and the Guarantors to be performed hereunder on or prior thereto
have been duly performed.
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<PAGE>
(f) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers, of Morrison & Foerster, L.L.P. and Pepe & Hazard, counsel for
the Issuers and the Guarantors, to the effect set forth in Exhibit B
hereto.
(g) At the time this Agreement is executed and at the Closing Date,
the Initial Purchasers shall have received from Ernst & Young, Band
Rosenbaum & Martin P.C., and Ennis, Cavouto & Company, each independent
public accountants, dated as of the date of this Agreement and as of the
Closing Date, customary comfort letters addressed to the Initial Purchasers
and in form and substance satisfactory to the Initial Purchasers and
counsel for the Initial Purchasers with respect to the financial statements
and certain financial information of the Company and its subsidiaries,
Bash, Design Dynamics and Pro-Mix contained in the Offering Memorandum.
(h) The Initial Purchasers shall have received an opinion, dated the
Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers, of Latham & Watkins, counsel for the Initial Purchasers,
covering such matters as are customarily covered in such opinions.
(i) Latham & Watkins shall have been furnished with such documents, in
addition to those set forth above, as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in
this Section 8 and in order to evidence the accuracy, completeness or
satisfaction in all material respects of any of the representations,
warranties or conditions herein contained.
(j) Prior to the Closing Date, the Issuers and the Guarantors shall
have furnished to the Initial Purchasers such further information,
certificates and documents as the Initial Purchasers may reasonably
request.
(k) The Issuers, the Guarantors and the Trustee shall have entered
into the Indenture and the Initial Purchasers shall have received
counterparts, conformed as executed, thereof.
(l) The Issuers and the Guarantors shall have entered into the
Registration Rights Agreement and the Initial Purchasers shall have
received counterparts, conformed as executed, thereof.
(m) The Company and its members shall have entered into the Tax
Payment Agreement and the initial Purchasers shall have received
counterparts conformed as executed, thereof.
(n) The Real Estate Transaction shall be consummated prior to, or
simultaneously with, the Closing of the Offering on substantially the terms
described in the Offering Memorandum and the Initial Purchasers shall have
received counterparts, conformed as executed, of such documentation as they
deem necessary to evidence the consummation thereof.
(o) The Amended Credit Facility shall be consummated prior to, or
simultaneously with, the Closing of the Offering on substantially the terms
described in the Offering Memorandum and the Initial Purchasers shall have
received counterparts, conformed as executed, of the Amended Credit
Facility and such other documentation as they deem necessary to evidence
the consummation thereof.
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<PAGE>
(p) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of
Rule 463(g) under the Act, that (i) it is downgrading its rating assigned
to any class of securities of the Issuers or (ii) it is reviewing its
ratings assigned to any class of securities of the Issuers with a view to
possible downgrading, or with negative implications, or direction not
determined.
(q) The Notes shall have been approved for trading on PORTAL.
All opinions, certificates, letters and other documents required by this
Section 8 to be delivered by the Issuers and the Guarantors will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to the Initial Purchasers. The Issuers and the Guarantors
shall furnish the Initial Purchasers with such conformed copies of such
opinions, certificates, letters and other documents as they shall reasonably
request.
9. Initial Purchasers' Information. The Issuers and the Guarantors
acknowledge that the statements with respect to the offering of the Series A
Notes set forth in the last paragraph of the cover page and the third paragraph
and the third sentence of the fourth paragraph under the caption "Plan of
Distribution" in the Offering Memorandum constitute the only information
relating to the Initial Purchasers furnished to the Issuers in writing by or on
behalf of the Initial Purchasers expressly for use in the Offering Memorandum.
10. Survival of Representations and Agreements. All representations and
warranties, covenants and agreements of the Initial Purchasers, the Issuers and
the Guarantors contained in this Agreement, including the agreements contained
in Sections 4(f) and 11(d), the indemnity agreements contained in Section 6 and
the contribution agreements contained in Section 7, shall remain operative and
in full force and effect regardless of any investigation made by or on behalf of
the Initial Purchasers, any controlling person thereof, or by or on behalf of
the Issuers and the Guarantors or any controlling person thereof, and shall
survive delivery of and payment for the Series A Notes to and by the Initial
Purchasers. The representations contained in Section 5 and the agreements
contained in Sections 4(f), 6, 7 and 11(d) shall survive the termination of this
Agreement, including any termination pursuant to Section 11.
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon execution and delivery
of a counterpart hereof by each of the parties hereto.
(b) The Initial Purchasers shall have the right to terminate this
Agreement at any time prior to the Closing Date by notice to the Issuers
from the Initial Purchasers, without liability (other than with respect to
Sections 6 and 7) on the Initial Purchasers' part to either of the Issuers
or any of the Guarantors if, on or prior to such date, (i) either of the
Issuers or any of the Guarantors shall have failed, refused or been unable
to perform in any material respect any agreement on their part to be
performed hereunder, (ii) any other condition to the obligations of the
Initial Purchasers hereunder as provided in Section 8 is not fulfilled when
and as required in any material respect, (iii) in the reasonable judgment
of the Initial Purchasers, any material adverse change shall have occurred
since the respective dates as of which information is given in the Offering
Memorandum in the condition (financial or otherwise), business, properties,
assets,
25
<PAGE>
liabilities, prospects, net worth, results of operations or cash flows of
the Company and its subsidiaries, taken as a whole, other than as set forth
in the Offering Memorandum, or (iv)(A) any domestic or international event
or act or occurrence has materially disrupted, or in the opinion of the
Initial Purchasers will in the immediate future materially disrupt, the
market for the Issuers' securities or for securities in general; or (B)
trading in securities generally on the New York or American Stock Exchange
shall have been suspended or materially limited, or minimum or maximum
prices for trading shall have been established, or maximum ranges for
prices for securities shall have been required, on such exchange, or by
such exchange or other regulatory body or governmental authority having
jurisdiction; or (C) a banking moratorium shall have been declared by
federal or state authorities, or a moratorium in foreign exchange trading
by major international banks shall have been declared; or (D) there is an
outbreak or escalation of armed hostilities involving the United States on
or after the date hereof, or if there has been a declaration by the United
States of a national emergency or war, the effect of any of which shall be,
in the Initial Purchasers' judgment, to make it inadvisable or
impracticable to proceed with the offering or delivery of the Series A
Notes on the terms and in the manner contemplated in the Offering
Memorandum; or (E) there shall have been such a material adverse change in
general economic, political or financial conditions or if the effect of
international conditions on the financial markets in the United States
shall be such as, in the Initial Purchasers' judgment, makes it inadvisable
or impracticable to proceed with the delivery of the Series A Notes as
contemplated hereby.
(c) Any notice of termination pursuant to this Section 11 shall be by
telephone or telephonic facsimile and, in either case, confirmed in writing
by letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to clause (iv) of Section 11(b),
in which case each party will be responsible for its own expenses), or if
the sale of the Series A Notes provided for herein is not consummated
because any condition to the obligations of the Initial Purchasers set
forth herein is not satisfied or because of any refusal, inability or
failure on the part of either of the Issuers or any of the Guarantors to
perform any agreement herein or comply with any provision hereof, the
Issuers and the Guarantors shall reimburse the Initial Purchasers for all
out-of-pocket expenses (including the reasonable fees and expenses of the
Initial Purchasers' counsel), incurred by the Initial Purchasers in
connection herewith.
12. Notice. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the Initial
Purchasers shall be mailed, delivered, telecopied and confirmed in writing or
sent by a nationally recognized overnight courier service guaranteeing delivery
on the next business day to Bear, Stearns & Co. Inc., 245 Park Avenue, New York,
New York 10167, Attention: Corporate Finance Department, telecopy number: (212)
272-3092, with a copy to Latham & Watkins, 885 Third Avenue, Suite 1000, New
York, New York 10022, Attention: Roger H. Kimmel, telecopy number: (212)
751-4864; and if sent to either of the Issuers or any of the Guarantors, shall
be mailed, delivered, telecopied and confirmed in writing or sent by a
nationally recognized overnight courier service guaranteeing delivery on the
next business day to Production Resource Group, L.L.C., 539 Temple Hill Road,
New Windsor, New York 12553, Attention: Chief Financial Officer, telecopy
number: (914) 567-5804, with a copy to Morrison & Foerster L.L.P., 1290 Avenue
of the Americas, New York, New York 10104, Attention: Joseph W. Bartlett,
telecopy number: (212) 468-7900.
13. Parties. This Agreement shall inure solely to the benefit of, and shall
be binding upon, the Initial Purchasers, the Issuers and the Guarantors and the
controlling persons and agents referred to in
26
<PAGE>
Sections 6 and 7, and their respective successors and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provision
herein contained. The term "successors and assigns" shall not include a
purchaser, in its capacity as such, of Notes from the Initial Purchasers.
14. Construction. This Agreement shall be construed in accordance with the
internal laws of the State of New York. TIME IS OF THE ESSENCE IN THIS
AGREEMENT.
15. Captions. The captions included in this Agreement are included solely
for convenience of reference and are not to be considered a part of this
Agreement.
16. Counterparts. This Agreement may be executed in various counterparts
which together shall constitute one and the same instrument.
[Signature page to follow]
27
<PAGE>
If the foregoing correctly sets forth the understanding among the Initial
Purchasers, the Issuers and the Guarantors please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
PRODUCTION RESOURCE GROUP, L.L.C.
By:
-------------------------------------
Name:
Title:
PRG FINANCE CORPORATION
By:
-------------------------------------
Name:
Title:
PRG PLANNING & DEVELOPMENT GROUP LLC
By:
-------------------------------------
Name:
Title:
ECTS, A SCENIC TECHNOLOGY COMPANY, INC.
By:
-------------------------------------
Name:
Title:
SHOWPAY, L.L.C.
By:
-------------------------------------
Name:
Title:
28
<PAGE>
ATTRACTION MANAGEMENT LLC
By:
-------------------------------------
Name:
Title:
Accepted and agreed to as of the date first above written:
BEAR, STEARNS & CO. INC.
By:
-------------------------------
Name:
Title:
BT ALEX. BROWN INCORPORATED
By:
-------------------------------
Name:
Title:
MORGAN STANLEY & CO. INCORPORATED
By:
-------------------------------
Name:
Title:
BNY CAPITAL MARKETS, INC.
By:
-------------------------------
Name:
Title:
29
<PAGE>
SCHEDULE I
Principal Amount
Initial Purchaser of Series A Notes
Bear, Stearns & Co. Inc. $ 55,000,000
BT Alex.Brown Incorporated 20,000,000
Morgan Stanley & Co. Incorporated 20,000,000
BNY Capital Markets, Inc. 5,000,000
-------------
Total $ 100,000,000
=============
30
<PAGE>
EXHIBIT A
List of Guarantors
PRG Planning & Development Group LLC., a Delaware limited liability company.
ECTS, A Scenic Technology Company, Inc., a Delaware corporation.
Showpay, L.L.C., a Delaware limited liability company.
Attraction Management LLC, a Delaware limited liability company.
A-1
<PAGE>
EXHIBIT B
Form of Opinion of Morrison & Foerster, L.L.P.
1. The Company (a) is a Delaware limited liability company duly formed,
validly existing and in good standing under the laws of Delaware, (b) has all
requisite power and authority to carry on its business as it is currently being
conducted and to own, lease and operate its properties, and (c) is duly
qualified and is in good standing as a foreign limited liability company,
authorized to do business in each jurisdiction in which the nature of its
business or its ownership or leasing of property requires such qualification
except where the failure to be so qualified could not reasonably be expected to
have a Material Adverse Effect.
2. Each of the Company's subsidiaries (a) is a corporation or limited
liability company, as applicable, duly formed, validly existing and in good
standing under the laws of its jurisdiction of organization, (b) has all
requisite power and authority to carry on its business as it is currently being
conducted and as described in the Offering Memorandum and to own, lease and
operate its properties, and (c) is duly qualified and in good standing as a
foreign corporation or limited liability company, as applicable, authorized to
do business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except where the
failure to be so qualified could not reasonably be expected to have a Material
Adverse Effect.
3. Each of the Issuers and the Guarantors has all requisite corporate or
limited liability company power and authority, as applicable, to execute,
deliver and perform its obligations under this Agreement and each of the other
Operative Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby, including, without limitation, the corporate
and limited liability company power and authority, as applicable, to issue, sell
and deliver the Notes and to issue and deliver the Guarantees as provided
herein.
4. All of the outstanding capital stock of each material subsidiary of the
Company is owned by the Company, free and clear of any security interest, claim,
lien, limitation on voting rights or encumbrance; and all such securities have
been duly authorized, validly issued, and are fully paid and nonassessable and
were not issued in violation of any preemptive or similar rights.
5. This Agreement has been duly and validly authorized, executed and
delivered by each of the Issuers and the Guarantors.
6. The Registration Rights Agreement has been duly and validly authorized,
executed and delivered by each of the Issuers and the Guarantors, and is the
valid and binding obligation of each of the Issuers and the Guarantors,
enforceable against each of them in accordance with its terms, except to the
extent that (a) enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity); and (b) the enforceability of indemnification and
contribution provisions may be limited by Federal and state securities laws and
the policies underlying such laws.
7. The Indenture has been duly and validly authorized, executed and
delivered by each of the Issuers and
B-1
<PAGE>
the Guarantors, and is the valid and binding obligation of each of the Issuers
and the Guarantors, enforceable against each of them in accordance with its
terms (assuming the due authorization, execution and delivery of the Indenture
by the Trustee), except to the extent that (a) enforcement thereof may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity); and (b) the waiver contained in
Section 4.06 of the Indenture may be deemed unenforceable.
8. The Amended Credit Facility has been duly and validly authorized,
executed and delivered by each of the Company and the subsidiaries party
thereto, and is the valid and binding obligation of each of the Company and such
subsidiaries, enforceable against each of them in accordance with its terms,
except to the extent that (a) enforcement thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity) and (b) the waiver contained in Section __ of
the Amended Credit Facility may be deemed unenforceable.
9. The Series A Notes have been duly and validly authorized and executed by
each of the Issuers for issuance and sale to the Initial Purchasers pursuant to
this Agreement, and, when authenticated in accordance with the terms of the
Indenture and delivered against payment therefor in accordance with the terms
hereof and thereof, the Series A Notes will be the valid and binding obligations
of the Issuers, enforceable against each of them in accordance with their terms
and entitled to the benefits of the Indenture, except to the extent that (a)
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity); and (b) the waiver contained in Section 4.06 of the Indenture may be
deemed unenforceable. The Offering Memorandum contains a summary of the terms of
the Series A Notes, which is accurate in all material respects.
10. The Series B Notes have been duly and validly authorized for issuance
by each of the Issuers, and, when issued and authenticated in accordance with
the terms of the Exchange Offer and the Indenture, the Series B Notes will be
the valid and binding obligations of each of the Issuers, enforceable against
each of them in accordance with their terms and entitled to the benefits of the
Indenture, except to the extent that (a) enforcement thereof may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity); and (b) the waiver contained in Section 4.06 of
the Indenture may be deemed unenforceable. The Offering Memorandum contains a
summary of the terms of the Series B Notes, which is accurate in all material
respects.
11. The Guarantees of the Series A Notes have been duly and validly
authorized and executed by each of the Guarantors, and when the Series A Notes
have been issued and authenticated in accordance with the terms of the Indenture
and delivered against payment therefor in accordance with the terms hereof and
thereof, the Guarantees of the Series A Notes will be the valid and binding
obligations of each of the Guarantors, enforceable against each of
B-2
<PAGE>
them in accordance with their terms and entitled to the benefits of the
Indenture, except to the extent that (a) enforcement thereof may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity); and (b) the waiver contained in Section 4.06 of
the Indenture may be deemed unenforceable. The Offering Memorandum contains a
summary of the terms of the Guarantees of the Series A Notes, which is accurate
in all material respects.
12. The Guarantees of the Series B Notes have been duly and validly
authorized by each of the Guarantors, and when executed and delivered in
accordance with the terms of the Indenture, and when the Series B Notes have
been issued and authenticated in accordance with the terms of the Exchange Offer
and the Indenture, the Guarantees of the Series B Notes will be the valid and
binding obligations of each of the Guarantors, enforceable against each of them
in accordance with their terms and entitled to the benefits of the Indenture,
except to the extent that (a) enforcement thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity); and (b) the waiver contained in Section 4.06 of
the Indenture may be deemed unenforceable. The Offering Memorandum contains a
summary of the terms of the Guarantees of the Series B Notes, which is accurate
in all material respects.
13. The Offering Memorandum contains a summary of the terms of each of the
Indenture, the Registration Rights Agreement, the Real Estate Transaction and
the Amended Credit Facility which, in each case, is accurate in all material
respects. The statements under the captions "Description of Notes," "Notice to
Investors" and "Plan of Distribution" in the Offering Memorandum, insofar as
such statements constitute a summary of the legal matters, documents or
proceedings referred to therein, present fairly in all material respects, such
legal matters, documents and proceedings.
14. To the best of such counsel's knowledge, neither the Company nor any of
its subsidiaries is (a) in violation of its charter or bylaws or other
organizational documents, as applicable, or (b) in default in the performance of
any bond, debenture, note, indenture, mortgage, deed of trust or other agreement
or instrument to which it is a party or by which it is bound or to which any of
its properties is subject, which, in the case of clause (b), singly or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
15. No registration under the Act of the Series A Notes is required for the
sale of the Series A Notes to the Initial Purchasers as contemplated hereby or
for the Exempt Resales assuming (a) that each Initial Purchaser is a QIB, (b)
that the purchasers who buy the Series A Notes in the Exempt Resales are either
QIBs or Reg S Investors, (c) the accuracy of the Initial Purchasers'
representations regarding the absence of general solicitation in connection with
the sale of Series A Notes to the Initial Purchasers and the Exempt Resales
contained herein and (d) the accuracy of the Issuers' and the Guarantors'
representations in Sections 5(a)(vii) and (xxxv) (other than with respect to the
first sentence).
16. Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, and each amendment or supplement thereto, as of its
date (except for the financial
B-3
<PAGE>
statements and related notes, the financial statement schedules and other
financial and statistical data included therein or omitted therefrom, as to
which no opinion need be expressed), contains the information specified in, and
meets the requirements of, Rule 144A(d)(4) under the Act.
17. When the Series A Notes and the Guarantees are issued and delivered
pursuant to this Agreement, no Series A Note or Guarantee will be of the same
class (within the meaning of Rule 144A under the Act) as securities of the
Issuers or of any of the Guarantors that are listed on a national securities
exchange registered under Section 6 of the Exchange Act or that are quoted in a
United States automated inter-dealer quotation system.
18. None of (a) the execution, delivery or performance by either of the
Issuers or any of the Guarantors of this Agreement or any of the other Operative
Documents to which it is a party, (b) the consummation of the Real Estate
Transaction, (c) the issuance and sale of the Notes and the issuance of the
Guarantees and (d) consummation by the Issuers of the transactions described in
the Offering Memorandum under the caption "Use of Proceeds," violates, conflicts
with or constitutes a breach of any of the terms or provisions of, or a default
under (or an event that with notice or the lapse of time, or both, would
constitute a default), or requires consent under, or results in the imposition
of a lien or encumbrance on any properties of the Company or any of its
subsidiaries, or an acceleration of any indebtedness of the Company or any of
its subsidiaries pursuant to, (i) the charter or bylaws or other organizational
documents, as applicable, of the Company or any of its subsidiaries, (ii) any
bond, debenture, note, indenture, mortgage, deed of trust or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which any of them or their property is or may be bound that has been filed or
incorporated by reference as an exhibit to any filing by the Company or any of
its subsidiaries with the Commission, (iii) any statute, rule or regulation
applicable to the Company or any its subsidiaries or any of their assets or
properties or (iv) to the best of such counsel's knowledge, any judgment, order
or decree of any court or governmental agency or authority having jurisdiction
over the Company or any of its subsidiaries or any of their assets or
properties. Assuming compliance with applicable state securities and Blue Sky
laws, as to which such counsel need express no opinion, and except for the
filing of a registration statement under the Act and qualification of the
Indenture under the Trust Indenture Act, or in connection with the Registration
Rights Agreement, no consent, approval, authorization or order of, or filing,
registration, qualification, license or permit of or with, (a) any court or
governmental agency, body or administrative agency or (b) any other person is
required for (i) the execution, delivery and performance by either of the
Issuers or any of the Guarantors of this Agreement or any of the other Operative
Documents to which it is a party, (ii) the Real Estate Transaction or (iii) the
issuance and sale of the Notes and the issuance of the Guarantees and the
transactions contemplated hereby and thereby, except such as have been obtained
and made or have been disclosed in the Offering Memorandum.
19. To the best of such counsel's knowledge, there is (a) no action, suit,
investigation or proceeding before or by any court, arbitrator or governmental
agency, body or official, domestic or foreign, now pending or threatened or
contemplated to which the Company or any of its subsidiaries is or may be a
party or to which the business or property of the Company or any of its
subsidiaries, is or may be subject, (b) no statute, rule, regulation or order
that has been enacted, adopted or issued by any governmental agency or that has
been proposed by any governmental body and (c) no injunction, restraining order
or order of any nature by a federal or state court or foreign court of competent
jurisdiction to which the Company or any of its
B-4
<PAGE>
subsidiaries is or may be subject or to which the business, assets, or property
of the Company or any of its subsidiaries is or may be subject, that, in the
case of clauses (a), (b) and (c) above, is required to be disclosed in the
Preliminary Offering Memorandum and the Offering Memorandum and that is not so
disclosed.
20. None of the Company or any of its subsidiaries is an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act.
21. To the best of such counsel's knowledge, there are no holders of
securities of the Company or any of its subsidiaries who, by reason of the
execution by the Issuers and the Guarantors of this Agreement or any other
Operative Document to which it is a party or the consummation by the Issuers and
the Guarantors of the transactions contemplated hereby and thereby, have the
right to request or demand that the Company or any of its subsidiaries register
under the Act or analogous foreign laws and regulations securities held by them.
22. To the best of such counsel's knowledge, there are not currently any
outstanding subscriptions, rights, warrants, calls, commitments of sale or
options to acquire, or instruments convertible into or exchangeable for, any
capital stock or other equity interest of any subsidiary of the Company.
23. To the best of such counsel's knowledge, no stop order preventing the
use of the Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued.
24. The Indenture complies as to form in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder. Prior to
the Exchange Offer or the effectiveness of the Shelf Registration Statement, the
Indenture is not required to be qualified under the Trust Indenture Act.
In addition, such counsel shall state that it has participated in conferences
with officers and other representatives of the Issuers and the Guarantors,
representatives of the independent certified public accountants of the Issuers
and the Guarantors and the Initial Purchasers and their representatives at which
the contents of the Preliminary Offering Memorandum and the Offering Memorandum
and related matters were discussed and, although it has not undertaken to
investigate or verify independently, and does not assume any responsibility for,
the accuracy, completeness or fairness of the statements contained in the
Preliminary Offering Memorandum or the Offering Memorandum (except as indicated
above), on the basis of the foregoing (relying as to materiality to the extent
such counsel deems appropriate upon facts provided to such counsel by officers
or other representatives of the Issuers and the Guarantors and without
independent verification of such facts), no facts have come to its attention
which led it to believe that the Preliminary Offering Memorandum or the Offering
Memorandum, as of its date or the Closing Date, contained an untrue statement of
a material fact or omitted to state any fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (except as to financial statements
and related notes, the
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<PAGE>
financial statement schedules and other financial and statistical data included
therein).
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF FORMATION
OF
PRODUCTION RESOURCES GROUP, L.L.C.
THE UNDERSIGNED, pursuant to the provisions of the Delaware Limited
Liability Company Act, 6 Del. C. ss. 18-101 et. seq., does hereby certify:
That the certificate of formation of Production Resources
Group, L.L.C. (the "Company"), filed with the Secretary of
State of the State of Delaware on August 7, 1995, has been
amended to change the name of the Company to:
Production Resource Group, L.L.C.
IN WITNESS WHEREOF, I have hereunto set my hand on this 4th day of June,
1996.
PRODUCTION RESOURCE GROUP, L.L.C.
By: /s/ Kevin Baxley
--------------------------------------
Kevin Baxley, Executive Vice President
Duly Authorized
<PAGE>
CERTIFICATE OF FORMATION
OF
PRODUCTION RESOURCES GROUP, L.L.C.
This Certificate of Formation of Production Resources Group, L.L.C. (the
"LLC"), dated August 4, 1995, is being duly executed and filed by Kevin J.
Baxley, as an authorized person, to form a limited liability company under the
Delaware Limited Liability Company Act (6 Del. C. ss. 18-101 et seq.)
First. The name of the limited liability company formed hereby is
Production Resources Group, L.L.C.
Second. The address of the registered office of the LLC in the State of
Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1290
Orange Street, Wilmington, DE 19801.
Third. The name and address of the registered agent for service of process
on the LLC in the State of Delaware is c/o The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation as of the date first above written.
By: /s/ Kevin Baxley
--------------------------------------
Kevin Baxley, Executive Vice President
Duly Authorized
<PAGE>
EXHIBIT 3.2
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT OF
PRODUCTION RESOURCE GROUP, L.L.C.
This Second Amended and Restated Limited Liability Company Agreement (the
"Agreement") of Production Resource Group L.L.C. (the "Company") is made as of
December 1, 1997 by and among Harris Production Services, Inc., a New York
corporation ("Harris"), and Scenic Properties L.L.C., a New York limited
liability company ("SPLLC") and the Persons who become Members of the Company in
accordance with the provisions hereof and whose names are set forth as Members
on Schedule A hereto as in effect from time to time.
RECITALS
The parties hereto have formed a limited liability company pursuant to the
Delaware Limited Liability Company Act, 6 Del. C. ss.18-101, et seq., as amended
from time to time (the "Delaware Act" or the "Act"), by filing a Certificate of
Formation of the Company with the office of the Secretary of State of the State
of Delaware on August 7, 1995 under the name "Production Resources Group,
L.L.C." The Certificate of Formation was subsequently amended to change the
Company's name to Production Resource Group, L.L.C. On January 1, 1996, the
parties, by execution of a certain Amended and Restated Limited Liability
Agreement (the "Amended Agreement"), amended and restated their operating
agreement in its entirety. In addition, on July 12, 1996, the parties, by a
First Amendment to the Amended and Restated Operating Agreement (the "First
Amendment") further amended their operating agreement. This Agreement expressly
incorporates all of the terms and conditions of the Amended Agreement as amended
by the First Amendment, and the parties wish to further amend and restate their
operating agreement in its entirety to read as set forth herein.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Members hereby agree as
follows:
ARTICLE I
DEFINED TERMS
Section 1.1 Definitions.
Unless the context otherwise requires, the terms defined in this Article I
shall, for the purposes of this Agreement, have the meanings herein specified.
"Additional Members" has the meaning set forth in Section 14.1 hereof.
<PAGE>
"Additional Units" has the meaning set forth in Section 14.1 hereof.
"Adjusted Capital Contributions" means the Capital Contributions of the
Unit Holders reduced by the amount of cash and the Gross Asset Value of any
Company Property distributed to such Unit Holder pursuant to Sections 10.1 or
16.4(d).
"Advisory Board" means the Board created and existing pursuant to Article
VII hereof.
"Affiliate" means with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by, or is under common control
with, the specified Person. As used in this definition, the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"Agreement" means this Second Amended and Restated Limited Liability
Company Agreement, as amended, modified, supplemented or restated from time to
time.
"Assignee" means any Person who is an assignee of a Member's interest in
the Company, or part thereof, and who does not become a Member.
"Assignment and Assumption Agreement" means the Assignment and Assumption
Agreement executed by the Member and the Company.
"Bankruptcy" (including the form "Bankrupt") means, with respect to any
Member: (a) the making of an assignment for the benefit of creditors by such
Member, (b) the filing of a voluntary petition in bankruptcy by such Member, (c)
the adjudication of such Member as a bankrupt or insolvent, or the entry against
such Member of an order for relief in any bankruptcy or insolvency proceeding;
provided that such order for relief or involuntary proceeding is not stayed or
dismissed within 120 days, (d) the filing by such Member of a petition or answer
seeking protection from creditors for itself or any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
bankruptcy statute, law or regulation, or (e) the filing by such Member of an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against it in any proceeding of that nature.
With respect to a Member that is not a natural person, Bankruptcy shall also
include the occurrence of any of the aforementioned events with respect to the
beneficial owner of a majority of the equity ownership of such Member.
"Board" means the Board of Managers established pursuant to Article V
hereof provided, however, that if there is only a single Manager, such Manager
shall have all powers delegated to the Board of Managers hereunder.
"Capital Account" means, with respect to any Unit Holder, the account
maintained for such Unit Holder in accordance with the provisions of Section 4.4
hereof.
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"Capital Appreciation Units" shall mean Units as listed on Schedule B
hereof entitling their Unit Holder(s) to the annual return specified in Schedule
B with respect to such class of Capital Appreciation Units and entitling their
Unit Holder(s) to share in the appreciation in the value of the Company upon a
Realization Event above the Threshold specified in Schedule B with respect to
such class of Capital Appreciation Units.
"Capital Contribution" means, with respect to any Unit Holder, the
aggregate amount of money and the initial Gross Asset Value of any property
(other than money) contributed to the Company pursuant to Section 4.1 hereof by
such Unit Holder. In the case of a Unit Holder who acquires an interest in the
Company by virtue of an assignment in accordance with the terms of this
Agreement, "Capital Contributions" has the meaning set forth in Section 4.4(a)
hereof.
"Cause" shall mean, with respect to a Member who is a natural person or
which is owned or controlled by a single natural person (a) commission by a
Member of a felony or of any criminal act involving moral turpitude which
results in an arrest or indictment, (b) deliberate and continued refusal to
perform employment duties reasonably requested by the Company or an Affiliate,
after 20 days' written notice by certified mail of such failure to perform,
specifying that failure constitutes Cause (other than as a result of vacation,
sickness, illness or injury), or (c) fraud, embezzlement, gross misconduct or
gross negligence in connection with the business of the Company or an Affiliate
which has a material adverse effect on the Company or an Affiliate; provided,
however, that in the case of a Member having an employment agreement with the
Company or any Affiliate, any definition of "Cause" contained in such agreement
shall supercede the definition contained herein.
"Certificate" means the Certificate of Formation filed with the Secretary
of State of Delaware on August 7, 1995 and any and all amendments thereto and
restatements thereof filed on behalf of the Company with the office of the
Secretary of State of the State of Delaware pursuant to the Delaware Act.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section (?) of the Code refers not only to
such specific section but also to any corresponding provision of any federal tax
statute enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Company" means Production Resource Group, L.L.C., the limited liability
company heretofore formed and continued under and pursuant to the Delaware Act
and this Agreement.
"Company Minimum Gain" shall mean an amount equal to the gain the Company
would realize if it disposed of any Company Property subject to a Company
Nonrecourse Liability for no consideration other than full satisfaction of such
liability determined strictly in accordance with Regulation section 1.704-2(d).
Notwithstanding any provision to the contrary contained herein, Company Minimum
Gain and increases and decreases in Company Minimum Gain shall be
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computed in accordance with Section 704 of the Code and Regulations issued
thereunder, as the same may be issued and interpreted from time to time. A
Member's share of Company Minimum Gain at the end of any Fiscal Year equals:
the sum of (a) the nonrecourse deductions allocated to that Member
(and to that Member's predecessors in interest) up to that time and
(b) the distributions made to that Member (and to that Member's
predecessors in interest) up to that time of proceeds of a Nonrecourse
Liability allocable to an increase in Company Minimum Gain minus the
sum of (i) that Member's (and that Member's predecessors in interest)
aggregate share of the net decreases in Company Minimum Gain and (ii)
that Member's (and that Member's predecessors in interest) aggregate
share of decreases resulting from revaluations of Company Property
subject to one or more Company Nonrecourse Liabilities.
"Company Nonrecourse Liability" means a liability to the extent that no
Member or related person bears the economic risk of loss (as defined in
Regulation Section 1.752-2) with respect to the liability.
"Company Property" means any property owned by the Company.
"Competing Business" shall mean any activity which (a) involves the conduct
of the themed entertainment, production management, theatrical rental, scenery,
rigging, supply of physical product elements (including lighting and sound),
theatrical equipment or exhibit business or the design and build business, (b)
involves the conduct of the theatrical equipment software business, (c) directly
competes with any other business conducted by the Company or any of its
Affiliates or any other business if the Company or such Affiliate took
substantial steps in anticipation of commencing such business prior to the
Termination or Bankruptcy of the competing Member and the person engaging in the
Competing Business was aware of such steps. For purposes of this Agreement,
neither Kaleidoscope Creative, Inc. nor J. Harris, Inc. shall be considered to
be a Competing Business.
"Covered Person" means a Member, a Manager, or Advisor, any Affiliate of a
Member or of a Manager, any officers, directors, shareholders, partners,
employees, representatives or agents of a Member, Manager or their respective
Affiliates, or any employee or agent of the Company or its Affiliates.
"Delaware Act" means the Delaware Limited Liability Company Act, 6 Del. C.
ss. 18-101, et seq., as amended from time to time.
"Depreciation" means, for each Fiscal Year or other period, an amount equal
to the depreciation, amortization or other cost recovery deduction allowable
with respect to an asset for such Fiscal Year or other period; provided,
however, that if the Gross Asset Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of such Fiscal Year or
other period, Depreciation shall be an amount that bears the same ratio to such
beginning Gross Asset
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Value as the federal income tax depreciation, amortization or other cost
recovery deduction with respect to such asset for such Fiscal Year or other
period bears to such beginning adjusted tax basis; and provided further, that if
the federal income tax depreciation, amortization or other cost recovery
deduction for such Fiscal Year or other period is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Managers.
"Division" shall mean each entity in which the Company has a controlling
equity interest and each other division (whether or not formed as a separate
legal entity) which is accounted for on a separate basis for internal Company
purposes as determined in good faith by the Managers on a consistent basis.
Unless changed by the Managers, the Divisions shall consist of (a) the Scenic
Division, (b) the Event Services Division (c) the Lighting Division, (d) the
Sound Division and (e) the PRG Corporate division.
"Division Officers" shall mean those persons designated as officers of a
Division by the Managers.
"Excluded Assets" or "Excluded Liabilities" shall mean any assets held by a
Member or any liabilities of a Member that are listed as excluded assets or
excluded liabilities, as the case may be, in the Assignment and Assumption
Agreement executed by the Member and the Company and, notwithstanding anything
to the contrary contained in the Assignment and Assumption Agreements between
Harris and ECTS, A Scenic Technology Company, Inc. ("STNY") and the Company, the
capital stock of Showpay owned by Harris and STNY shall constitute an Excluded
Asset and Showpay shall be deemed to have contributed its assets to the Company
immediately prior to the contributions of Harris and STNY .
"Fiscal Quarter" shall mean each of the four consecutive three-month
periods in each Fiscal Year.
"Fiscal Year" means (a) the period commencing upon the formation of the
Company and ending on December 31, 1996, (b) any subsequent 12 month period
commencing on January 1 and ending on December 31, or (c) any portion of the
period described in clause (b) of this sentence for which the Company is
required to allocate Profits, Losses and other items of Company income, gain,
loss or deduction pursuant to Article IX hereof.
"Gross Asset Value" means, with respect to any asset, such asset's adjusted
basis for federal income tax purposes, except as follows:
(1) the initial Gross Asset Value of any asset contributed by a Member to
the Company shall be the gross fair market value of such asset, as agreed to by
the contributing Member and the Managers;
(2) the Gross Asset Value of all Company assets shall be adjusted to equal
their respective gross fair market values, as determined by the Managers, as of
the following times: (i) the
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acquisition of an additional interest in the Company by any new or existing
Member in exchange for more than a de minimis Capital Contribution; (ii) the
distribution by the Company to a Unit Holder of more than a de minimis amount of
Company assets as consideration for an interest in the Company; and (c) the
liquidation of the Company within the meaning of Regulation
ss.1.704-l(b)(2)(ii)(g); provided, however, that adjustments pursuant to clause
(i) and clause (ii) of this sentence shall be made only if the Managers
reasonably determine that such adjustments are necessary or appropriate to
reflect the relative economic interests of the Unit Holders in the Company; and
(3) the Gross Asset Value of any Company asset distributed to any Unit
Holder shall be the gross fair market value of such asset on the date of
distribution, as determined by the distributed Member and the Managers.
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Paragraph (a) or Paragraph (b) above, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Profits and Losses.
"Initial Members" shall mean Harris, STNY, ECTS Contracting of Las Vegas,
Inc. ("SCLV"), Showpay, Inc. ("Showpay"), Scenic Properties, L.L.C. ("SPLLC")
and Theatre Techniques Associates, Inc. ("TTA"). STNY, SCLV and TTA have merged
into Harris subsequent to the date of the original agreement and the Units
originally issued to Showpay have been transferred to Harris.
"Initial Public Offering" shall mean the initial sale of equity securities
in the Company or in an incorporated successor of the Company in an underwritten
public offering registered with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended; provided
however, that an Initial Public Offering shall not include a registration
relating solely to employee benefit plans on Forms S-1 or S-4 or similar forms
that may be promulgated in the future, or a registration relating solely to a
Commission Rule 145 transaction on Form S-4 or similar forms that may be
promulgated in the future.
"Liquidating Trustee" has the meaning set forth in Section 16.3 hereof.
"Liquidation Preference" means the right to receive liquidations
distributions prior to the rights of holders of Regular Units to receive such
liquidating distributions as set forth in Schedule B, hereof.
"Majority Vote" means the written approval of, or the affirmative vote by,
Members holding a majority of the Units held by Members other than Members
holding any class of Units which are, by their terms, non-voting Units.
"Managers" means the Persons designated in Section 5.2 hereof as managers
of the Company within the meaning of the Delaware Act. The initial Manager is
identified on Exhibit A hereto.
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"Member" means any Person named as a member of the Company on Schedule A
hereto and includes any Person admitted as an Additional Member or a Substitute
Member pursuant to the provisions of this Agreement, and "Members" means two (2)
or more of such Persons when acting in their capacities as members of the
Company.
"Member Minimum Gain" means an amount determined by first computing for
each Member Nonrecourse Liability any gain the Company would realize if it
disposed of the Company Property subject to that liability for no consideration
other than full satisfaction of the liability, and then aggregating the
separately computed gains. The amount of Member Minimum Gain includes any
minimum gain arising from a conversion, refinancing, or other change to a debt
instrument, only to the extent a Member is allocated a share of that minimum
gain. Member Minimum Gain and increases and decreases in Member Minimum Gain are
intended to be computed in accordance with Section 704 of the Code and the
Regulations issued thereunder.
"Member Nonrecourse Liability" means any Company Liability to the extent
such liability is nonrecourse under Delaware law, and on which a Member or
Related Person bears the economic risk of loss under Section 1.752-2 of the
Regulations.
"Net Cash Flow" means, for each Fiscal Year or other period of the Company,
the gross cash receipts of the Company from all sources but excluding any
amounts, such as gross receipts taxes, that are held by the Company as a
collection agent or in trust for others or that are otherwise not
unconditionally available to the Company, less all amounts paid by or for the
account of the Company during the same Fiscal Year or other period (including,
without limitation, payments of principal and interest on any Company
indebtedness and expenses reimbursed to the Managers under Section 5.6 hereof),
and less any amounts determined by the Managers to be necessary to provide a
reasonable reserve for working capital needs or any other contingencies of the
Company. Net Cash Flow shall be determined in accordance with the cash receipts
and disbursements method of accounting and otherwise in accordance with
generally accepted accounting principles, consistently applied. Net Cash Flow
shall not be reduced by depreciation, amortization, cost recovery deductions,
depletion, similar allowances or other noncash items, but shall be increased by
any reduction of reserves previously established.
"Non-Participating Units" shall mean units of any class listed on Schedule
B designated as "Non-Participating Units" and hereof which participate in the
Profits of the Company only to the extent specified on Schedule B. As of the
date hereof, Capital Appreciation Units, Preferred Capital Appreciation Units,
Preferred Units and 8% Convertible Preferred Units are designated as
Non-Participating Units. Non-Participating Units may or may not have a
Liquidation Preference.
"Officers" shall mean those persons designated as officers of the Company
by Managers.
"Participating Units" shall mean units of any class listed on Schedule B
hereof which share with the Regular Units in the Profits of the Company.
Participating Units may or may not have a Liquidation Preference.
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"Person" includes any individual, corporation, association, partnership
(general or limited), joint venture, trust, estate, limited liability company,
or other legal entity or organization.
"Preferred Capital Appreciation Units" shall mean Units with the rights and
privileges of Capital Appreciation Units but with the liquidation preference
indicated on Schedule B hereof.
"Preferred Return" shall mean the return, if any, payable to a particular
class of Unit Holders, designated as a "Preferred Return" in Schedule B, hereof.
"PRG" shall mean Production Resource Group, L.L.C., a Delaware limited
liability company.
"Profits" and "Losses" means, for each Fiscal Year, an amount equal to the
Company's taxable income or loss for such Fiscal Year, determined in accordance
with ss. 703(a) of the Code (but including in taxable income or loss, for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to ?703(a)(1) of the Code), with the following adjustments:
(4) any income of the Company exempt from federal income tax and not
otherwise taken into account in computing Profits or Losses pursuant to this
definition shall be added to such taxable income or loss;
(5) any expenditures of the Company described in ss.705(a)(2)(B) of the
Code (or treated as expenditures described in ss.705(a)(2)(B) of the Code
pursuant to Regulation ss.1.704-l(b)(2)(iv)(i)) and not otherwise taken into
account in computing Profits or Losses pursuant to this definition shall be
subtracted from such taxable income or loss;
(6) in the event the Gross Asset Value of any Company asset is adjusted in
accordance with Paragraph (b) or Paragraph (c) of the definition of "Gross Asset
Value" above, the amount of such adjustment shall be taken into account as gain
or loss from the disposition of such asset for purposes of computing Profits or
Losses;
(7) gain or loss resulting from any disposition of any asset of the Company
with respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the asset disposed
of, notwithstanding that the adjusted tax basis of such asset differs from its
Gross Asset Value; and
(8) in lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Fiscal Year or other period,
computed in accordance with the definition of "Depreciation" above.
"Regulations" means the income tax regulations, including temporary
regulations, promulgated under the Code, as such regulations may be amended from
time to time including corresponding provisions of succeeding regulations.
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"Realization Event" means (i) a sale of substantially all of the assets of
the Company in one transaction or in a series of related transactions (ii) a
sale of fifty percent or more of the interests in the Company held, directly and
indirectly, by the Founders in one transaction or a series of related
transactions, or (iii) an Initial Public Offering.
"Related Person" means a Person having a relationship to a Member that is
described in Section 1.752-4(b) of the Regulations.
"Senior Lender" has the meaning set forth in Section 15.5 hereof.
"Tax Matters Member" has the meaning set forth in Section 12.1 hereof.
"Threshold" means the level above which holders of a series of Capital
Appreciation Units or Preferred Capital Appreciation Units are entitled to share
in the proceeds of a Realization Event.
"Unit" shall mean an interest of a Member in the Company entitling the
holder to a share in Company profits, losses and operating distributions as
provided herein.
"Unit Holder" means any Person who holds one or more Units, regardless of
whether such Person is a Member and regardless of whether such Units were
initially acquired by such Person from the Company or by assignment from another
Unit Holder.
ARTICLE II
FORMATION AND TERM
Section 2.1 Formation
(9) The Members hereby agree to continue the Company as a limited liability
company under and pursuant to the provisions of the Delaware Act and agree that
the rights, duties and liabilities of the Members and the Managers shall be as
provided in the Delaware Act, except as otherwise provided herein.
(10) The Initial Members have contributed all of their assets other than
their Excluded Assets subject to all of their liabilities other than Excluded
Liabilities and they were admitted to the Company as Members and issued one or
more classes of Units. Upon the effective date hereof, the Members own the
number and class of Units set forth in Schedule A.
(11) The name and mailing address of each Unit Holder shall be listed on
Schedule A attached hereto. The Managers shall update Schedule A from time to
time as necessary to reflect accurately the information therein. Any amendment
or revision to Schedule A made in accordance with this Agreement shall not be
deemed an amendment to this Agreement. Any reference in this Agreement to
Schedule A shall be deemed to be a reference to Schedule A as amended and in
effect from time to time.
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Section 2.2 Name
The name of the Company is Production Resource Group, L.L.C. The
business of the Company may be conducted upon compliance with all applicable
laws under any other name or names designated by the Managers which names may
but need not include reference to Production Resource Group, L.L.C. or any
variation thereon.
Section 2.3 Term.
The term of the Company commenced on the date the Certificate was filed
in the office of the Secretary of State of the State of Delaware. The Company
shall have perpetual life.
Section 2.4 Registered Agent and Office
The Company's registered agent and office in Delaware shall be The
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware, 19801. At
any time, the Managers may designate another registered agent and/or registered
office.
Section 2.5 Principal Place of Business
The principal place of business of the Company shall be at 4170 West Harmon
Avenue, Las Vegas, Nevada or at such other location as the Managers may
determine. Upon ten days notice to the Members, the Managers may change the
location of the Company's principal place of business.
Section 2.6 Qualification in Other Jurisdictions.
The Managers shall cause the Company to be qualified, formed or registered
under assumed or fictitious name statutes or similar laws in any jurisdiction in
which the Company transacts business. The Managers, as authorized persons,
within the meaning of the Delaware Act, shall execute, deliver and file any
certificates (and any amendments and/or restatements thereof) necessary for the
Company to qualify to do business in a jurisdiction in which the Company may
wish to conduct business and shall comply with any requirements, such as the
publication of the contents of the Agreement, that may be imposed by the laws of
any jurisdiction in which the Company is qualified to do business.
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Section 2.7 Limitation on Liability.
No Member shall be liable for the debts, liabilities, contracts or other
obligations of the Company, except as provided in this Agreement or the Act.
Each Member shall be liable only to make its capital contribution as herein
specifically provided and shall not be required, after its capital contribution
shall have been paid, to make any further capital contribution to the Company,
or to lend any funds to the Company or to repay to the Company, any Member or
any creditor of the Company any negative balance in such Member's Capital
Account.
ARTICLE III
PURPOSE AND POWERS OF THE COMPANY
Section 3.1 Purpose
The purpose of the Company is to acquire, hold, protect, manage and dispose
of the assets contributed by the Initial Members and the assets of such other
businesses as are acquired, from time to time, by the Company, to carry on the
businesses formerly conducted by the Initial Members and such other businesses
in related or unrelated industries, anywhere in the world, in which the Managers
choose to engage and to engage in any and all activities necessary, advisable or
incidental thereto.
Section 3.2 Powers of the Company
(12) The Company, acting through its Board of Managers, shall have the power and
authority to take any and all actions necessary, appropriate, proper, advisable,
incidental or convenient to or for the furtherance of the purpose set forth in
Section 3.1, including, but not limited to the power:
(1) to conduct its business, carry on its operations and have and
exercise the powers granted to a limited liability company by the Delaware
Act in any state, territory, district or possession of the United States,
or in any foreign country that may be necessary, convenient or incidental
to the accomplishment of the purpose of the Company;
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(2) to acquire by purchase, lease, contribution of property or
otherwise, own, hold, operate, maintain, finance, improve, lease, sell,
convey, mortgage, transfer, demolish or dispose of any real or personal
property that may be necessary, convenient or incidental to the
accomplishment of the purpose of the Company;
(3) to enter into, perform and carry out contracts of any kind,
including, without limitation, contracts with the Managers, any Member, any
Affiliate thereof, any employee or group of employees of the Company, or
any agent of the Company necessary to, in connection with, convenient to,
or incidental to the accomplishment of the purpose of the Company; (1)
(4) to purchase, take, receive, subscribe for or otherwise acquire,
own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise
dispose of, and otherwise use and deal in and with, shares or other
interests in or obligations of domestic or foreign corporations,
associations, general or limited partnerships, trusts, limited liability
companies, or individuals or direct or indirect obligations of the United
States or of any government, state, territory, governmental district or
municipality or of any instrumentality of any of them;
(5) to lend money for its proper purpose, to invest and reinvest its
funds, to take and hold real and personal property for the payment of funds
so loaned or invested;
(6) to sue and be sued, complain and defend, and participate in
administrative or other proceedings, in its name;
(7) to purchase liability and other insurance to protect the Company's
property and business:
(8) to open bank accounts in the name of the Company or in other names
used by the Company in conducting its business, and shall determine from
time to time the authorized signatories for such accounts and invest any
Company funds temporarily (by way of example but not limitation) in time
deposits, short-term governmental obligations, commercial paper or other
investments;
(9) upon the affirmative vote or written consent of a majority of the
Managers to sell or otherwise dispose of all or substantially all of the
assets of the Company as part of a single transaction or plan;
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(10) to execute on behalf of the Company all instruments and
documents, including, without limitation: checks, drafts, notes and other
negotiable instruments; mortgages or deeds of trust; security agreements;
financing statements; documents providing for the acquisition, mortgage or
disposition of the Company's property; assignments; bills of sale; leases;
partnership agreements; operating agreements of other limited liability
companies; and any other instruments or documents necessary or appropriate,
in the opinion of the Managers, to the business of the Company; (1)
(11) to employ accountants, legal counsel, managing agents or other
experts to perform services for the Company and to compensate them from
Company funds;
(12) to enter into any and all other agreements on behalf of the
Company, with any other Person for any purpose, in such forms as the
Managers may approve;
(13) to do and perform all other acts as may be necessary or
appropriate to the conduct of the Company's business; and
(14) to establish and maintain reserves in such amount and for such
purposes for and on behalf of the Company as the Managers may deem
necessary or desirable, which monies shall not be considered in determining
the Net Cash Flow of the Company available for distribution;
(15) to indemnify any Person to the maximum extent permitted by the
Delaware Act;
(16) to negotiate, enter into, renegotiate, extend, renew, terminate,
modify, amend, waive, execute, acknowledge or take any other action with
respect to any lease, contract or security agreement in respect of any
assets of the Company;
(17) to borrow money and issue evidences of indebtedness, and to
secure the same by a mortgage, pledge or other lien on the assets of the
Company;
(18) to pay, collect, compromise, litigate, arbitrate or otherwise
adjust or settle any and all other claims or demands of or against the
Company or to hold such proceeds against the payment of contingent
liabilities;
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(19) to make, execute, acknowledge and file any and all documents or
instruments necessary, convenient or incidental to the accomplishment of
the purpose of the Company; and
(20) to cease its activities and cancel its Certificate;
(13) The Company may merge with, or consolidate into, another Delaware
limited liability company or other business entity (as defined in Section
18-209(a) of the Delaware Act) or effect any other form of business combination
upon a vote of a majority of the Managers.
(14) The Managers shall establish annual budgets, target revenues and
earnings, business plans and goals for cross-Divisional interaction and
integration for the Company and for each Division. The Managers shall meet with
the officers of each Division at least annually to review these items and such
other matters as may be appropriate. The Managers shall appoint the Division
Officers of each of the Company's Divisions who shall act as set forth in
Article VII.
(15) Except as otherwise agreed by the Managers, all borrowings of all
Members shall be conducted through PRG. If it is necessary to calculate
Divisional profits or Divisional net cash flow, such items shall be reduced by
the Division's allocable share of any borrowings as determined in good faith by
the Managers taking account of the utilization of such borrowings.
Section 3.3 Initial Public Offering.
(16) The Managers shall have the right to effect an Initial Public Offering
upon a majority vote of the Managers.
(17) If the Managers believe it to be necessary or appropriate to convert
the Company to a corporation or other legal form to further an Initial Public
Offering they may effect such conversion upon a majority vote of the Managers.
(18) Upon the conversion of the Company to corporate form: (i) all Regular
Units shall convert on an equal basis without regard to any differences in
Capital Accounts with respect to such Units and (ii) all Units that share in the
appreciation of the value of the Company above a specified Threshold shall
convert to shares of stock in the corporation based on the ratio of the Unit
Holders' Capital Account balances to the sum of all Capital Account balances
after adjusting such Capital Accounts for the gain or loss that would be
recognized if all Company assets had been sold for their fair market values
immediately prior to such conversion. For example, if the only classes of
outstanding Units at the time of conversion were Regular Units and Capital
Appreciation Units with a Threshold of $55 million and the Company had a value
of $105 million at such time, holders of
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Regular Units would first have their Capital Account balances increased to $55
million with the remaining $50 million in value shared among the holders of
Regular and Capital Appreciation Units in proportion to the total number of
Units held by each such holder.
ARTICLE IV
CAPITAL CONTRIBUTIONS, UNITS,
CAPITAL ACCOUNTS AND ADVANCES
Section 4.1 Capital Contributions
(19) Each Unit Holder has contributed or is deemed to have contributed to
the capital of the Company the amount set forth opposite the Unit Holder's name
on Schedule A attached hereto. The agreed value of the Capital Contributions
made or deemed to have been made by each Unit Holder shall be set forth on
Schedule A.
(20) No Unit Holder shall be required to make any additional capital
contribution to the Company. No Unit Holder shall have any personal liability
for the repayment of any Capital Contribution of any other Member or Assignee.
Section 4.2 Units
(21) Interests in the Company shall be divided into and be represented by
Units. Units shall be either Participating Units or Non-Participating Units. As
of the date hereof, Participating Units are comprised of the following Units:
Regular Units, Capital Appreciation Units, Preferred Capital Appreciation Units,
Preferred Units and 8% Convertible Preferred Units. As of the date hereof, the
following Units are hereby converted into Regular Units on a Unit for Unit
basis: TTA Units and SPLLC Units. As of the date hereof, the NY Stage Command
Units and Worldwide Stage Command Units are converted to 500,000 Regular Units.
As of the date hereof, the SPLLC Units are redeemed in exchange for the
Company's ownership of real property in New Windsor, NY, Cornwall-on-Hudson, NY,
and Las Vegas, NV as described in the Company's Preliminary Offering Memo dated
December 3, 1997 prepared in connection with the Company's issuance of Senior
Subordinated Notes due 2007. Participating Units shall have solely the rights
specifically set forth herein and in Schedule B hereto as in effect from time to
time. Non-Participating Units shall have solely the rights specifically set
forth herein and in Schedule B hereto as in effect from time to time. Except as
otherwise provided herein, all Units of a specific class shall have equal rights
inter se. Except as otherwise required by Delaware law, Units other than Regular
Units shall have no right to vote on any matter requiring the vote of the
Members.
(22) Regular Units shall be entitled to receive their pro rata share of
Profits or Losses and Net Cash Flow after provision for the payment of the
Preferred Return and the exclusion of the Profits or Losses or Net Cash Flow
specially allocated or distributed to a one or more classes of
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Units other than Regular Units. Except in the case of a Member owning solely
Regular Units, no portion of a Member's Capital Account shall be considered
attributable to the Regular Units held by the Member and Regular Units shall
represent solely a right to participate in the future Profits or Losses of the
Company rather than the right to receive distributions upon the liquidation of
the Company.
(23) The Managers may create such other class, classes or series of Units
or other equity interests in the Company as they shall deem necessary or
desirable, which Units or other equity interests in the Company may have voting
rights, rights to distributions and allocations, or other rights that are
different from, and superior or inferior to those of, the then-existing Units;
provided, however, that, except as otherwise provided herein, no class or series
of Units may be created with voting rights, rights to distributions and
allocations, or other rights superior to those of an existing class or classes
of Units (other than Regular Units) without the consent of a majority in
interest of each affected class or series of such other Units. For purposes of
the proviso in the immediately preceding sentence, a class or series of Units
shall not be deemed to have rights superior to any other class or series of
Units solely because such class or series has the ability to share in the value
of the Company above or below the threshold established for any existing class
or series of Units. Schedule B of this Agreement shall be amended from time to
time to reflect the creation of additional classes and series of Units. The
creation of a new class or classes of Units shall not constitute an amendment to
this Agreement.
(24) A Member may own one or more classes of Units. Except as otherwise
specifically provided herein, the ownership of other classes of Units shall not
affect the rights or obligations of a Member with respect to Units of other
classes. Any reference to the holder of a class of Units shall be deemed to
refer to such holder only to the extent of the Units of the relevant class held
by such Member unless the context clearly and unequivocally provides otherwise.
(25) The number and class or classes of each Unit Holder's respective Units
shall be set forth on Schedule A attached hereto. Each Unit Holder hereby agrees
that its interest in the Company and in its Units shall for all purposes be
personal property. A Unit Holder shall have no interest in specific Company
property.
Section 4.3 Status of Capital Contributions
(26) No Member shall be entitled to demand the return of its Capital
Contributions prior to the termination of the Company. No Unit Holder shall have
the right to demand or receive property other than cash, except as may be
specifically provided in this Agreement.
(27) No Unit Holder shall receive any interest, salary or drawing with
respect to its Capital Contributions or its Capital Account or for services
rendered on behalf of the Company or otherwise in its capacity as a Unit Holder,
except as otherwise specifically provided in this Agreement.
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Section 4.4 Capital Accounts
(28) An individual Capital Account shall be established and maintained for
each Unit Holder. The original Capital Account established for any Unit Holder
who acquires an interest in the Company by virtue of an assignment in accordance
with the terms of this Agreement shall be in the same amount as, and shall
replace, the Capital Account of the assignor of such interest, and, for purposes
of this Agreement, such Unit Holder shall be deemed to have made the Capital
Contributions made by the assignor of such interest (or made by such assignor's
predecessor in interest). To the extent such Unit Holder acquires less than the
entire interest in the Company of the assignor of the interest so acquired by
such Unit Holder, the original Capital Account of such Unit Holder and its
Capital Contributions shall be in proportion to the interest it acquires, and
the Capital Account of the assignor who retains a partial interest in the
Company, and the amount of its Capital Contributions, shall be reduced in
proportion to the interest it retains.
(29) The Capital Account of each Unit Holder shall be maintained in
accordance with the following provisions:
(1) to such Unit Holder's Capital Account there shall be credited such
Unit Holder's Capital Contributions, such Unit Holder's distributive share
of Profits and the amount of any Company liabilities that are assumed by
such Unit Holder or that are secured by any Company assets distributed to
such Unit Holder;
(2) to such Unit Holder's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any Company assets distributed
to such Unit Holder pursuant to any provision of this Agreement, such Unit
Holder's distributive share of Losses and the amount of any liabilities of
such Unit Holder that are assumed by the Company or that are secured by any
property contributed by such Unit Holder to the Company; and (3) in
determining the amount of any liability for purposes of this Subsection
(b), there shall be taken into account 752(c) of the Code and any other
applicable provisions of the Code and the Regulations. (1)
(4) In the event that the Capital Accounts of the Members are adjusted
to reflect a revaluation of Company property pursuant to Regulations
Section 1.704-1(b)(2)(iv)(f), the Members' Capital Accounts shall be
adjusted in accordance with Regulations Section 1.704-1(b)(2)(iv)(g) for
allocations to them of Depreciation, depletion, amortization and gain or
loss.
(30) The foregoing provisions and the other provisions of the Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Managers shall determine that
it is prudent to modify the manner in which the Capital Accounts, or any debits
or credits thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Company or the Members), are computed in order to comply with
such Regulations, the Managers may make
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such modification, provided that it is not likely to have a material effect on
the amounts distributable to any Member pursuant to Article XVI hereof upon the
dissolution of the Company. The Managers also shall (i) make any adjustments
that are necessary or appropriate to maintain equality between the Capital
Accounts of the Members and the amount of Company capital reflected on the
Company's balance sheet, as computed for book purposes in accordance with
Regulations Section 1.704-1(b)(2)(iv)(g), and (ii) make any appropriate
modifications in the event unanticipated events (for example, the acquisition by
the Company of oil or gas properties) might otherwise cause this Agreement not
to comply with Regulations Section 1.704-1(b).
Section 4.5 Advances
If any Unit Holder shall advance any funds to the Company in excess of its
Capital Contributions, the amount of such advance shall neither increase its
Capital Account nor entitle it to any increase in its share of the distributions
of the Company. The amount of any such advance shall be a debt obligation of the
Company to such Unit Holder and shall be repaid to it by the Company with
interest at a rate equal to the lesser of (a) the prime rate as announced from
time to time by The Bank of New York, plus 2% per annum, and (b) the maximum
rate permitted by applicable law, and upon such other terms and conditions as
shall be mutually determined by such Unit Holder and the Managers. Any such
advance shall be payable and collectible only out of Company assets, and the
Unit Holders shall not be personally obligated to repay any part thereof. No
Person who makes any nonrecourse loan to the Company shall have or acquire, as a
result of making such loan, any direct or indirect interest in the profits,
capital or property of the Company, other than as a creditor.
Section 4.6 Long-Term Incentive Plan.
(31) The Company will adopt a long-term incentive plan in such form and
with such terms as may be agreed to by the Managers.
(32) The Managers are authorized to issue up to 750,000 Units pursuant to
such plan to Managers, advisors, officers and employees any may also issue units
under employment agreements with the Company's senior managers and advisors.
(33) Initial grants pursuant to the long-term incentive plan will be made
to the persons and in the amounts shown in Schedule C hereto. Such grants will
be of Capital Appreciation Units or such other class or classes of Units as may
be designated by the Manager in accordance with Section 4.2(c) hereof and will
entitle their holders solely to share in any appreciation in the value of PRG
above its value at the time of organization.
(34) The Managers are authorized to adopt such other compensation plans,
and employment agreements including plans providing for ownership of "phantom
units" with such terms and conditions as they shall deem appropriate.
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ARTICLE V
MANAGERS
Section 5.1 Management by Managers; Standard of Care.
(35) Subject to the provisions of this Agreement and the Act regarding
rights expressly granted to the Members or expressly requiring the approval of
the Board of Advisors, the management of the business and affairs of the Company
shall be conducted by or under the responsibility of the Manager, or, if there
shall be more than one Manager at any time, the Managers acting as a Board of
Managers ("Board of Managers") and to the maximum extent permitted under the
Act, the Board of Managers shall function in a manner similar to a corporate
board of directors and shall be held to the same standard of care and fiduciary
obligation as a member of the board of directors of a Delaware corporation whose
charter and bylaws afford the maximum protection against liability to its
directors. Except for situations in which the approval of the Members or of the
Board of Advisors is expressly required by this Operating Agreement or by
non-waivable provisions of applicable law, the Managers shall have full and
complete authority, power and discretion to manage and control the business,
affairs and properties of the Company, to make all decisions regarding those
matters and to perform any and all other acts or activities customary or
incident to the management of the Company's business.
(36) Each Manager shall perform the duties of a Manager, including the
duties as a member of any committee of the Board of Managers upon which the
Manager may serve, in good faith, in a manner such Manager believes to be in the
best interests of the Company, and with such care, including reasonable inquiry,
as an ordinarily prudent person in a like position would use under similar
circumstances.
Section 5.2 Number, Identity, Tenure and Qualifications of Managers.
(37) The authorized number of Managers of the Company shall be not less
than one (1) nor more than nine (9) until and unless changed by a duly adopted
amendment to this Agreement. The number of Managers of the Company shall be
fixed from time to time by a vote of a majority of the Managers or the
affirmative vote or written consent of a majority in interest of the Members.
The initial Manager or Managers are set forth in Exhibit A hereto.
(38) Managers shall be elected by a Majority Vote of the Members at the
annual meeting of the Members of the Company to serve for a term of two (2)
years or until their successor or successors have been elected or appointed
pursuant to the provisions of this Agreement. If there are more than one
Manager, the terms of the Managers shall be staggered such that the terms of
one-half (1/2) of the Managers shall end in any year except that if there is an
odd number of Managers, the additional Manager shall serve an initial two-year
term.
(39) A Manager need not be a Member.
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Section 5.3 The following rules shall apply at any time that there is more
than one Manager:
(40) Meetings of the Managers may be called by two or more Managers or by
the Chairman of the Company, and shall be held at the principal office of the
Company, unless some other place is designated in the notice of the meeting.
Accurate minutes of any meeting of the Board of Managers or any committee shall
be maintained by the Secretary or other officer designated for that purpose.
(41) The Managers shall have regular meetings not less frequently than
quarterly at such place and such time as shall be approved by resolution of the
Managers. Such regular meetings may be held without notice.
(42) Special meetings of the Managers may be called at any time by the
Chairman of the Managers, if any, or the President, or any Vice President, or
Secretary, or any two (2) Managers. At least forty-eight (48) hours' notice of
the time and place of special meetings shall be delivered personally to the
Managers or personally communicated to them by an officer of the Company by
telephone or facsimile. Notice sent to a Manager by letter shall be addressed to
him or her at the address shown upon the records of the Company, or if not shown
on Company records, at the principal place of business of the Company. Notice
that is mailed shall be deposited in the United States mail, postage prepaid, at
least four (4) days prior to the date of the meeting. (1)
(43) When a Manager is present at any Manager's meeting, however called or
noticed, and either prior to or after the holding of such meeting, (i) signs a
written consent to the meeting or waiver of notice of such meeting, or, (ii)
attends a meeting without notice but without protesting, then the transactions
of the meeting are as valid as if conducted at a meeting regularly called and
noticed.
(44) Any action required or permitted to be taken by the Managers may be
taken without a meeting and shall have the same force and effect as if taken by
a vote of Managers at a meeting, provided the action is authorized by a consent
signed individually or collectively by a majority of the Managers. Such consent
shall be filed with the regular minutes of the Managers and a copy of the
consent shall promptly be provided to all Managers.
(45) Any action required or permitted to be taken by the Managers may be
taken by a telephonic meeting so long as each Manager is notified of the date
and time of said meeting, or so long as there is an appropriate waiver of notice
or action by written consent following said telephone conference, and each
Manager at the meeting is identified and is able to hear and otherwise
participate in the telephonic conference without restriction.
(46) A majority or more of the Managers as fixed by this Agreement
constitute a quorum for the transaction of business. A majority vote of the
number of Managers as fixed by this Agreement (as opposed to a percentage of the
quorum) shall be necessary to transact business, provided that less than a
majority of the Managers, in the absence of a quorum, may adjourn the meeting
from time to time. A meeting at which a quorum is initially present may continue
to
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transact business, notwithstanding the withdrawal of Managers, if any action
taken is approved by at least a majority of the Managers.
(47) Notice of the time and place of holding an adjourned meeting need not
be given to absent Managers if the time and place is fixed at the meeting
adjourned and the adjourned meeting is held within twenty-four (24) hours. If
the meeting is adjourned for more than twenty-four (24) hours, notice shall be
given to all Managers not present at the time of adjournment.
(48) The Managers shall receive compensation for serving as Managers as
determined by the Chairman from time to time. Compensation may include cash
compensation, Units, or options to acquire Units.
Section 5.4 Managers have no Exclusive Duty to Company
The Managers shall not be required to manage the Company as their sole and
exclusive function and a Manager may have other business interests and may
engage in other activities in addition to those relating to the Company,
provided that the pursuit of other ventures and other activities directly
competitive with the business of the Company by the Managers is hereby
prohibited.
Section 5.5 Limitation on Authority.
No Member (other than a Member who is also a Manager) shall have any power
or authority to bind the Company unless the Member has been authorized by the
Managers to act as an agent of the Company. Senior executive officers of the
Company or of a Division shall have the authority to bind the Company within the
scope of authority delegated to them by the Managers.
Section 5.6 Reimbursement
The Company shall reimburse the Managers for all ordinary and necessary
out-of-pocket expenses incurred by the Managers on behalf of the Company. Such
reimbursement shall be treated as an expense of the Company that shall be
deducted in computing the Net Cash Flow and shall not be deemed to constitute a
distributive share of Profits or a distribution or return of capital to the
Manager. The Managers shall determine the proper apportionment of salaries and
general and administrative expenses among the Divisions using such methods as
they believe to be reasonable or convenient.
Section 5.7 Removal of Manager.
(49) A Manager may be removed with or without cause by a Majority Vote. If
the Board Notice (as defined in section 7.1(d)) has been given, a Manager may
also be removed by a vote of a majority of the Board of Advisors.
(50) Any removal of a Manager shall become effective on such date as may be
specified by the Members (or members of the Board of Advisors as the case may
be) voting in favor thereof. Should a Manager that is removed also be a Member,
such Member shall continue to participate in the Company as a Member and shall
share in the Profits, Losses and Net Cash Flow in the same
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ratios, as provided in Article VIII and Article IX hereof, as were applicable to
such Member before its removal as Manager.
Section 5.8 Resignation of Manager
A Manager may resign from its position as a Manager at any time upon not
less than 30 days prior written notice to all of the Members and to the members
of the Board of Advisors.
Section 5.9 Vacancies
If a vacancy on the Board of Managers shall exist at any time other than an
annual or special meeting of the Members of the Company, a majority of the
Managers may elect or appoint a Manager to fill the vacancy and to serve until
the next annual meeting of the Members.
ARTICLE VI
OFFICERS
Section 6.1 Officers
The Managers may designate one or more Persons as officers of the Company,
including, without limitation, a Chairman, one or more Vice Chairmen, a
President, one or more Vice Presidents, a Chief Operating Officer, a
Treasurer/Chief Financial Officer, a Controller, a Secretary and one or more
Assistant Secretaries, may create such committees as they deem necessary or
appropriate, and may endow Managers, Members or employees with such titles and
such powers as they deem appropriate to carry on the business of the Company.
Subject to the rights, if any, of an officer under any contract of employment,
any officer may be removed, either with or without cause, by a vote of a
majority of the Managers, at any regular or special meeting of the Managers, or
by the Chairman or any officer upon whom such power of removal may be conferred
by the Managers.
ARTICLE VII
ADVISORY BOARD
Section 7.1 Advisory Board.
(a) The Managers are authorized to create an Advisory Board to advise the
Company with respect to the formulation and implementation of the Company's
strategic plan and such other advice as may be requested by the Managers.
(b) Except as set forth in Sections 7.1(c) and (d) hereof, members of the
Advisory Board shall serve purely an advisory role and shall not have any
decision-making authority with respect to the Company or its operations; Members
of the Advisory Board shall not be fiduciaries of the Company subject, however,
to their duty to retain the confidential nature of all information provided to
them in their capacity as Members of the Advisory Board.
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(c) The Company shall not implement any related party transaction which
would require disclosure pursuant to Rule 404 promulgated under the Securities
Act of 1933, as amended without the consent of a majority of the members of the
Advisory Board.
(d) The Managers may by notice to the Advisory Board members and the
written consent of such members (the "Board Notice"), create a fiduciary
relationship between the Advisory Board and the Company and, in such case,
except as set forth in the notice, the Advisory Board shall have the rights and
responsibilities of a corporate board established pursuant to the Delaware
Corporate law.
Section 7.2 Number, Identity, Tenure and Qualifications.
(a) Prior to the giving of the Board Notice, the Managers shall appoint
such number of members of the Advisory Board as they deem necessary and
appropriate. Members of the Advisory Board shall serve at the pleasure of the
Managers and may be removed with or without cause by the Managers at any time.
(b) After the giving of the Board Notice, the Members shall appoint the
Members of the Advisory Board by a Majority Vote and shall have right, by
Majority Vote, to remove any member of the Advisory Board.
Section 7.3 Meetings of Advisory Board.
(a) Prior to the giving of the Board Notice, meetings of the Advisory Board
may be called by the Managers at such times as they deem necessary or
appropriate. It is anticipated that the Advisory Board will meet at least
quarterly.
(b) After the giving of the Board Notice, Board meetings may be called by
the Chairman or any member of the Advisory Board and the Board will meet at
least quarterly.
(c) The Advisory Board may establish such committees including an Audit
Committee and a Compensation Committee, as it may deem to be necessary or
desirable.
Section 7.4 Advisory Board Members have no Exclusive Duty to Company.
The Members of the Advisory Board shall not be required to serve as such as
their sole and exclusive function and may have other business interests and may
engage in other activities in addition to those relating to the Company,
provided that the pursuit of other ventures and other activities directly
competitive with the business of the Company by the members of the Advisory
Board is hereby prohibited.
Section 7.5 Remuneration of Advisory Board Members.
The Members of the Advisory Board shall be entitled to such compensation
for service thereon as the Managers deem to be appropriate, including equity
incentives if determined by the Managers to be appropriate.
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ARTICLE VIII
MEMBERS
Section 8.1 Powers of Members.
The Members shall have the power to exercise any and all rights or powers
granted to the Members pursuant to the express terms of this Agreement. The
Members shall also have the power to authorize the Managers, by Majority Vote,
to possess and exercise any right or power not already vested in the Managers
pursuant to Section 3.2 or any other provision of this Agreement. In addition to
the foregoing, the Members have the power to exercise any and all other rights
or powers of the Company and do all lawful acts and things as are not by the
Delaware Act or this Agreement directed or required to be exercised or done by
the Managers.
Section 8.2 Partition.
Each Member irrevocably waives, until termination of the Company, any and
all rights that it may have to maintain an action for partition of the Company'
s property.
Section 8.3 Resignations; Retirements.
A Member may not resign from the Company without a Majority Vote of the
other Members. If a Member is permitted to resign pursuant to this Section 8.3,
and, following its resignation, there would be fewer than two remaining Members,
an additional member may be admitted to the Company, upon the affirmative vote
of a majority in interest of the Members, upon its execution of an instrument
signifying its agreement to be bound by the terms and conditions of this
Agreement. Such admission shall be deemed effective immediately prior to the
resignation, and, immediately following such admission, the resigning Member
shall cease to be a member of the Company. In such event, the Company shall not
dissolve if the business of the Company is continued without dissolution in
accordance with Section 16.2(c) hereof. The Company may recover damages for
breach of this Section 8.3 if any Member violates this Section 8.3 and may
offset the Company's damages against any amount owed to a resigning Member for
distributions.
ARTICLE IX
ALLOCATIONS
Section 9.1 Profits and Losses.
(51) For each Fiscal Year or shorter period for which it is necessary to
allocate Profits or Losses, the Managers shall allocate Profits or Losses (other
than Profits and Loses attributable to a Realization Event) as follows:
(52) Profits shall be allocated:
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(1) First to the extent of, and in proportion to, Losses allocated
pursuant to Section 9.1(d) below, and not previously offset;
(2) Next, to the holders of Units of each class or series entitled to
receive a Preferred Return specified on Schedule B, hereof ratably among
such holders in proportion to the amount of Preferred Return accrued to
date that each such holder is entitled to receive; and
(3) The balance shall be allocated among the Unit Holders in
proportion to the number of Participating Units other than Units entitled
to receive a Preferred Return held by each Unit Holder.
(53) Profits attributable to a Realization Event shall be allocated as
follows:
(1) First, to the extent of, and in proportion to, Losses allocated
pursuant to Section 9.1(d) below, and not previously offset;
(2) Next, to holders of Participating Units until the aggregate
Capital Accounts of holders of participating Units with respect to such
Units equal the lowest Threshold established for any class or series of
outstanding Units;
(3) Next, to holders of Participating Units and holders of
Non-Participating Units with the lowest Threshold established for any class
or series of outstanding Units until the aggregate Capital Accounts of such
holders with respect to such Units equals such lowest Threshold;
(4) Next, to repeat the allocations in Section 9.1(c)(iii) with
respect to each successively higher Threshold for any class or series of
outstanding Units until the aggregate Capital Accounts of the holders of
all Participating and Non-Participating Units equal the highest Threshold
for any class or series of outstanding Units; and (1)
(5) The balance shall be allocated among the holders of Participating
and Non-Participating Units in proportion to the number of units held by
each Unit holder.
(54) Except as otherwise specifically provided herein, Losses shall be
allocated among the Unit Holders:
(1) First to the extent of, and in proportion to, Profits allocated
pursuant to Section 9.1(b) and (c) above, and not previously offset
hereunder;
(2) Next to the holders of Units (other than Units entitling their
holder to a Liquidation Preference) in proportion to the number of such
Units held by each Member until the Capital Accounts of all Members
attributable to such Units have been reduced to zero;
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(3) Next to the holders of Units entitling their holder to a
Liquidation Preference in proportion to the number of such Units held by
each Member until the Capital Accounts of such Members attributable to such
Units or have been reduced to zero; and
(4) The balance, if any, to the holders of all Units in proportion to
the number of such Units held by each Member.
Section 9.2 Allocation Rules.
(55) In the event Members are admitted to the Company pursuant to this
Agreement on different dates, the Profits (or Losses) allocated to the Unit
Holders for each Fiscal Year during which Members are so admitted shall be
allocated among the Unit Holders in proportion to the number of Units each holds
from time to time during such Fiscal Year in accordance with ss.706 of the Code,
using any convention permitted by law and selected by the Managers.
(56) For purposes of determining the Profits, Losses or any other items
allocable to any period, Profits, Losses and any such other items shall be
determined on a daily, monthly or other basis, as determined by the Managers
using any method that is permissible under ss.706 of the Code and the
Regulations thereunder.
(57) Except as otherwise provided in this Agreement, all items of Company
income, gain, loss, deduction and any other allocations not otherwise provided
for shall be divided among the Unit Holders in the same proportions as they
share Profits and Losses for the Fiscal Year in question.
(58) The Members are aware of the income tax consequences of the
allocations made by this Article IX and hereby agree to be bound by the
provisions of this Article IX in reporting their shares of Company income and
loss for income tax purposes.
(59) Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of the Company, within the meaning of
Regulations Section 1.752-3(a)(3), the Members' interests in Company profits are
held solely by the Regular Unit Holders in proportion to the number of Units
held by such Unit Holders.
(60) To the extent permitted by Section 1.704-2(h)(3) of the Regulations,
the Managers shall endeavor not to treat distributions having been made from the
proceeds of a Nonrecourse Liability or a Member Nonrecourse Debt (as defined by
such Regulations).
(61) In the case of a Member holding one or more classes of Units, the
determination of the Capital Account attributable to a specific class of Units
shall be made by dividing the total Capital Account by the aggregate number of
Units without regard to class.
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Section 9.3 Tax Allocations: Section 704(c) of the Code.
(62) In accordance with ss.704(c) of the Code and the Regulations
thereunder, income, gain, loss and deduction with respect to any property
contributed to the capital of the Company shall, solely for income tax purposes,
be allocated among the Unit Holders so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its initial Gross Asset Value (computed in accordance with
Section 1.1 hereof).
(63) In the event the Gross Asset Value of any Company asset is adjusted
pursuant to Paragraph (ii) of the definition of "Gross Asset Value" contained in
Section 1.1 hereof, subsequent allocations of income, gain, loss and deduction
with respect to such asset shall take account of any variation between the
adjusted basis of such asset for federal income tax purposes and its Gross Asset
Value in the same manner as under ss.704(c) of the Code and the Regulations
thereunder.
(64) Any elections or other decisions relating to allocations under this
Section 9.3, including the selection of any allocation method permitted under
proposed Regulation ss.1.704-1(c), shall be made by the Managers in any manner
that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 9.3 are solely for purposes of federal,
state and local taxes and shall not affect, or in any way be taken into account
in computing, any Unit Holder's Capital Account or share of Profits, Losses,
other items or distributions pursuant to any provision of this Agreement.
Section 9.4 Regulatory Allocations
The following special allocations shall be made in the following order (all
capitalized terms not defined in this Section 9.4 or in Section 1.1 hereof shall
have the meanings given to such terms by the Regulations):
(65) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, notwithstanding any other provision of this
Article IX, if there is a net decrease in Company Minimum Gain during any
Company Fiscal Year, each Member shall be specially allocated items of Company
income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal
Years) in an amount equal to such Member's share of the net decrease in Company
Minimum Gain, determined in accordance with Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant thereto. The
items to be so allocated shall be determined in accordance with Sections
1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section 9.4(a) is
intended to comply with the minimum gain chargeback requirement in Section
1.704-2(f) of the Regulations and shall be interpreted consistently therewith.
(66) Member Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of
this Article IX, if there is a net decrease in Member Nonrecourse Debt Minimum
Gain attributable to a Member Nonrecourse Debt during any Company Fiscal Year,
each Member who has a share of the Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
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Section 1.704-2(i)(5) of the Regulations, shall be specially allocated items of
Company income and gain for such Fiscal Year (and, if necessary, subsequent
Fiscal Years) in an amount equal to such Member's share of the net decrease in
Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
Debt, determined in accordance with Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant thereto. The
items to be so allocated shall be determined in accordance with Sections
1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section 9.4(b) is
intended to comply with the minimum gain chargeback requirement in Section
1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.
(67) Qualified Income Offset. In the event any Member unexpectedly receives
any adjustments, allocations, or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5) or Section
1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company income and gain
shall be specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the Adjusted
Capital Account Deficit of such Member as quickly as possible, provided that an
allocation pursuant to this Section 9.4(c) shall be made only if and to the
extent that such Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article IX have been tentatively made as
if this Section 9.4(c) were not in the Agreement.
(68) Gross Income Allocation. In the event any Member has a deficit Capital
Account at the end of any Company Fiscal Year which is in excess of the sum of
(i) the amount such Member is obligated to restore pursuant to any provision of
this Agreement, and (ii) the amount such Member is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated
items of Company income and gain in the amount of such excess as quickly as
possible, provided that an allocation pursuant to this Section 9.4(d) shall be
made only if and to the extent that such Member would have a deficit Capital
Account in excess of such sum after all other allocations provided for in this
Article IX have been made as if Section 9.4(c) hereof and this Section 9.4(d)
were not in the Agreement.
(69) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year
shall be allocated in proportion to the Capital Contributions of the Members on
the last day of the immediately preceding Fiscal Year.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for
any Fiscal Year shall be specially allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Debt to which such
Member Nonrecourse Deductions are attributable in accordance with Regulations
Section 1.704-2(I)(1).
(g) Code Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as the result of a
distribution to a Member
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in complete liquidation of its interest in the Company, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Members in accordance with their interests in the Company in the event
Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Members to whom
such distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
Section 9.5 Curative Allocations.
The allocations set forth in Section 9.4 hereof (the "Regulatory
Allocations") are intended to comply with certain requirements of the
Regulations. It is the intent of the Members that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of Company income, gain, loss, or
deduction pursuant to this Section 9.5. Therefore, notwithstanding any other
provision of this Article IX (other than the Regulatory Allocations), the
Managers shall make such offsetting special allocations of Company income, gain,
loss or deduction in whatever manner it determines appropriate so that, after
such offsetting allocations are made, each Member's Capital Account balance is,
to the extent possible, equal to the Capital Account balance such Member would
have had if the Regulatory Allocations were not part of the Agreement and all
Company items were allocated pursuant to Section 9.1 hereof.
ARTICLE X
DISTRIBUTIONS
Section 10.1 Net Cash Flow
Except as otherwise provided in Article XVI hereof
(relating to the dissolution of the
Company), any distribution of the Net Cash
Flow during any Fiscal Year shall be made to
the Unit Holders as follows:
(70) First to distribute to the Unit Holders cash in an amount sufficient
to enable the Unit Holders to fund their federal and state income tax
liabilities attributable to their respective distributive shares of the taxable
income of the Company calculated by assuming that each Unit Holder pays tax at
the highest marginal rate applicable to individuals for Federal and New York
State income tax purposes.
(71) Second, to the holders of Units of a Class entitled to receive a
Preferred Return in an amount equal to the Preferred Return accrued to date
reduced by the amount previously distributed pursuant to Section 10.1(a) with
respect to such Preferred Return;
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(72) Third, to the Unit Holders in an amount equal to the cumulative
Profits allocated to such Unit Holders hereunder reduced by the amount
previously distributed pursuant to Section 10.1(a) with respect to such Profits;
(73) Fourth, to the Unit Holders until all Unit Holders have received an
amount equal to their Adjusted Capital Contributions; and
(74) The balance shall be distributed to the Members in proportion to the
number of Units held by each Member.
Section 10.2 Distribution Rules.
(75) All distributions pursuant to Section 10.1(a) hereof shall be at such
times and in such amounts as shall be determined by the Managers except that all
distributions (other than distributions in satisfaction of a Preferred Return)
must be made pro rata based on the aggregate Profits allocated to each Member.
(76) All amounts withheld pursuant to the Code or any provision of any
state or local tax law with respect to any payment, distribution or allocation
to the Company or the Unit Holders shall be treated as amounts distributed to
the Unit Holders pursuant to this Article X for all purposes of this Agreement.
The Managers are authorized to withhold from distributions, or with respect to
allocations, to the Unit Holders and to pay over to any federal, state or local
government any amounts required to be so withheld pursuant to the Code or any
provision of any other federal, state or local law and shall allocate such
amounts to those Unit Holders with respect to which such amounts were withheld.
In addition, the Managers may, but shall not be required to, pay amounts
otherwise payable to any Member (whether as a distribution, compensation or
otherwise) to the Internal Revenue Service or the tax authorities of other
jurisdictions in which the Company is engaged in business if the Managers
determine such payments to be necessary or appropriate. If the Managers elect to
make such payments with respect to any Member, such Member agrees to cooperate
with the Managers by providing such information or forms as are reasonably
requested by the Managers in connection with the making of such payments.
Section 10.3 Limitations on Distribution.
Notwithstanding any provision to the contrary contained in this Agreement,
the Company shall not make a distribution to any Unit Holder on account of its
interest in the Company if such distribution would violate Section 18-607 of the
Delaware Act or other applicable law.
ARTICLE XI
BOOKS AND RECORDS
Section 11.1 Books, Records and Financial Statements.
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(77) At all times during the continuance of the Company, the Company shall
maintain, at its principal place of business or at such other location as is
determined by the Managers, separate books of account for the Company that shall
show a true and accurate record of all costs and expenses incurred, all charges
made, all credits made and received and all income derived in connection with
the operation of the Company business in accordance with generally accepted
accounting principles consistently applied, and, to the extent inconsistent
therewith, in accordance with this Agreement. The Company shall also maintain
true and accurate records sufficient for it to calculate Divisional Profits and
Divisional Losses for each Division if necessary or appropriate for it to do so.
Such books of account, together with a certified copy of this Agreement and of
the Certificate, shall at all times be maintained at the principal place of
business of the Company and shall be open to inspection and examination at
reasonable times by each Member and its duly authorized representative for any
purpose reasonably related to such Member's interest in the Company. In the
discretion of the Managers, the books of account and the records of the Company
may be examined by and reported upon as of the end of each Fiscal Year by a firm
of independent certified public accountants selected by the Managers. Any Member
shall have the right to have a private audit of the Company books and records
conducted at reasonable times and after reasonable advance notice to the Company
for any purpose reasonably related to such Member's interest in the Company, but
any such private audit shall be at the expense of the Member desiring it, and it
shall not be paid for out of Company funds.
(78) The Managers shall prepare and maintain, or cause to be prepared and
maintained, the books of account of the Company and the following documents
shall be transmitted by the Managers to each Member at the times hereinafter set
forth.
(1) Within 60 days after the close of each of the first three Fiscal
Quarters in the Fiscal Year, a report containing such financial information
for such Fiscal Quarter as the Managers deem appropriate
(2) Within three months after the close of each Fiscal Year, the
following financial statements, examined by and certified to by the
independent certified public accountants referred to in Subsection (a) of
this Section 11.1 if, but only if, the Managers have elected to retain
independent accountants:
(1) balance sheet of the Company as of the beginning and close of
such Fiscal Year;
(2) statement of Company Profits and Losses for such Fiscal Year;
and
(3) statement of such Member's Capital Account as of the close of
such Fiscal Year, and changes therein during such Fiscal Year.
(3) Within three months after the close of each Fiscal Year, the
following documents:
(1) a statement indicating such Member's share of each item of
Company income, gain, loss, deduction or credit for such Fiscal Year
for income tax purposes; and
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(2) a copy of each income tax return, federal or state, filed by
the Company for such Fiscal Year.
(79) All information contained in any statement or other document
distributed to any Member pursuant to Subsection (ii) of this Section 11.1 shall
be deemed accurate, binding and conclusive with respect to such Member unless
written objection is made thereto by such Member to the Company within 20
business days after the receipt of such statement or other document by such
Member.
Section 11.2 Accounting Method
For both financial and tax reporting purposes and for purposes of
determining Profits and Losses, the books and records of the Company shall be
kept on the accrual method of accounting applied in a consistent manner and
shall reflect all Company transactions and be appropriate and adequate for the
Company's business. The Members acknowledge that the Company will maintain both
tax and GAAP books and records if determined to be necessary or appropriate by
the Managers.
Section 11.3 Annual Audit
The Managers shall determine whether or not to obtain an independent
outside audit. If the Managers determine that such an audit is desirable, the
Managers shall obtain such audit as soon as practical after the end of each
Fiscal Year, but not later than 120 days after such end. If independent
certified public accountants referred to in Section 11.1(a) hereof have been
engaged by the Company, the financial statements of the Company shall be audited
by them, and such financial statements shall be accompanied by a report of such
accountants containing their opinion. The cost of such audits will be an expense
of the Company. A copy of the audited financial statements and the accountants'
report will be furnished to each Member within 10 business days after their
receipt by the Managers.
Section 11.4 Membership Certificates Interests in the Company shall be
represented by membership certificates in such form as may be determined by the
Managers.
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ARTICLE XII
TAX MATTERS
Section 12.1 Tax Matters Member.
(80) The Chief Financial Officer of the Company, or if there is none, the
General Counsel of the Company, is hereby designated as the initial "Tax Matters
Partner" of the Company for purposes of ss.6231(a)(7) of the Code and shall have
the power to manage and control, on behalf of the Company, any administrative
proceeding at the Company level with the Internal Revenue Service relating to
the determination of any item of Company income, gain, loss, deduction or credit
for federal income tax purposes.
(81) The Tax Matters Partner shall, within 10 days of the receipt of any
notice from the Internal Revenue Service in any administrative proceeding at the
Company level relating to the determination of any Company item of income, gain,
loss, deduction or credit, mail a copy of such notice to each Unit Holder.
(82) The Managers may at any time hereafter designate a new Member as Tax
Matters Member.
Section 12.2 Right to Make Section 754 Election
The Managers may, in their sole discretion, make an election in accordance
with ss.754 of the Code, to adjust the basis of Company property in the case of
a distribution of property within the meaning of ss.734 of the Code, and in the
case of a transfer of a Company interest within the meaning of ss.743 of the
Code. Each of the Unit Holders shall, upon request of the Managers, supply the
information necessary to give effect to such an election.
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ARTICLE XIII
LIABILITY, EXCULPATION AND INDEMNIFICATION
Section 13.1 Liability.
(83) Except as otherwise provided by the Delaware Act, the debts,
obligations and liabilities of the Company, whether arising in contract, tort or
otherwise, shall be solely the debts, obligations and liabilities of the
Company, and no Covered Person shall be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a Covered
Person.
(84) Except as otherwise expressly required by law, a Member, in its
capacity as such, shall have no liability in excess of (i) the amount of its
Capital Contributions, (ii) its share of any assets and undistributed Profits of
the Company, (iii) its obligation to make other payments expressly provided for
in this Agreement, and (iv) the amount of any distributions wrongfully
distributed to it either as a result of a computational error or in an amount in
excess of that permitted to be distributed by the Act.
Section 13.2 Exculpation.
(85) No Covered Person shall be liable to the Company or any other Covered
Person for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Covered Person in good faith on behalf of the
Company and in a manner reasonably believed to be within the scope of authority
conferred on such Covered Person by this Agreement, except that a Covered Person
shall be liable for any such loss, damage or claim incurred by reason of such
Covered Person's gross negligence or willful misconduct.
(86) A Covered Person shall be fully protected in relying in good faith
upon the records of the Company and upon such information, opinions, reports or
statements presented to the Company by any Person as to matters the Covered
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Company, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, Profits, Losses or Net Cash Flow or any
other facts pertinent to the existence and amount of assets from which
distributions to Members might properly be paid.
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Section 13.3 Fiduciary Duty
(87) To the extent that, at law or in equity, a Covered Person has duties
(including fiduciary duties) and liabilities relating thereto to the Company or
to any other Covered Person, a Covered Person acting under this Agreement shall
not be liable to the Company or to any other Covered Person for its good faith
reliance on the provisions of this Agreement. The provisions of this Agreement,
to the extent that they restrict the duties and liabilities of a Covered Person
otherwise existing at law or in equity, are agreed by the parties hereto to
replace such other duties and liabilities of such Covered Person.
(88) Unless otherwise expressly provided herein, (i) whenever a conflict of
interest exists or arises between Covered Persons, or (ii) whenever this
Agreement or any other agreement contemplated herein or therein provides that a
Covered Person shall act in a manner that is, or provides terms that are, fair
and reasonable to the Company or any Member, the Covered Person shall resolve
such conflict of interest in favor of the Company absent permission of the
Managers to the contrary. In the absence of bad faith by the Covered Person, the
resolution, action or term so made, taken or provided by the Covered Person
shall not constitute a breach of this Agreement or any other agreement
contemplated herein or of any duty or obligation of the Covered Person at law or
in equity or otherwise.
Section 13.4 Indemnification.
To the fullest extent permitted by applicable law, a Covered Person shall
be entitled to indemnification from the Company for any loss, damage or claim
incurred by such Covered Person by reason of any act or omission performed or
omitted by such Covered Person in good faith on behalf of the Company and in a
manner reasonably believed to be within the scope of authority conferred on such
Covered Person by this Agreement, except that no Covered Person shall be
entitled to be indemnified in respect of any loss, damage or claim incurred by
such Covered Person by reason of gross negligence or willful misconduct with
respect to such acts or omissions; provided, however, that any indemnity under
this Section 13.4 shall be provided out of and to the extent of Company assets
only, and no Covered Person shall have any personal liability on account
thereof.
Section 13.5 Expenses
To the fullest extent permitted by applicable law, expenses (including
legal fees) incurred by a Covered Person in defending any claim, demand, action,
suit or proceeding may, in the sole discretion of the Managers, from time to
time, be advanced by the Company prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Company of an undertaking
by or on behalf of the Covered Person to repay such amount if it shall be
determined that the Covered Person is not entitled to be indemnified as
authorized in Section 13.4 hereof.
Section 13.6 Outside Businesses
Any Member, Manager or Affiliate thereof may engage in or possess an
interest in other business ventures of any nature or description, independently
or with others provided that such
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business does not compete with the business of the Company, and, in such case,
the Company, the Members and the Manager shall have no rights by virtue of this
Agreement in and to such independent ventures or the income or profits derived
therefrom. Nothing in this Section 13.6 shall supersede any restriction
contained in any other agreement to which a Member, Manager or Affiliate is a
party.
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ARTICLE XIV
ADDITIONAL MEMBERS AND UNITS
Section 14.1 Additional Units
By approval of a majority of the Managers, the Company is authorized to
offer, sell or grant additional limited liability company interests in the
Company ("Additional Units") to any Person in such amounts and on such terms as
the Managers may determine; provided, that without the consent of a majority in
interest of the Members, the Managers may not issue more than a total of ten
million Units. Each Person who subscribes for or is otherwise granted any of the
Additional Units shall be admitted as an additional member of the Company (each,
an "Additional Member" and collectively, the "Additional Members") at the time
such Person (a) executes this Agreement or a counterpart of this Agreement and
(b) is named as a Member on Schedule A hereto. The legal fees and expenses of
the Company associated with such admission shall be borne by the Company unless
otherwise agreed by the new Member (in which event such fees or portion thereof
shall be specially allocated to such Member).
Section 14.2 Allocations.
Additional Units shall not be entitled to any retroactive allocation of the
Company's income, gains, losses, deductions, credits or other items; provided,
that subject to the restrictions of ss.706(d) of the Code, Additional Units
shall be entitled to their respective share of the Company's income, gains,
losses, deductions, credits and other items arising under contracts entered into
before the effective date of the issuance of any Additional Units to the extent
that such income, gains, losses, deductions, credits and other items arise after
such effective date. To the extent consistent with ss.706(d) of the Code and
Regulations promulgated thereunder, the Company's books may be closed at the
time Additional Units are issued (as though the Company's tax year had ended) or
the Company may credit to the Additional Units pro rata allocations of the
Company's income, gains, losses, deductions, credits and items for that portion
of the Company's Fiscal Year after the effective date of the issuance of the
Additional Units.
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ARTICLE XV
ASSIGNABILITY AND SUBSTITUTE MEMBERS
Section 15.1 Assignability of Units
No Member may transfer, assign or pledge as security for indebtedness the
whole or any part of its Units and any purported transfer, other than a transfer
upon the death of a Member or pursuant to Section 15.5 hereof, shall be null and
void.
Section 15.2 Recognition of Assignment by Company
No assignment, or any part thereof, that is in violation of this Article XV
shall be valid or effective, and neither the Company nor the Members shall
recognize the same for the purpose of making distributions of Net Cash Flow
pursuant to Section 10.1 hereof with respect to such Company interest or part
thereof. Neither the Company nor the nonassigning Members shall incur any
liability as a result of refusing to make any such distributions to the assignee
of any such invalid assignment.
Section 15.3 Indemnification
In the case of an assignment or attempted assignment of an interest in the
Company the parties engaging or attempting to engage in such assignment shall be
liable to indemnify and hold harmless the Company and the other Members from all
costs, liabilities and damages that any of such indemnified Persons may incur
(including, without limitation, incremental tax liability and lawyers' fees and
expenses) as a result of such assignment or attempted assignment and efforts to
enforce the indemnity granted hereby.
Section 15.4 Effect of Termination of Service
(89) If a Member is an officer or employee of PRG or one or more of its
Affiliates at the time such Member first becomes a Member and such officer or
employee is terminated for Cause as an officer or employee of PRG or of an
Affiliate (such Member being referred to as a "Terminated Member") the Company
shall have the right, but not the obligation, to purchase the Units held by such
Terminated Member for the lesser of (i) the Adjusted Capital Contribution of the
Terminated Member or (ii) the fair market value of his or her Units, in either
case determined as of the end of the immediately preceding fiscal quarter and
payable as set forth in Section 15.4(b) hereof. This Section 15.4 shall be
superseded in the case of any Member who is a party to a certain Owners'
Agreement dated as of January 1, 1996 or by inconsistent provisions in any
employment contract between a Member and the Company and in the case of any
inconsistency between this Agreement and such Owners Agreement or employment
agreement the Owners Agreement shall control in the
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absence of an employment agreement and the employment agreement, if any, shall
otherwise control.
(90) The Managers in their sole discretion may determine whether any amount
payable pursuant to Section 15.4(a) hereof shall be paid in cash or by delivery
of the Company's promissory note providing for a balloon payment of principal no
later than the fifth anniversary of the issuance of such note and providing for
interest payments no less frequently than annually with interest at the prime
rate announced from time to time by the bank with whom the Company maintains its
primary banking relationship at the time of the issuance of such note, or if
such rate is not generally available such other prime rate as is quoted by The
Wall Street Journal. In the event that the Company shall default in the payment
due at the time and in the amount provided for by this Agreement, the Terminated
Member to whom such payment is due shall be entitled solely to claim against the
Company as a creditor and hereby waives any claim for rescission of the subject
Unit sale transaction or any other beneficial or equitable recognition as a
Member of the Company.
(91) Any determination of value made pursuant to this Section 15.4 shall be
made by the Managers in good faith based on the best information readily
available to the Managers including reports, if any, showing the valuation of
the Divisions prepared for and presented to any unrelated parties. The
determination made by the Managers shall be final and conclusive absent willful
malfeasance or fraud.
(92) Upon tender of all payments due to such Member pursuant to this
Section 15.4, the Member or his, her or its personal representative shall
deliver to the Company the certificate or certificates, if any, for the Units
purchased by the Company in form constituting good delivery (including, without
limitation, any reasonably requested form of instrument of conveyance or Company
power to the extent not previously supplied pursuant to this Agreement), with
all requisite transfer tax stamps, if any, affixed thereto, and such probate,
estate or tax certificates or other documents as may be reasonably required by
the Company to evidence the authority of a personal representative and
compliance with any applicable estate and inheritance tax requirements.
Section 15.5 Assignment to Senior Lender
Notwithstanding anything to the contrary contained herein, if required by
the Bank of New York, its successors and assigns, or any other senior
institutional lender to the Company (a "Senior Lender"), a Member may grant a
security interest in and pledge or assign its Units to such Senior Lender and
its successors and assigns. The Company agrees that any such assignment or
pledge will not violate Section 15.1 or Section 15.2 hereof.
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ARTICLE XVI
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 16.1 No Dissolution.
The Company shall not be dissolved by the admission of Additional Members
or substitute Members in accordance with the terms of this Agreement.
Section 16.2 Events Causing Dissolution.
The Company shall be dissolved and its affairs shall be wound up upon the
occurrence of any of the following events:
(93) the written consent of all Members;
(94) the death, retirement, resignation, expulsion, Bankruptcy or
dissolution of a Member who is a Manager or the occurrence of any other event
under the Delaware Act that terminates the continued membership of a Member who
is a Manager in the Company unless, within 90 days after the occurrence of such
an event, a majority in interest of the remaining Members agree in writing to
continue the business of the Company and to the appointment, if necessary or
desired, effective as of the date of such event, of one or more Additional
Members; or
(95) the entry of a decree of judicial dissolution under Section 18-802 of
the Delaware Act.
Section 16.3 Notice of Dissolution
Upon the dissolution of the Company, the Person or Persons approved by
a Majority Vote to carry out the winding up of the Company (the "Liquidating
Trustee") shall promptly notify the Members of such dissolution.
Section 16.4 Liquidation.
Upon dissolution of the Company, the Liquidating Trustee shall immediately
commence to wind up the Company's affairs; provided, however, that a reasonable
time shall be allowed for the orderly liquidation of the assets of the Company
and the satisfaction of liabilities to creditors so as to enable the Members to
minimize the normal losses attendant upon a liquidation. The Unit Holders shall
continue to share Profits and Losses during liquidation in the same proportions,
as specified in Article IX hereof, as before liquidation. Each Member shall be
furnished with a statement prepared by the Company's certified public
accountants that shall set forth the assets and
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liabilities of the Company as of the date of dissolution. The proceeds of
liquidation shall be distributed, as realized, in the following order and
priority:
(96) to creditors of the Company, including Unit Holders who are creditors,
to the extent otherwise permitted by law, in satisfaction of the liabilities of
the Company;
(97) to the establishment of reserves for contingent or unforeseen
obligations of the Company;
(98) to the repayment of any loans from any Members;
(99) to the Members the remaining proceeds of liquidation in accordance
with their Capital Account balances, after giving effect to any contributions,
distributions and allocations for all periods through the date of dissolution
and for allocations that would be made if all assets of the Company distributed
in kind had been sold for their fair market value.
Section 16.5 Termination.
The Company shall terminate when all of the assets of the Company, after
payment of or due provision for all debts, liabilities and obligations of the
Company, have been distributed to the Unit Holders in the manner provided for in
this Article XVI, and the Certificate shall have been canceled in the manner
required by the Delaware Act.
Section 16.6 Claims of the Members
The Members and Assignees shall look solely to the Company's assets for the
return of their Capital Contributions, and if the assets of the Company
remaining after payment of or due provision for all debts, liabilities and
obligations of the Company are insufficient to return such Capital
Contributions, the Members and Assignees shall have no recourse against the
Company or any other Member or the Managers.
ARTICLE XVII
AMENDMENTS AND MEETINGS
Section 17.1 Amendments.
(100) Any amendment to this Agreement shall be adopted and be effective as
an amendment hereto if it receives the affirmative vote of a majority in
interest of the Members, provided that such amendment be in writing and executed
by a majority in interest of the Members.
(101) Notwithstanding Section 17.1(a), this Agreement shall not be amended
to:
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(1) subject the Members to liability beyond that contemplated herein
without the unanimous consent of the affected Members;
(2) amend any provision that materially adversely affects the economic
interests of a Member in the Company or the value of Units by altering the
interest of any Member in the amount or timing of distribution or the
allocation of Profits, Losses (other than any such alteration caused by the
acquisition of additional Units by any Member or as otherwise specifically
provided herein) without the consent of (x) two-thirds in interest of all
Members in the case of an amendment applying in a substantially similar
manner to all classes of Units or (y) two-thirds in interest of each
affected class of Units in the case of any other amendment. . ction 17.2
Meetings of the Members
(102) Meetings of the Members may be called by the Managers and shall be
called by the Managers upon the written request of twenty percent in interest of
the Members or upon the request of the Board of Advisors. The call shall state
the location of the meeting and the nature of the business to be transacted.
Notice of any such meeting shall be given to all Members not less than three
business days nor more than 30 days prior to the date of such meeting. Members
may vote in person or by proxy at such meeting. Whenever a vote, consent or
approval of Members is permitted or required under this Agreement, such vote,
consent or approval may be given at a meeting of Members or may be given in
accordance with the procedure prescribed in Subsection (c) of this Section 17.2.
Except as otherwise expressly provided in this Agreement, a majority vote of the
Members shall be required to constitute the act of the Members.
(103) For the purpose of determining the Members entitled to vote on, or to
vote at, any meeting of the Members or any adjournment thereof, the Managers or
the Member requesting such meeting may fix, in advance, a date as the record
date for any such determination. Such date shall not be more than 30 days nor
less than 10 business days before any such meeting.
(104) Each Member may authorize any Person to act for it by proxy on all
matters in which a Member is entitled to participate, including waiving notice
of any meeting, or voting or participating at a meeting. Every proxy must be
signed by the Member or its attorney-in-fact. No proxy shall be valid after the
expiration of 11 months from the date thereof unless otherwise provided in the
proxy. Every proxy shall be revocable at the pleasure of the Member executing
it.
(105) Each meeting of Members shall be conducted by the Managers or Member
or Board of Advisor member requesting such meeting or by such other Person that
the Managers or Member or Board of Advisors member requesting such meeting may
designate.
42
<PAGE>
ARTICLE XVIII
MISCELLANEOUS
Section 18.1 Notices
All notices provided for in this Agreement shall be in writing, duly signed
by the party giving such notice, and shall be delivered, telecopied or mailed by
registered or certified mail (return receipt requested) as follows:
(106) if given to the Company, in care of the Managers at the Company's
mailing address set forth on Schedule A attached hereto;
(107) if given to a Manager, at its mailing address set forth on Schedule A
attached hereto; or
(108) if given to any Member at the address set forth opposite its name on
Schedule A attached hereto, or at such other address as such Member may
hereafter designate by written notice to the Company.
All such notices shall be deemed to have been given when received.
Section 18.2 Failure to Pursue Remedies
The failure of any party to seek redress for violation of, or to insist
upon the strict performance of, any provision of this Agreement shall not
prevent a subsequent act, which would have originally constituted a violation,
from having the effect of an original violation.
Section 18.3 Cumulative Remedies.
The rights and remedies provided by this Agreement are cumulative and the
use of any one right or remedy by any party shall not preclude or waive its
right to use any or all other remedies. Said rights and remedies are given in
addition to any other rights the parties may have by law, statute, ordinance or
otherwise.
Section 18.4 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of all of the
parties and, to the extent permitted by this Agreement, their successors, legal
representatives and assigns.
Section 18.5 Interpretation
43
<PAGE>
Throughout this Agreement, nouns, pronouns and verbs shall be construed as
masculine, feminine, neuter, singular or plural, whichever shall be applicable.
All references herein to "Articles," "Sections" and paragraphs shall refer to
corresponding provisions of this Agreement.
Section 18.6 Severability
The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provision were
omitted.
Section 18.7 Counterparts
This Agreement may be executed in any number of counterparts with the same
effect as if all parties hereto had signed the same document. All counterparts
shall be construed together and shall constitute one instrument; provided,
however, that the failure of any party to have executed this Agreement shall not
prevent this Agreement from being enforceable on all parties who have executed
this Agreement or a copy hereof.
Section 18.8 Integration
This Agreement constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.
Section 18.9 Governing Law.
This Agreement and the rights of the parties hereunder shall be
interpreted in accordance with the laws of the State of Delaware, and all rights
and remedies shall be governed by such laws without regard to choice of law
principles.
Section 18.10 Arbitration
44
<PAGE>
Any dispute, difference or controversy arising under this Agreement and
involving solely the payment of money shall be settled by arbitration. Any
arbitration pursuant to this Section 18.10 shall be held before a panel of three
arbitrators, one of which shall be selected by each of Chairman of the Board of
Managers and the interested Member and the third of which shall be selected by
the mutual election of such two arbitrators. Each party shall bear its own
expenses for counsel and other out-of-pocket costs in connection with any
resolution of a dispute, difference or controversy. Any arbitration shall take
place in New York, New York or in Las Vegas, Nevada at the election of the
Company, or at such other location as the parties may agree upon, according to
the American Arbitration Association's Commercial Arbitration Rules now in force
and hereafter adopted. The parties agree that, in any arbitration the Members
shall, to the maximum extent possible, have such rights as to the scope and
manner of discovery as are permitted in the Federal Rules of Civil Procedure and
consent to the entry of any order of any court of competent jurisdiction
necessary to enforce such discovery. The arbitrators shall make their award in
accordance with and based upon all the provisions of this Agreement and judgment
upon any award rendered by the arbitrators shall be entered in any court having
jurisdiction thereof. The fees and disbursements of such arbitrators shall be
borne equally by the parties, with each party bearing its own expenses for
counsel and other out-of-pocket costs. The arbitrators are specifically
authorized to award costs and attorney's fees to the party prevailing in the
arbitration and shall do so in any case in which they believe the arbitration
was not commenced in good faith.
Section 18.11 Headings. The headings and subheadings in this Agreement are
included for convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
IN WITNESS WHEREOF, this Amended Agreement has been executed by Members
representing a majority in interest of the issued and outstanding Units as of
the date first above stated.
HARRIS PRODUCTION SERVICES, SCENIC PROPERTIES LLC*
INC.
- -------------------------- --------------------------
By: By:
Name: Name:
Title: Title:
* Solely with respect to
Section 4.2 hereof.
SHOWPAY, INC.*
- --------------------------
By:
Name:
Title:
<PAGE>
* Solely with respect to Section 4.2
hereof.
46
<PAGE>
Schedule A
- ---------------------------------- ---------------------------- ----------------
Name and Address of Unit Holder Number and Class of Units Opening Capital
Account
- ---------------------------------- ---------------------------- ----------------
Harris Production Services, Inc. 5,000,200 Regular Units $ 50,000,000
539 Temple Hill Road
New Windsor, NY 12553
- ---------------------------------- ---------------------------- ----------------
- ---------------------------------- ---------------------------- ----------------
Theodore Van Bemmel, Jr. 17,241 Regular Units -
8772 Wittenwood Cove
Orlando, FL 32836
- ---------------------------------- ---------------------------- ----------------
- ---------------------------------- ---------------------------- ----------------
Kevin Baxley 129,980 Regular Units** -
19 Keeler Place
Ridgefield, CT 06877
- ---------------------------------- ---------------------------- ----------------
- ---------------------------------- ---------------------------- ----------------
William Ennis 51,992 Regular Units** -
70 Terrace Street
Haworth, NJ 07641
- ---------------------------------- ---------------------------- ----------------
- ---------------------------------- ---------------------------- ----------------
Bradley G. Miller 452,000 Capital -
140 Thompson Street, Apt 5D Appreciation Units
New York, N.Y. consisting of 113,000 of
each of Class A, B, C and
D of such Units**
- ---------------------------------- ---------------------------- ----------------
- ---------------------------------- ---------------------------- ----------------
Robert A. Manners**** 113,000 Class A Capital -
84 Hilltop Drive Appreciation Units**
Chappaqua, NY
- ---------------------------------- ---------------------------- ----------------
- ---------------------------------- ---------------------------- ----------------
Joseph Bartlett 10,000 Class A Capital -
Appreciation Units**
- ---------------------------------- ---------------------------- ----------------
- ---------------------------------- ---------------------------- ----------------
Thomas Lips 3,000 Class A Capital -
Appreciation Units**
- ---------------------------------- ---------------------------- ----------------
- ---------------------------------- ---------------------------- ----------------
Joseph Harris 3,000 Class A Capital -
Appreciation Units**
- ---------------------------------- ---------------------------- ----------------
- ---------------------------------- ---------------------------- ----------------
TOTALS $ 50,000,000.00
- ---------------------------------- ---------------------------- ----------------
<PAGE>
** Subject to vesting in accordance with the Company's Restricted Limited
Liability Company Unit Incentive Plan
48
<PAGE>
Schedule B
- ----------------- -------------------------------------------------------
Class of Units Special Rights and Privileges
- ----------------- -------------------------------------------------------
- ----------------- -------------------------------------------------------
Capital The holder of Capital Appreciation Units shall be entitled
Appreciation to receive in annual Preferred Return of five cents per
Units Capital Appreciation Unit and to share in the appreciation
in the value of the Company above the Threshold established
for each series of Capital Appreciation Units. The following
series of Capital Appreciation Units exist as of the date
hereof.
Series Threshold
------ ---------
Series A $55 million
Series B $70 million
Series C $85 million
Series D $95 million
Series E $105 million
Series F $115 million
Series G $125 million
Series H $135 million
Series I $145 million
Series J $155 million
Series K $165 million
Series L $175 million
Series M $185 million
Series N $195 million
Series O $205 million
Series P $215 million
Series Q $225 million
Series R $235 million
Series S $245 million
Series T $255 million
Series U $265 million
Series V $275 million
Series W $285 million
Capital Appreciation Units are hereby designated as
Non-Participating Units. Capital Appreciation Units and
Regular Units shall be pari passu with respect to
liquidation preferences after the satisfaction of the
applicable Threshold. The Managers may provide for
contractual modifications to the Thresholds established for
grants of Capital Appreciation Units pursuant to employment
agreements.
- ----------------- --------------------------------------------------------------
Preferred Capital The holder of Preferred Capital Appreciation Units shall be
Appreciation entitled to the same rights and Appreciation privileges of a
Participating holder of Capital Units of the same series and shall also
have a Liquidation Preference equal to the amount paid for
such Preferred Capital Appreciation Units as indicated in
the certificate issued
- ----------------- --------------------------------------------------------------
<PAGE>
- ----------------- --------------------------------------------------------------
Units by the Company in connection with such issuance. Preferred
Capital Appreciation Units are hereby designated as
Non-Participating Units.
- ----------------- --------------------------------------------------------------
Preferred Units The holder of Preferred Units shall be entitled to the same
rights and privileges of a holder of Regular Units and shall
also have a Liquidation Preference equal to the amount paid
for such Preferred Capital Appreciation Units as indicated
in the certificate issued by the Company in connection with
such insurance. Preferred Units are hereby designated as
Non-Participating Units.
- ----------------- --------------------------------------------------------------
8% Convertible The holder of 8% Convertible shall be entitled to receive an
Preferred Units eight percent Preferred Units (8%) per annum cumulative
distribution priority which will accumulate but not be paid
currently.
The Units will be convertible into IPO Securities at the
time of any IPO at a price equal to sixty-two and one-half
percent (62.5%) of the per share price of any IPO
Securities.
Upon conversion of the Preferred Units into IPO Securities
all accrued distributions will be eliminated (i.e.,
conversion will be based only on the Preferred Units' Unit
Price).
At any time after the earlier of (i) the third anniversary
of the issuance of the Preferred Units, or (ii) the date of
the IPO Notice at the option of the Investor, the Company
will redeem, provided the redemption is permitted under the
terms of the Company's agreement with its senior
institutional lenders, such Investor's Preferred Units at a
price equal to the number of outstanding Preferred Units to
be redeemed multiplied by the Unit Price plus all accrued
and unpaid distributions thereon. Certain other terms and
definitions related to the 8% Convertible Preferred Units
are contained in an Investment Option Agreement which is
available for inspection at the Company's office. 8%
Convertible Preferred Units are hereby designated as
Non-Participating Units.
- --------------------------------------------------------------------------------
50
<PAGE>
Schedule C
Long-Term Incentive Plan
- --------------------------- ---------------------------------------------------
Name of Participant Number of Units
- --------------------------- ---------------------------------------------------
Kevin Baxley 129,980
- --------------------------- ---------------------------------------------------
William Ennis 51,992
- --------------------------- ---------------------------------------------------
- --------------------------- ---------------------------------------------------
<PAGE>
Exhibit A
Schedule of Initial Managers
Jeremiah J. Harris
<PAGE>
CERTIFICATE OF INCORPORATION
OF
PRG FINANCE CORPORATION
FIRST: The name of this Corporation is PRG Finance Corporation.
SECOND: The address of the Corporation's Registered Office in the State of
Delaware is c/o Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801. The Registered Agent in
charge thereof is The Corporation Trust Company.
THIRD: 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 Delaware.
FOURTH: The total number of shares of stock that the Corporation shall have
authority to issue is 100 shares of common stock, no par value.
FIFTH: The board of directors is authorized to make, alter or repeal the
bylaws of the corporation. Election of directors need not be by
written ballot.
SIXTH: The name and mailing address of the incorporator is as follows:
Name: Edward C. White, Esq.
Mailing Address: Pepe & Hazard LLP
Goodwin Square
Hartford, CT 06103-4302
I, Edward C. White, being the incorporator hereinbefore named, for the
purpose of forming a corporation under the laws of the State of Delaware, do
make, file and record this Certificate, and do certify that the facts herein
stated are true, and I have accordingly hereunto set my hand this 15th day of
December, 1997.
/s/ Edward C. White
-----------------------
Edward C. White
Sole Incorporator
<PAGE>
BYLAWS
OF
PRG FINANCE CORPORATION
(A Delaware Corporation)
ARTICLE I
Offices
Section 1.1 Location. The principal office and any other offices of PRG
Finance Corporation (the "Corporation") shall be located at such places within
or without the State of Delaware as the Board of Directors may from time to time
determine.
ARTICLE II
Stockholders' Meetings
Section 2.1 Place of Meetings. Every meeting of the stockholders of the
Corporation shall be held at the principal office of the Corporation, or at such
other place either within or without the State of Delaware as shall be fixed in
the notices or waivers of notice of said meetings given as hereinafter provided.
Section 2.2 Annual Meeting. The annual meeting of the stockholders shall be
held on such day and at such time and place as the Board of Directors may
determine. At such meetings, the stockholders shall elect directors and transact
such other business as may be properly brought before the meeting. Failure to
hold an annual meeting as herein prescribed shall not affect otherwise valid
corporate acts. In the event of such failure, a substitute annual meeting may be
called in the same manner as a special meeting to be held as soon thereafter as
is convenient.
Section 2.3 Special Meetings. Special meetings of the stockholders for any
purpose, held either within or without the State of Delaware, may be called by
the President and shall be called by the President or Secretary at the request
in writing of a majority of the Board of Directors, or at the request in writing
of stockholders who in the aggregate, hold a majority of the voting power of the
issued and outstanding shares of the voting stock of the Corporation. No
business other than that directly related to the purpose or purposes specified
in the notice of such meeting shall be transacted at the meeting.
Section 2.4 Notice of Meetings. (a) Except as otherwise required by
statute, notice of each annual or special meeting of the stockholders shall be
given to each stockholder of record entitled to vote at such meeting not less
than ten (10) days nor more than sixty (60) days before the day on which the
meeting is to be held by delivering written notice thereof to each stockholder
- 1 -
<PAGE>
personally or by mailing such notice, postage prepaid, addressed to each
stockholder at each stockholder's address as it appears upon the records of the
corporation or by transmitting notice thereof to such stockholder at such
address by telecopy, telegraph, cable or any other available method. In the case
of the death, absence, incapacity or refusal of the Secretary, such notice may
be given by a person designated either by the Secretary or by the person or
persons calling the meeting or by the Board of Directors. Every such notice
shall state the time and place of the meeting and, in case of a special meeting,
shall state briefly the purpose thereof.
(b) Notice of any meeting of stockholders shall not be required to be given
to any stockholder who shall attend such meeting in person or by proxy or who
shall in person or by attorney thereunto authorized, waive such notice in
writing or by telecopy, telegraph, cable or any other available method either
before or after the meeting.
(c) When a meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting, except when expressly required by law, if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given, in the manner described in this Section, to each stockholder of record
entitled to vote at the meeting.
Section 2.5 Quorum. (a) To constitute a quorum for the transaction of
business at any meeting of stockholders, there must be present, in person or by
proxy, the holders of a majority of the issued and outstanding shares of voting
stock of the Corporation entitled to vote at such meeting. When a quorum is
present at any meeting a majority of the stock so represented thereat and
entitled to vote shall, except where a larger vote is required by law, by the
Certificate of Incorporation, or by these Bylaws, decide any question brought
before such meeting.
(b) Where a separate vote by a class or classes is required, a majority of
the outstanding shares of such class or classes, present in person or
represented by proxy, shall constitute a quorum entitled to take action with
respect to that vote on that matter and the affirmative vote of a majority of
shares of such class or classes present in person or represented by proxy at the
meeting shall be the act of such class.
(c) The stockholders present or proxy holders at a duly held meeting at
which a quorum was present may continue to transact business notwithstanding the
withdrawal of enough shares to leave less than a quorum.
(d) In the absence of a quorum a majority in interest of the stockholders
of the Corporation entitled to vote, present in person or represented by proxy
or, in the absence of all such stockholders, any officer entitled to preside at,
or act as secretary of, such meeting, shall have the power to adjourn the
meeting from time to time, until stockholders holding the requisite amount of
stock shall be present or represented.
- 2 -
<PAGE>
Section 2.6 Action by Stockholders Without a Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action which may be taken at
an annual or special meeting of stockholders may be taken without a meeting,
without prior notice, and without a vote, if consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted, and said consent or consents are filed with
the Secretary of the Corporation and kept as part of the corporate records.
Prompt notice of the taking of such action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing and who, if the action had been taken at a meeting, would
have been entitled to notice of the meeting.
Section 2.7 Record Date. (a) For the purpose of determining the
stockholders entitled to notice of or to vote at a meeting of stockholders or
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive a payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be a date earlier than the date on which such
action is taken by the Board of Directors, nor more than sixty (60) nor less
than ten (10) days before the particular event requiring such determination is
to occur.
(b) If no record date is fixed by the Board of Directors:
(1) 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 day next preceding the day on which notice is mailed, or, if notice is
waived, at the close of business on the day next preceding the day on which
the meeting is held.
(2) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the first day on
which the written consent is delivered to the Secretary of the Corporation.
(3) The record date for determining stockholders for any other purpose
shall be the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
(c) 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
this adjourned meeting.
Section 2.8 Number of Votes for Each Stockholder. Each stockholder shall be
entitled to one vote, in person or by proxy, for each share of stock standing in
the stockholder's name on the books of the Corporation as of the record date
unless, and except to the extent that, voting rights of
- 3 -
<PAGE>
shares of any class are increased, limited, or denied by relevant law, these
Bylaws, or the Certificate of Incorporation.
Section 2.9 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 the
stockholder by proxy, but, except as otherwise expressly permitted by law, no
proxy shall be voted or acted upon after three (3) years after its execution,
unless the proxy provides for a longer period or the proxy (a) states that it is
irrevocable and (b) is coupled with an interest sufficient in law to support an
irrevocable power. Proxies shall be signed and dated and filed with the
Secretary of the Corporation.
Section 2.10 Pledged Stock; Fiduciaries; Joint Owners. (a) In the event a
stockholder of record is otherwise permitted to pledge his stock, or any part
thereof, said pledgor may authorize, by a writing signed and dated and filed
with the Secretary of the Corporation, the pledgee to vote said stock. Such an
authorization will be valid and binding on the Corporation.
(b) Persons holding stock in a fiduciary capacity shall be entitled to vote
the shares. In the case of stock held jointly by two or more executors,
administrators, guardians, conservators, trustees or other fiduciaries, such
fiduciaries may designate in writing one or more of their number to represent
such stock and vote the shares so held, unless there is a provision to the
contrary in the instrument, if any, defining their powers and duties.
(c) Except as provided in this Section 2.10, if stock having voting power
stand of record in the name of two or more persons, their acts with respect to
the votes shall, if only one votes, bind all, or, if more than one vote, the act
of the majority shall bind all. If more than one vote, but the vote is evenly
split, votes shall be determined as provided by statute.
Section 2.11 Presiding Officer. At each meeting of the stockholders the
President, any Vice President, or any other officer designated by the Board of
Directors, shall act as chairman, and the Secretary or an Assistant Secretary of
the Corporation, or in the absence of the Secretary and all Assistant
Secretaries, a person whom the chairman of the meeting shall appoint, shall act
as secretary of the meeting and keep the minutes thereof.
Section 2.12 Inspectors. The chairman of the meeting may at any time
appoint one or more inspectors to serve at a meeting of the stockholders. Such
inspectors shall decide upon the qualifications of voters, accept and count the
votes for and against the questions presented, report the results of such votes,
and subscribe and deliver to the secretary of the meeting a certificate stating
the number of shares of stock issued and outstanding and entitled to vote
thereon and the number of shares voted for and against the questions presented.
The inspectors need not be stockholders of the Corporation, and any director or
officer of the Corporation may be an inspector on any question other than a vote
for or against such person's election to any position with the Corporation or on
any other question in which such person may be directly interested. Before
acting as herein provided each inspector shall subscribe an oath faithfully to
execute the duties of an inspector with strict impartiality and according to the
best of such inspector's ability.
- 4 -
<PAGE>
ARTICLE III
Board of Directors
Section 3.1 Authority, Number, Election, and Term of Office. The business,
property, and affairs of the Corporation shall be under the care and management
of its Board of Directors. The Board of Directors shall consist of no less than
two (2) and no more than five (5) members. The initial Board of Directors is set
at three (3) members. The stockholders may, at any meeting held for the purpose
during the year, remove directors at any time, with or without any showing of
cause. Each director shall hold office until such director's successor is
elected and qualified or until such director's earlier death or resignation or
removal. Any director may resign at any time upon written notice to the
Corporation. Such resignation shall take effect at the date of receipt of such
notice or at any later time specified therein; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective. No director need be a stockholder of the Corporation.
Section 3.2 Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until
their successors are elected and qualified or until their earlier death or
resignation or removal.
Section 3.3 Place of Meetings. The Board of Directors may hold its meetings
at such place or places within or without the State of Delaware as it may from
time to time determine.
Section 3.4 Annual Meetings. The Board of Directors shall meet for the
purpose of organization, the election of officers, and the transaction of other
business, as soon as practicable following each annual meeting of the
stockholders. Such meeting shall be called and held at the place and time
specified in the notice or waiver of notice thereof as in the case of a special
meeting.
Section 3.5 Regular Meetings. Regular meetings of the Board of Directors
shall be held at such places and at such times as the Board shall from time to
time by resolution determine. If any day fixed for a regular meeting shall be a
legal holiday at the place where the meeting is to be held, then the meeting
which would otherwise be held on that day shall be held at said place at the
same hour on the next succeeding business day. Notice of regular meetings need
not be given.
Section 3.6 Special Meetings. Other meetings of the Board of Directors may
be held whenever the President or any director may deem it advisable. Notice of
each meeting shall be sent by mail, telecopy, telegraph or cable to each
director, addressed to such director's residence or usual place of business, at
least two days before the day on which the meeting is to be held, or shall be
delivered personally or by telephone, not later than one day before the day on
which the meeting is to be held. Each notice shall state the time and place of
the meeting but need not state the purposes thereof except as otherwise herein
expressly provided.
- 5 -
<PAGE>
Section 3.7 Waiver of Notice. Whenever notice is required to be given to
any director, a waiver of notice by such director in writing or by telecopy,
telegraph, cable or otherwise, whether before or after the such meeting is held,
and filed with the Secretary, shall be equivalent to the giving of such notice.
If any Director is present at a meeting of the Board of Directors, notice of
such meeting shall be deemed to have been waived.
Section 3.8 Action by Directors Without a Meeting. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the Board
or committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 3.9 Telephonic Participation in Directors Meetings. Unless
otherwise restricted by the Certificate of Incorporation or these Bylaws, a
director or member of a committee of the Board of Directors may participate in a
meeting of the Board of Directors or of such committee by means of a conference
telephone or similar communications equipment enabling all directors
participating in the meeting to hear one another, and participation in such a
meeting shall constitute presence in person at such meeting.
Section 3.10 Quorum and Voting Requirement. Except as otherwise expressly
provided in the Certificate of Incorporation or in these Bylaws, a majority of
the total number of directorships shall constitute a quorum for the transaction
of business at all meetings of the Board of Directors. Except as so otherwise
expressly provided, the act of a majority of the directors present at a meeting
at which a quorum is present shall be the act of the Board of Directors,
provided, that the affirmative vote in good faith of a majority of the
disinterested directors, even though the disinterested directors shall be fewer
than a quorum, shall be sufficient to authorize a contract or transaction in
which one or more directors have interest if the material facts as to such
interest and the relation of the interested directors to the contract or
transaction have been disclosed or are known to the 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 3.11 Committees; Appointment and Authority. The Board of Directors
may, by resolution adopted by the affirmative vote of a majority of the whole
Board of Directors, designate one or more committees, each committee to consist
of one or more of the directors of the Corporation. 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 and
may define the number and qualifications which shall constitute a quorum of such
committee. Except as otherwise limited by law, any such committee, to the extent
provided in the resolution appointing such committee, shall have and may
exercise all such authority of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not
- 6 -
<PAGE>
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. A majority of
all the members of any such committee may determine its action and fix the time
and place of its meetings, unless the Board of Directors shall otherwise
provide. The Board of Directors shall have power to change the members of any
committee at any time, to fill vacancies and to discharge any such committee,
either with or without cause, at any time.
Section 3.12 Compensation of Directors. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, the Board of Directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
Section 3.13 Presiding Officer. At each meeting of the Board of Directors
the Chairman of the Board of Directors, or in the absence of the Chairman, a
vice chairman, if any, or any other director designated by the Chairman, shall
act as chairman, and the Secretary or an Assistant Secretary of the Corporation,
or in the absence of the Secretary and all Assistant Secretaries, a person whom
the chairman of the meeting shall appoint, shall act as secretary of the meeting
and keep the minutes thereof.
ARTICLE IV
Officers
Section 4.1 Titles, Election, and Duties. The directors shall elect at the
annual directors' meeting a President and Chief Executive Officer and a
Secretary. The directors may, in addition to the foregoing, elect a Treasurer,
one or more Vice Presidents, one or more Assistant Treasurers, one or more
Assistant Secretaries, and any other officers the election of which they deem
expedient or necessary. Any number of offices may be held by the same person.
The officers need not be stockholders, and need not be residents of Delaware.
Each officer shall, subject to these Bylaws, have in addition to the duties and
powers herein set forth, such duties and powers as the Board of Directors shall
from time to time designate. In all cases where the duties of any officer, agent
or employee are not specifically prescribed by the Bylaws, or by the Board of
Directors, such officer, agent or employee shall obey the orders and
instructions of the President. The directors shall from time to time determine
which officers shall be permitted to sign checks on behalf of the Corporation.
Section 4.2 Chairman of the Board. The Chairman of the Board shall preside
at all meetings of the Board of Directors at which he is present. The Chairman
has authority to designate a vice chairman or other designee to preside over the
meetings in his absence.
Section 4.3 President and Chief Executive Officer. The President shall,
subject to the direction and under the supervision of the Board of Directors, be
the Chief Executive Officer of the
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Corporation and shall have general and active control of its affairs and
business and supervision over its officers, agents and employees. Except as
otherwise voted by the Board of Directors, the President shall preside at each
meeting of stockholders at which he is present and shall see that all orders and
resolutions of the Board are carried into effect. In general the President shall
perform all duties as may from time to time be assigned, or specifically
required to be performed, by these Bylaws, from the Board of Directors, or by
law.
Section 4.4 Vice President. The Vice President, if any, shall have such
powers and perform such duties as may be assigned by the Board of Directors, the
Executive Committee or the President. In the absence or disability of the
President, the Vice President (or in the event there be more than one Vice
President, the Vice Presidents in the order designated by the Board of
Directors, or in the absence of any designation, in the order of their election)
shall perform the duties and exercise the powers of the President.
Section 4.5 Treasurer. The Treasurer shall, subject to the direction and
under the supervision of the Board of Directors, have charge and custody of, and
be responsible for, all funds and securities of the Corporation and may endorse
for deposit or collection, checks, notes, and other obligations for the payment
of money to the Corporation or its order, and deposit the same to the credit of
the Corporation in such depositories as the Board of Directors may designate.
The Treasurer shall disburse funds of the Corporation as may be ordered by the
Board of Directors, making proper vouchers for such disbursements, and shall
render to the Board of Directors or the stockholders, whenever the Board may
require the Treasurer to do so, a statement of all such transactions as
Treasurer or the financial condition of the Corporation. The Treasurer shall
keep accurate books of account of the Corporation's transactions which shall be
the property of the Corporation and shall be subject at all times to the
inspection and control of the Board of Directors, any committee of the Board
designated by it to so act or the President.
Section 4.6 Assistant Treasurer. It shall be the duty of the Assistant
Treasurer, if any, in the absence of the Treasurer, to perform the Treasurer's
duties, and such officer shall also perform such other duties as may be
assigned, or specifically required to be performed by the Board of Directors or
by the President.
Section 4.7 Secretary. It shall be the duty of the Secretary to act as
Secretary of, and record and keep the minutes of, all meetings of the Board of
Directors, committees of the Board of Directors, and of stockholders; to cause
to be given notice of all meetings of stockholders and directors; to be
custodian of all corporate records (other than financial) and the seal of the
Corporation and to affix the seal, or cause it to be affixed, to all
certificates for shares of stock of the Corporation and to all documents, the
execution of which on behalf of the Corporation under its seal, shall have been
specifically or generally authorized by the Board of Directors; to have charge
of the record of stockholders, including lists of stockholders and also of other
books, records, and papers of the Corporation relating to its organization as a
Corporation and to see that the reports, statements, and other documents
required by law are properly kept or filed; and in general to perform all the
duties incident to the office of Secretary and such other duties as may from
time to time be assigned by the Board of Directors or by the President.
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Section 4.8 Assistant Secretary. It shall be the duty of the Assistant
Secretary, if any, in the absence of the Secretary, to perform the Secretary's
duties, and such officer shall also perform such other duties as may be
assigned, or specifically required to be performed, by the Board of Directors or
by the President.
Section 4.9 Compensation. The salaries of all officers shall be fixed by
the Board of Directors or special committee thereof, in such manner as they
shall from time to time determine, and none of such officers shall be prevented
from receiving a salary by reason of the fact that such officer is a director of
the Corporation.
Section 4.10 Term of Office and Vacancies. Each of such officers shall
serve for the term of one year and until a successor is duly elected and
qualified, but any officer may be removed by the Board of Directors at any time
with or without cause and with or without notice by a resolution adopted by the
affirmative vote of directors holding a majority of the directorships. Vacancies
among the officers by reason of death, resignation, or other causes shall be
filled for the unexpired term by the majority vote of the directors in office,
though the number of such directors may constitute less than a quorum.
ARTICLE V
Stock
Section 5.1 Issuance by the Board of Directors. The Board of Directors may
issue at one time, or from time to time, all or a portion of the authorized but
unissued shares of the capital stock of the Corporation as in their opinion and
discretion may be deemed in the Corporation's best interests. The Board may
accept, in consideration for such shares, services, money and other property of
any description actually received by the Corporation, provided, that such
consideration has a value not less than the par value of said shares, if any,
and that the consideration is legally acceptable for the issue of said shares.
Section 5.2 Certificates of Stock. Certificates of stock shall be in a form
adopted by the Board of Directors and shall be signed by the President or the
Vice President and by the Secretary or Assistant Secretary, and shall carry the
corporate seal. Any or all of the signatures on a certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue. All certificates
shall be consecutively numbered and the name of the person, firm or corporation
owning the shares represented thereby, the number of such shares represented by
each such certificate, the date of issue, and, in the case of cancellation, the
date of cancellation, shall be entered on the Corporation's books.
Section 5.3 Transfer of Stock. Shares of stock shall be transferred on the
books of the Corporation upon surrender to the Corporation or the transfer agent
(designated by the Board of
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Directors) of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer.
Section 5.4 Lost Certificates. The Board of Directors may, in case any
certificate representing capital stock of the Corporation is lost, stolen,
destroyed, or mutilated, authorize the issuance of a new certificate in lieu
thereof, upon such terms and conditions, including reasonable indemnification of
the Corporation, as the Board shall determine.
ARTICLE VI
Dividends and Fiscal Year
Section 6.1 Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock subject to the provisions of the Certificate of Incorporation.
Section 6.2 Fiscal Year. The fiscal year shall begin on the first day of
January.
ARTICLE VII
Books and Records
Section 7.1 Books and Records. The Corporation shall maintain correct
and complete books and records of account and shall keep minutes of the
proceedings of the stockholders, directors and any executive or other committee
of directors. The books and records of the Corporation may be kept at such
places within or without the State of Delaware as the Board of Directors may
from time to time determine. The stock record books and the blank stock
certificate books shall be kept by the Secretary or by any other officer
designated by the Board of Directors.
Section 7.2 Address of Stockholders. Each Stockholder shall furnish to the
Secretary of the Corporation or to the transfer agent of the Corporation an
address at which notices of meetings and all other corporate notices may be
served upon or mailed to such stockholder, and if any stockholder shall fail to
designate such address, corporate notices may be served upon such stockholder by
mail, postage prepaid, to such stockholder's address last known to the Secretary
or to the transfer agent of the Corporation or by transmitting a notice thereof
to such stockholder at such address by telecopy, cable or other available
method.
Section 7.3 Audit of Books and Accounts. The books and accounts of the
Corporation shall be audited at least once in each fiscal year by certified
public accountants of good standing selected by the Board of Directors.
ARTICLE VIII
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Amendments and Changes
Section 8.1 Execution of Contracts. Unless the Board of Directors, or other
committee designated by the Board to act, shall otherwise determine, the
President and the Treasurer may enter into any contract or execute any contract
or other instrument, the execution of which is not otherwise specifically
provided for, in the name and on behalf of the Corporation. The Board of
Directors, or any committee designated thereby with power so to act, except as
otherwise provided in these Bylaws, may authorize any other or additional
officer or officers or agent or agents of the Corporation, and such authority
may be general or confined to specific instances. Unless authorized so to do by
these By-Laws or by the Board of Directors or by any such committee, no officer,
agent or employee shall have any power or authority to bind the Corporation by
any contract or engagement or to pledge its credit or to render it liable
pecuniarily for any purpose or to any amount.
Section 8.2 Loans. Unless the Board of Directors, or other committee
designated by the Board to act, shall otherwise determine, the President and the
Treasurer may contract for loans and issue, endorse or accept evidence of
indebtedness on behalf of the Corporation. The Board of Directors, or any
committee designated thereby with power so to act, except as otherwise provided
in these Bylaws, may authorize any other or additional officer or officers or
agent or agents of the Corporation, and such authority may be general or
confined to specific instances. When so authorized, the officer or officers
hereunto authorized may effect loans and advances at any time for the
Corporation from any bank, trust company or other institution, or from any firm,
corporation or individual, and for such loans and advances may make, execute and
deliver promissory notes or other evidences of indebtedness of the Corporation,
and, when authorized as aforesaid, as security for the payment of any and all
loans, advances, indebtedness and liabilities of the Corporation, may mortgage,
pledge, hypothecate or transfer any real or personal property at any time owned
or held by the Corporation, and to that end execute instruments of mortgage or
pledge or otherwise transfer such property.
Section 8.3 Checks, Drafts, etc. All checks, drafts, bills or exchange or
other orders for the payment of money, obligations, notes, or other evidence of
indebtedness, bills of lading, warehouse receipts and insurance certificates of
the Corporation, shall be signed or endorsed by such officer or officers, agent
or agents, attorney or attorneys, employee or employees, of the Corporation as
shall from time to time be determined by resolution of the Board of Directors or
other committee designated by the Board so to act.
Section 8.4 Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositaries as the Board of Directors or other
committee designated by the Board so to act may from time to time designate, or
as may be designated by any officer or officers or agent or agents of the
Corporation to whom such power may be delegated by the Board of Directors or
other committee designated by the Board so to act and, for the purpose of such
deposit and for the purposes of collection for the account of the Corporation
may be endorsed, assigned and delivered by any officer, agent or employee of the
Corporation or in such other manner as may from time to time be
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designated or determined by resolution of the Board of Directors or other
committee designated by the Board so to act.
Section 8.5 Proxies in Respect of Securities of Other Corporations. Unless
otherwise provided by resolution adopted by the Board of Directors or other
committee so designated to act by the Board, the President or any Vice President
may from time to time appoint an attorney or attorneys or agent or agents of the
Corporation, in the name and on behalf of the Corporation, to cast the votes
which the Corporation may be entitled to cast as the holder of stock or other
securities in any other corporation, association or trust any of whose stock or
other securities may be held by the Corporation, at meetings of the holders of
the stock or other securities of; such other corporation, association or trust,
or to consent in writing, in the name of the Corporation as such holder, to any
action by such other corporation, association or trust, and may instruct the
person or persons so appointed as to the manner of casting such votes or giving
such consent, and may execute or cause to be executed in the name and on behalf
of the Corporation and under its corporate seal, or otherwise, all such written
proxies or other instruments as such officer may deem necessary or proper in the
premises.
ARTICLE IX
Amendments and Changes
Section 9.1 Amendment to the Bylaws. The Board of Directors may adopt the
Bylaws of the Corporation. The Certificate of Incorporation and the Bylaws of
the Corporation may be adopted, repealed, or amended by the affirmative vote of
the stockholders holding a majority of the shares outstanding. No Bylaws shall
be adopted, and no existing Bylaws shall be amended, or repealed, unless written
notice of such proposed action shall have been given with respect to the meeting
at which such action shall be taken. If the power to adopt Bylaws is conferred
upon the Board of Directors by the Certificate of Incorporation, it shall not
divest or limit the power of the stockholders to adopt, amend or repeal Bylaws.
ARTICLE X
Indemnification
Section 10.1 Directors, Officers, Employees and Agents. The Corporation
shall indemnify directors, officers, employees and agents of the Corporation to
the fullest extent required and permitted by the General Corporation Law of the
State of Delaware.
ARTICLE XI
Waiver
Section 11.1 Waiver. Any stockholder, director or officer of the
Corporation may waive any and all requirements as to notice of or formality as
to time, place or objects of any meeting,
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either before or after the time of such meeting as stated in the waiver, and
such waiver shall be deemed to be the equivalent of due notice of such meeting.
ARTICLE XII
Seal
Section 12.1 Seal. The corporate seal shall, subject to alteration by the
Board of Directors, consist of a flat-faced circular die with the word
"Delaware" together with the name of the Corporation and the year of its
organization cut or engraved thereon. The corporate seal may be used by causing
it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
Certification
These Bylaws were adopted by the Corporation as of the ____ day of
December, 1997.
---------------------------------------------
Jeremiah J. Harris
Chairman of the Board of Directors
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EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
Dated as of December 24, 1997
by and among
Production Resource Group, L.L.C.,
PRG Finance Corporation,
the Guarantors Named on the Signature Pages Hereto
and
Bear, Stearns & Co. Inc.,
BT Alex. Brown Incorporated,
Morgan Stanley & Co. Incorporated,
BNY Capital Markets, Inc.
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This Registration Rights Agreement (this "Agreement") is made and entered
into as of December 24, 1997 by and among Production Resource Group, L.L.C., a
Delaware limited liability company (the "Company"), PRG Finance Corporation, a
Delaware corporation ("Finance" and, together with the Company, the Issuers"),
the guarantors named on the signature pages hereto (collectively, the
"Guarantors"), and Bear, Stearns & Co. Inc., BT Alex. Brown Incorporated, Morgan
Stanley & Co. Incorporated and BNY Capital Markets, Inc. (collectively, the
"Initial Purchasers"), who have agreed to purchase the Company's 11 1/2% Series
A Senior Subordinated Notes due 2008 (the "Series A Notes") pursuant to the
Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated December
19, 1997 (the "Purchase Agreement"), by and among the Issuers, the Guarantors
and the Initial Purchasers. In order to induce the Initial Purchasers to
purchase the Series A Notes, the Issuers and the Guarantors have agreed to
provide the registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the obligations of the Initial
Purchasers set forth in Section 3 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes of
this Agreement upon the occurrence of (a) the filing and effectiveness under the
Act of the Exchange Offer Registration Statement relating to the Series B Notes
to be issued in the Exchange Offer, (b) the maintenance of such Registration
Statement as continuously effective and the keeping of the Exchange Offer open
for a period not less than the minimum period required pursuant to Section 3(b)
hereof and (c) the delivery by the Issuers to the Registrar under the Indenture
of Series B Notes in the same aggregate principal amount as the aggregate
principal amount of Series A Notes that were tendered by Holders thereof
pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Series A Notes, each Interest
Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Issuers under the Act of the Series
B Notes pursuant to the Exchange Offer Registration Statement pursuant to which
the Issuers offer the Holders of all outstanding Transfer Restricted Securities
the opportunity to exchange all such outstanding Transfer
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Restricted Securities held by such Holders for Series B Notes in an aggregate
principal amount equal to the aggregate principal amount of the Transfer
Restricted Securities tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose to
sell the Series A Notes to (a) certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act and (b) non-U.S. persons outside the
United States in reliance upon Regulation S under the Act.
Holders: As defined in Section 2(b) hereof.
Indenture: The Indenture, dated as of December 24, 1997, among the Issuers,
First Union National Bank, as trustee (the "Trustee"), and the Guarantors,
pursuant to which the Notes are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Person: An individual, partnership, corporation, limited liability company,
trust or unincorporated organization, or a government or agency or political
subdivision thereof.
Prospectus: The prospectus included in a Registration Statement, as amended
or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date relating to Notes,
each Person who is a Holder of Notes on the record date with respect to the
Interest Payment Date corresponding to such Damages Payment Date.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Issuers relating
to (a) an offering of Series B pursuant to an Exchange Offer or (b) the
registration for resale of Transfer Restricted Securities pursuant to the Shelf
Registration Statement, which is filed pursuant to the provisions of this
Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
Series B Notes: The Issuers' 11 1/2% Series B Senior Subordinated Notes due
2008 to be issued pursuant to the Indenture (a) in the Exchange Offer or (b)
pursuant to a Shelf Registration Statement, in each case, in exchange for Series
A Notes.
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Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in
effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to occur of
(a) the date on which such Note is exchanged in the Exchange Offer and entitled
to be resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Act, (b) the date on which such Note has
been effectively registered under the Act and disposed of in accordance with a
Shelf Registration Statement and (c) the date on which such Note is first
eligible to be distributed to the public pursuant to Rule 144 under the Act or
by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein).
Underwritten Registration or Underwritten Offering: A registration in which
securities of the Issuers are sold to an underwriter for reoffering to the
public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the benefits
of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be a
holder of Transfer Restricted Securities (each, a "Holder") whenever such Person
owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under applicable law
or Commission policy (after the procedures set forth in Section 6(a) below have
been complied with), the Issuers and the Guarantors shall (i) cause to be filed
with the Commission as soon as practicable after the Closing Date, but in no
event later than 60 days after the Closing Date, the Exchange Offer Registration
Statement, (ii) use their best efforts to cause such Exchange Offer Registration
Statement to become effective at the earliest possible time, but in no event
later than 150 days after the Closing Date, (iii) in connection with the
foregoing, file (A) all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause such Exchange Offer
Registration Statement to become effective, (B) if applicable, a post-effective
amendment to such Exchange Offer Registration Statement pursuant to Rule 430A
under the Act and (C) cause all necessary filings in connection with the
registration and qualification of the Series B Notes to be made under the Blue
Sky laws of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, commence and Consummate the Exchange Offer. The Exchange
Offer shall be on the appropriate form permitting registration of the Series B
Notes to be offered in exchange for the Transfer Restricted Securities and to
permit resales of Notes held by Broker-Dealers as contemplated by Section 3(c)
below.
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(b) The Issuers shall cause the Exchange Offer Registration Statement to be
effective continuously and shall keep the Exchange Offer open for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 business days. The Issuers shall cause
the Exchange Offer to comply with all applicable federal and state securities
laws. No securities other than the Notes shall be included in the Exchange Offer
Registration Statement. The Issuers shall use their best efforts to cause the
Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 business days thereafter.
(c) The Issuers shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Series A Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Issuers) may exchange such
Series A Notes pursuant to the Exchange Offer; however, such Broker-Dealer may
be deemed to be an "underwriter" within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with any resales of the Series B Notes received by such Broker-Dealer
in the Exchange Offer, which prospectus delivery requirement may be satisfied by
the delivery by such Broker-Dealer of the Prospectus contained in the Exchange
Offer Registration Statement. Such "Plan of Distribution" section shall also
contain all other information with respect to such resales by Broker-Dealers
that the Commission may require in order to permit such resales pursuant
thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer
or disclose the amount of Notes held by any such Broker-Dealer except to the
extent required by the Commission as a result of a change in policy after the
date of this Agreement.
The Issuers and the Guarantors shall use their best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 6(c) below to the extent
necessary to ensure that it is available for resales of Notes acquired by
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities, and to ensure that it conforms with the requirements
of this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of one year from the
date on which the Exchange Offer Registration Statement is declared effective.
The Issuers shall provide sufficient copies of the latest version of such
Prospectus to Broker-Dealers promptly upon request at any time during such
one-year period in order to facilitate such resales.
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SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Issuers and the Guarantors are not
required to file an Exchange Offer Registration Statement or permitted to
consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy (after the procedures set forth in Section
6(a) below have been complied with) or (ii) if any Holder of Transfer Restricted
Securities notifies the Company on or prior to the 20th business day following
the Consummation of the Exchange Offer (A) that such Holder is prohibited by
applicable law or Commission policy from participating in the Exchange Offer, or
(B) that such Holder may not resell the Series B Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and that the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder, or (C) that such
Holder is a Broker-Dealer and holds Series A Notes acquired directly from the
Issuers or one of their affiliates, then the Issuers and the Guarantors shall:
(x) Use their best efforts to file a shelf registration statement with
the Commission pursuant to Rule 415 under the Act, which may be an
amendment to the Exchange Offer Registration Statement (in any event, the
"Shelf Registration Statement") on or prior to the earliest to occur of (1)
the 60th day after the date on which the Issuers and the Guarantors
determine that they are not required to file the Exchange Offer
Registration Statement and (2) the 60th day after the date on which the
Issuers receive notice from a Holder of Transfer Restricted Securities as
contemplated by clause (ii) above (such earliest date being the "Shelf
Filing Deadline"), which Shelf Registration Statement shall provide for
resales of all Transfer Restricted Securities the Holders of which shall
have provided the information required pursuant to Section 4(b) hereof; and
(y) Cause such Shelf Registration Statement to be declared effective
by the Commission on or prior to the 150th day after the Shelf Filing
Deadline.
The Issuers and the Guarantors shall use their best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Notes by the Holders of
Transfer Restricted Securities entitled to the benefit of this Section 4(a), and
to ensure that it conforms with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as announced from time to
time, for a period of at least two years following the Closing Date.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Issuers in writing, within 20 business days after receipt of a request
therefor, such information as the Issuers may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such reasonably
requested information. Each Holder of Notes as to which any Shelf Registration
Statement is being effected, by its participation in the Shelf Registration
Statement, shall be deemed to agree to furnish promptly to the Issuers all
information required to be disclosed in order to make the information previously
furnished to the Issuers by such Holder not materially misleading.
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SECTION 5. LIQUIDATED DAMAGES
If (a) any of the Registration Statements required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (b) any of such Registration Statements has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (c) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (d) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself immediately declared effective (each such event referred to
in clauses (a) through (d), a "Registration Default"), the Issuers and the
Guarantors hereby jointly and severally agree to pay liquidated damages to each
Holder of Transfer Restricted Securities with respect to the first 90-day period
immediately following the occurrence of the first Registration Default, in an
amount equal to one-half of one percentage point (0.5%) per annum of the
principal amount of Transfer Restricted Securities held by such Holder. The
amount of the liquidated damages shall increase by an additional one-half of one
percent (0.5%) per annum of the principal amount of Transfer Restricted
Securities with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of liquidated damages of two
percent (2.0%) per annum of the principal amount of Transfer Restricted
Securities. All accrued liquidated damages shall be paid by the Issuers on each
Damages Payment Date to Record Holders by wire transfer of immediately available
funds or by federal funds check and to Holders of Certificated Securities by
wire transfers to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified on each Damages
Payment Date, as provided in the Indenture. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities,
the accrual of liquidated damages with respect to such Transfer Restricted
Securities will cease.
All obligations of the Issuers and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, the Issuers and the Guarantors shall comply with all of the provisions of
Section 6(c) below, shall use their best efforts to effect such exchange to
permit the sale of Transfer Restricted Securities being sold in accordance with
the intended method or methods of distribution thereof, and shall comply with
all of the following provisions:
(i) If in the reasonable opinion of counsel to the Issuers there is a
question as to whether the Exchange Offer is permitted by applicable law,
the Issuers and the Guarantors hereby agree to seek a no-action letter or
other favorable decision from the Commission allowing the Issuers and the
Guarantors to Consummate an Exchange Offer for such Series A Notes. Each of
the Issuers
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and the Guarantors hereby agrees to pursue the issuance of such a decision
to the Commission staff level but shall not be required to take
commercially unreasonable action to effect a change of Commission policy.
Each of the Issuers and the Guarantors hereby agrees, however, to (A)
participate in telephonic conferences with the Commission, (B) deliver to
the Commission staff an analysis prepared by counsel to the Issuers setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursue a
resolution (which need not be favorable) by the Commission staff of such
submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the Issuers, prior to the
Consummation thereof, a written representation to the Issuers (which may be
contained in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an affiliate of
either of the Issuers or any Guarantor, (B) it is not engaged in, and does
not intend to engage in, and has no arrangement or understanding with any
person to participate in, a distribution of the Series B Notes to be issued
in the Exchange Offer and (C) it is acquiring the Series B Notes in its
ordinary course of business. In addition, all such Holders of Transfer
Restricted Securities shall otherwise cooperate in the Issuers'
preparations for the Exchange Offer. Each Holder shall be deemed to
acknowledge and agree that any Broker-Dealer and any such Holder using the
Exchange Offer to participate in a distribution of the securities to be
acquired in the Exchange Offer (1) could not under Commission policy as in
effect on the date of this Agreement rely on the position of the Commission
enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and
Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted
in the Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters (including any no-action letter obtained pursuant
to clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a secondary
resale transaction and that such a secondary resale transaction should be
covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K if the resales are of Series B Notes obtained by such Holder
in exchange for Series A Notes acquired by such Holder directly from the
Issuers.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Issuers and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Issuers and the Guarantors
are registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available May
13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) and, if
applicable, any no-action letter obtained pursuant to clause (i) above and
(B) including a representation that neither of the Issuers nor any of the
Guarantors has entered into any arrangement or understanding with any
Person to distribute the Series B Notes to be received in the Exchange
Offer and that, to the best of the Issuers' and the Guarantors' information
and belief, each Holder participating in the Exchange Offer is acquiring
the Series B Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the Series B Notes received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf Registration
Statement, the Issuers and the Guarantors shall comply with all the provisions
of Section 6(c) below and shall use their best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being sold
in accordance with the intended method or methods of distribution thereof, and
pursuant thereto the
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Issuers will as expeditiously as possible prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof.
(c) General Provisions. In connection with any Registration Statement and
any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus required to permit resales of Notes by
Broker-Dealers), the Issuers and the Guarantors shall:
(i) use their best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Act or any regulation thereunder, financial
statements of the Guarantors) for the period specified in Section 3 or 4
hereof, as applicable; upon the occurrence of any event that would cause
any such Registration Statement or the Prospectus contained therein (A) to
contain a material misstatement or omission or (B) not to be effective and
usable for resale of Transfer Restricted Securities during the period
required by this Agreement, the Issuers shall file promptly an appropriate
amendment to such Registration Statement, in the case of clause (A),
correcting any such misstatement or omission, and, in the case of either
clause (A) or (B), use their best efforts to cause such amendment to be
declared effective and such Registration Statement and the related
Prospectus to become usable for their intended purpose(s) as soon as
practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary
to keep the Registration Statement effective for the applicable period set
forth in Section 3 or 4 hereof, as applicable, or such shorter period as
will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
the applicable provisions of Rules 424 and 430A under the Act in a timely
manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement during
the applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders (in the
case of a Shelf Registration Statement) promptly and, if requested by such
Persons, to confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to any Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, (D) of
the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement in order to make
the
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statements therein not misleading, or that requires the making of any
additions to or changes in the Prospectus in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Issuers and the Guarantors shall use their best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) furnish to each of the selling Holders and each of the
underwriter(s), if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any amendments
or supplements to any such Registration Statement or Prospectus (including
all documents incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the review and
comment of such Holders and underwriter(s), if any, for a period of at
least five business days, and the Issuers will not file any such
Registration Statement or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which a selling Holder of Transfer Restricted
Securities covered by such Registration Statement or the underwriter(s), if
any, shall reasonably object within five business days after the receipt
thereof. A selling Holder or underwriter, if any, shall be deemed to have
reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains a material misstatement or omission or fails to comply with
the applicable requirements of the Act;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriter(s), if any, make the Issuers' representatives available (and
representatives of the Guarantors) for discussion of such document and
other customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the selling
Holders, any underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney or accountant retained by such
selling Holders or any of the underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Issuers and
the Guarantors and cause the Issuers' and the Guarantors' officers,
directors and employees to supply all information reasonably requested by
any such Holder, underwriter, attorney or accountant in connection with
such Registration Statement subsequent to the filing thereof and prior to
its effectiveness;
(vii) if requested by any selling Holders or the underwriter(s), if
any, promptly include in any Registration Statement or Prospectus, pursuant
to a supplement or post-effective amendment if necessary, such information
as such selling Holders and underwriter(s), if any, may reasonably request
to have included therein, including, without limitation, information
relating to the "Plan of Distribution" of the Transfer Restricted
Securities, information with respect to the principal amount of Transfer
Restricted Securities being sold to such underwriter(s), the purchase price
being paid therefor and any other terms of the offering of the Transfer
Restricted Securities to be sold in such offering; and make all required
filings of such Prospectus supplement or post-effective
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amendment as soon as practicable after the Issuers are notified of the
matters to be included in such Prospectus supplement or post-effective
amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies, if
so requested by the Holders of a majority in aggregate principal amount of
Notes covered thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the underwriter(s), if
any, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
all documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) deliver to each selling Holder and each of the underwriter(s), if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Issuers and the Guarantors hereby
consent to the use of the Prospectus and any amendment or supplement
thereto by each of the selling Holders and each of the underwriter(s), if
any, in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(xi) enter into such agreements (including an underwriting agreement),
and make such representations and warranties, and take all such other
actions in connection therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement, all to such extent
as may be requested by the Initial Purchasers or by any Holder of Transfer
Restricted Securities or underwriter in connection with any sale or resale
pursuant to any Registration Statement contemplated by this Agreement; and
whether or not an underwriting agreement is entered into and whether or not
the registration is an Underwritten Registration, the Issuers and the
Guarantors shall:
(A) furnish to the Initial Purchasers, each selling Holder and
each underwriter, if any, in such substance and scope as they may
request and as are customarily made by issuers to underwriters in
primary underwritten offerings, upon the date of the Consummation of
the Exchange Offer and, if applicable, the effectiveness of the Shelf
Registration Statement:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by (x) the
President or any Vice President and (y) a principal financial or
accounting officer of each of the Issuers and the Guarantors,
confirming, as of the date thereof, the matters set forth in
paragraphs (a), (b), (c) and (d) of Section 8 of the Purchase
Agreement and such other matters as such parties may reasonably
request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Issuers and the Guarantors, covering the matters set forth in
paragraphs (1) through (24) of Exhibit B to the Purchase
Agreement, as applicable, and such other matters as such parties
may reasonably request, and in any event including a statement to
the effect that such counsel has participated in conferences with
officers and other representatives of the Issuers and the
Guarantors, representatives of the independent public accountants
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for the Issuers, the Initial Purchasers' representatives and the
Initial Purchasers' counsel in connection with the preparation of
such Registration Statement and the related Prospectus and have
considered the matters required to be stated therein and the
statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness of
such statements; and that such counsel advises that, on the basis
of the foregoing (relying as to materiality to the extent such
counsel deems appropriate upon facts provided to such counsel by
officers and other representatives of the Issuers and the
Guarantors and without independent check or verification), no
facts came to such counsel's attention that caused such counsel
to believe that the applicable Registration Statement, at the
time such Registration Statement or any post-effective amendment
thereto became effective, and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation, contained
an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, or that the Prospectus
contained in such Registration Statement as of its date and, in
the case of the opinion dated the date of Consummation of the
Exchange Offer, as of the date of Consummation, contained an
untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. Without limiting the foregoing, such counsel may
state further that such counsel assumes no responsibility for,
and has not independently verified, the accuracy, completeness or
fairness of the financial statements, notes and schedules and
other financial data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness
of the Shelf Registration Statement, as the case may be, from the
Issuers' independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters by underwriters in connection with primary underwritten
offerings, and affirming the matters set forth in the comfort
letters delivered pursuant to Section 8 of the Purchase
Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Issuers
pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Issuers and the
Guarantors contemplated in clause (A)(1) above cease to be true and correct, the
Issuers or the Guarantors shall so advise the Initial Purchasers and the
underwriter(s), if any, and each selling Holder promptly and, if requested by
such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the
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registration and qualification of the Transfer Restricted Securities under
the securities or Blue Sky laws of such jurisdictions as the selling
Holders or underwriter(s) may request and do any and all other acts or
things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the Shelf
Registration Statement; provided, however, that neither of the Issuers nor
any of the Guarantors shall be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits or to taxation, other
than as to matters and transactions relating to the Registration Statement,
in any jurisdiction where it is not now so subject;
(xiii) shall issue, upon the request of any Holder of Series A Notes
covered by the Shelf Registration Statement, Series B Notes, having an
aggregate principal amount equal to the aggregate principal amount of
Series A Notes surrendered to the Issuers by such Holder in exchange
therefor or being sold by such Holder; such Series B Notes to be registered
in the name of such Holder or in the name of the purchaser(s) of such
Notes, as the case may be; in return, the Series A Notes held by such
Holder shall be surrendered to the Issuers for cancellation;
(xiv) cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be
in such denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior to any
sale of Transfer Restricted Securities made by such underwriter(s);
(xv) use their best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriter(s), if
any, to consummate the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (viii) above;
(xvi) if any fact or event contemplated by clause (c)(iii)(D) above
shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of the Registration Statement and provide
the Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depositary Trust Company;
(xviii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use their reasonable best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies or
authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the
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disposition of such Transfer Restricted Securities;
(xix) otherwise use their best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
their security holders, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
for the twelve-month period (A) commencing at the end of any fiscal quarter
in which Transfer Restricted Securities are sold to underwriters in a firm
or best efforts Underwritten Offering or (B) if not sold to underwriters in
such an offering, beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the Registration
Statement;
(xx) cause the Indenture to be qualified under the TIA not later than
the effective date of the first Registration Statement required by this
Agreement, and, in connection therewith, cooperate with the Trustee and the
Holders of Notes to effect such changes to the Indenture as may be required
for such Indenture to be so qualified in accordance with the terms of the
TIA; and execute and use their best efforts to cause the Trustee to
execute, all documents that may be required to effect such changes and all
other forms and documents required to be filed with the Commission to
enable such Indenture to be so qualified in a timely manner;
(xxi) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by the Issuers are then listed if requested by
the Holders of a majority in aggregate principal amount of Series A Notes
or the managing underwriter(s), if any; and
(xxii) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 and
Section 15 of the Exchange Act.
Each Holder shall be deemed to agree by acquisition of a Transfer
Restricted Security that, upon receipt of any notice from the Issuers of the
existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such
Holder will forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the applicable Registration Statement until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xvi) hereof, or until it is advised in writing (the "Advice") by the
Issuers that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by reference in
the Prospectus. If so directed by the Issuers, each Holder will deliver to the
Issuers (at the Issuers' expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Transfer
Restricted Securities that was current at the time of receipt of such notice. In
the event the Issuers shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section
6(c)(iii)(D) hereof to and including the date when each selling Holder covered
by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or
shall have received the Advice.
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SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Issuers' or the Guarantors' performance of
or compliance with this Agreement will be borne by the Issuers and the
Guarantors, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made by the Initial Purchasers or any Holder with the NASD
(and, if applicable, the fees and expenses of any "qualified independent
underwriter" and its counsel that may be required by the rules and regulations
of the NASD)); (ii) all fees and expenses of compliance with federal securities
and state Blue Sky or securities laws; (iii) all expenses of printing (including
printing certificates for the Series B Notes to be issued in the Exchange Offer
and printing of Prospectuses), messenger and delivery services and telephone;
(iv) all fees and disbursements of counsel for the Issuers, the Guarantors and,
subject to Section 7(b) below, the Holders of Transfer Restricted Securities;
(v) all application and filing fees in connection with listing Notes on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Issuers and the Guarantors (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Issuers and the Guarantors will, in any event, bear their internal
expenses (including, without limitation, all salaries and expenses of their
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Issuers.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Issuers and the Guarantors
will reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities being tendered in the Exchange Offer and/or resold pursuant to the
"Plan of Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Latham & Watkins or such other counsel as may be chosen by the Holders of a
majority in aggregate principal amount of the Transfer Restricted Securities for
whose benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Issuers and the Guarantors, jointly and severally, agree to
indemnify and hold harmless (i) each Holder, (ii) each person, if any, who
controls any Holder within the meaning of Section 15 of the Act or Section 20(a)
of the Exchange Act and (iii) the respective officers, directors, partners,
employees, representatives and agents of each Holder or any controlling person
to the fullest extent lawful, from and against any and all losses, liabilities,
claims, damages and expenses whatsoever (including but not limited to attorneys'
fees and any and all expenses whatsoever incurred in investigating, preparing or
defending against any investigation or litigation, commenced or threatened, or
any claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus, or in any
supplement thereto or amendment
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thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Issuers will not be liable in
any such case to the extent, but only to the extent, that any such loss,
liability, claim, damage or expense arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with information relating to any
Holder furnished to the Issuers in writing by or on behalf of such Holder
expressly for use therein. This indemnity agreement will be in addition to any
liability which the Issuers and the Guarantors may otherwise have, including,
under this Agreement.
(b) Each Holder, by its participation in the Exchange Offer or Shelf
Registration Statement, shall be deemed to acknowledge and agree, severally and
not jointly, to indemnify and hold harmless (i) the Issuers and the Guarantors,
(ii) each person, if any, who controls the Issuers and the Guarantors within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and (iii)
the respective officers, directors, advisors, partners, employees
representatives and agents of each of them, against any losses, liabilities,
claims, damages and expenses whatsoever (including but not limited to attorneys'
fees and any and all expenses whatsoever incurred in investigating, preparing or
defending against any investigation or litigation, commenced or threatened, or
any claim whatsoever and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with information relating to any Holder furnished to the Issuers in
writing by or on behalf of such Holder expressly for use therein; provided,
however, that in no case shall any Holder be liable or responsible for any
amount in excess of the dollar amount of the proceeds received by such Holder
upon the sale of the Notes giving rise to such indemnification obligation. This
indemnity will be in addition to any liability which any Holder may otherwise
have, including under this Agreement.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 8 except to the extent that it has been prejudiced
in any material respect by such failure or from any liability which it may
otherwise have). In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent it
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying
16
<PAGE>
parties in connection with the defense of such action, (ii) the indemnifying
parties shall not have employed counsel to take charge of the defense of such
action within a reasonable time after notice of commencement of the action, or
(iii) such indemnified party or parties shall have reasonably concluded that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying party or parties shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties), in
any of which events such fees and expenses of counsel shall be borne by the
indemnifying parties; provided, however, that the indemnifying party under
subsection (a) or (b) above shall only be liable for the legal expenses of one
counsel (in addition to any local counsel) for all indemnified parties in each
jurisdiction in which any claim or action is brought. Anything in this
subsection to the contrary notwithstanding, an indemnifying party shall not be
liable for any settlement of any claim or action effected without its prior
written consent; provided, however, that such consent was not unreasonably
withheld.
(d) In order to provide for contribution in circumstances in which the
indemnification provided for in this Section 8 is for any reason held to be
unavailable from the Issuers and the Guarantors or is insufficient to hold
harmless a party indemnified hereunder, the Issuers and the Guarantors, on the
one hand, and each Holder (who shall be deemed to agree to these terms by its
participation in the Exchange Offer or the Shelf Registration Statement), on the
other hand, shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted, but after deducting in the case of losses,
claims, damages, liabilities and expenses suffered by the Issuers and the
Guarantors, any contribution received by the Issuers and the Guarantors from
persons, other than the Holders, who may also be liable for contribution,
including persons who control the Issuers and the Guarantors within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act) to which the
Issuers, the Guarantors and such Holder may be subject, in such proportion as is
appropriate to reflect the relative benefits received by the Issuers and the
Guarantors, on one hand, and such Holder, on the other hand, if such allocation
is not permitted by applicable law or indemnification is not available as a
result of the indemnifying party not having received notice as provided in this
Section 8, in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Issuers and the
Guarantors, on the one hand, and such Holder, on the other hand, in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Issuers and the Guarantors, on one hand,
and each Holder, on the other hand, shall be deemed to be in the same proportion
as (i) the total proceeds from the offering of the Notes (net of discounts but
before deducting expenses) received by the Issuers and the Guarantors and (ii)
the total proceeds received by such Holder upon the sale of the Notes giving
rise to such indemnification obligation. The relative fault of the Issuers and
the Guarantors, on the one hand, and of each Holder, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuers, the Guarantors
or such Holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Issuers, the Guarantors agree and the Holders shall be deemed to agree by
their participation in the Exchange Offer or the Shelf Registration Statement
that it would not be just and equitable if contribution pursuant to this Section
8(d) were determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to above.
Notwithstanding the provisions of this Section 8(d), (i) in no case shall any
Holder be required
17
<PAGE>
to contribute any amount in excess of the dollar amount by which the proceeds
received by such Holder upon the sale of the Notes exceeds the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission and (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8(d),
(A) each person, if any, who controls any Holder within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act and (B) the respective
officers, directors, partners, employees, representatives and agents of each
Holder or any controlling person shall have the same rights to contribution as
such Holder, and each person, if any, who controls the Issuers and the
Guarantors within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act shall have the same rights to contribution as the Issuers and the
Guarantors, subject in each case to clauses (i) and (ii) of this Section 8(d).
Any party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties
under this Section 8(d), notify such party or parties from whom contribution may
be sought, but the failure to so notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any obligation it
or they may have under this Section 8(d) or otherwise. No party shall be liable
for contribution with respect to any action or claim settled without its prior
written consent; provided, however, that such written consent was not
unreasonably withheld.
SECTION 9. RULE 144A
The Issuers and the Guarantors hereby agree with each Holder, for so long
as any Transfer Restricted Securities remain outstanding, to make available to
any Holder or beneficial owner of Transfer Restricted Securities in connection
with any sale thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Act in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder unless
such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on
the basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents required under the terms of such
underwriting arrangements.
18
<PAGE>
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by a Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Issuers.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Issuers and the Guarantors agree that monetary damages
(including the liquidated damages contemplated hereby) would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agree to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Issuers and the Guarantors will not, on
or after the date of this Agreement, enter into any agreement with respect to
their respective securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither of the Issuers nor any of the Guarantors has previously entered into any
agreement granting any registration rights with respect to its securities to any
Person. The rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of the
Issuers' securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. Neither of the Issuers nor any
Guarantor will take any action, or permit any change to occur, with respect to
the Notes that would materially and adversely affect the ability of the Holders
to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless the Issuers have obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
(e) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
19
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(ii) if to the Issuers or any of the Guarantors:
Production Resource Group, L.L.C.
539 Temple Hill Road
New Windsor, New York 12553
Telecopy No.: (914) 567-5804
Attention: Chief Financial Officer
With copies to:
Morrison & Foerster L.L.P.
1290 Avenue of the Americas
New York, New York 10104
Telecopy No.: (212) 468-7900
Attention: Joseph W. Bartlett, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
20
<PAGE>
(k) Entire Agreement. This Agreement, together with the other Operative
Documents (as defined in the Purchase Agreement), is intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Issuers with
respect to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
PRODUCTION RESOURCE GROUP, L.L.C.
By: ____________________________
Name:
Title:
PRG FINANCE CORPORATION
By: ____________________________
Name:
Title:
PRG PLANNING & DEVELOPMENT LLC
By: ____________________________
Name:
Title:
ECTS, A SCENIC TECHNOLOGY COMPANY, INC.
By: ____________________________
Name:
Title:
21
<PAGE>
SHOWPAY, L.L.C.
By: ____________________________
Name:
Title:
ATTRACTION MANAGEMENT LLC
By: ____________________________
Name:
Title:
22
<PAGE>
BEAR, STEARNS & CO.INC.
By:_________________________________
Name:
Title:
BT ALEX. BROWN INCORPORATED
By:_________________________________
Name:
Title:
MORGAN STANLEY & CO. INCORPORATED
By:_________________________________
Name:
Title:
BNY CAPITAL MARKETS, INC.
By:_________________________________
Name:
Title:
23
<PAGE>
EXHIBIT 4.2
- --------------------------------------------------------------------------------
PRODUCTION RESOURCE GROUP, L.L.C.
PRG FINANCE CORPORATION
11 1/2% SENIOR SUBORDINATED NOTES DUE 2008
---------------------
INDENTURE
Dated as of December 24, 1997
---------------------
FIRST UNION NATIONAL BANK
Trustee
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture Act Indenture
Section Section
310 (a)(1).................................................................7.10
(a)(2) ....................................................................7.10
(a)(3).....................................................................N.A.
(a)(4).....................................................................N.A.
(a)(5).....................................................................7.10
(b)........................................................................7.10
(c)........................................................................N.A.
311(a).....................................................................7.11
(b)........................................................................7.11
(c)........................................................................N.A.
312 (a)....................................................................2.05
(b)........................................................................12.03
(c)........................................................................12.03
313(a).....................................................................7.06
(b)(2).....................................................................7.06;
7.07
(c)........................................................................7.06;
12.02
(d)........................................................................7.06
314(a).....................................................................4.03;
12.02
(b)........................................................................11.02
(c)(1).....................................................................12.04
(c)(2).....................................................................12.04
(c)(3).....................................................................N.A.
(e)........................................................................11.05
(f)........................................................................NA
315 (a)....................................................................7.01
(b)........................................................................7.05,
12.02
(c)........................................................................7.01
(d)........................................................................7.01
(e)........................................................................6.11
316 (a)(last sentence).....................................................2.09
(a)(1).....................................................................6.05
(a)(1).....................................................................6.04
(a)(2).....................................................................N.A.
(b)........................................................................6.07
(c)........................................................................2.12
317 (a)(1).................................................................6.08
<PAGE>
(a)(2).....................................................................6.09
(b)........................................................................2.04
318 (a)....................................................................12.01
(b)........................................................................N.A.
(c)........................................................................12.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
2
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TABLE OF CONTENTS
Page
----
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.........................1
Section 1.01. Definitions..................................................1
Section 1.02. Other Definitions...........................................17
Section 1.03. Trust Indenture Act Definitions.............................17
Section 1.04. Rules of Construction.......................................18
ARTICLE 2. THE NOTES.........................................................18
Section 2.01. Form and Dating.............................................18
Section 2.02. Execution and Authentication................................20
Section 2.03. Registrar and Paying Agent..................................20
Section 2.04. Paying Agent to Hold Money in Trust.........................21
Section 2.05. Holder Lists................................................21
Section 2.06. Transfer and Exchange.......................................21
Section 2.07. Replacement Notes...........................................34
Section 2.08. Outstanding Notes...........................................34
Section 2.09. Treasury Notes..............................................35
Section 2.10. Temporary Notes.............................................35
Section 2.11. Cancellation................................................35
Section 2.12. Defaulted Interest..........................................36
ARTICLE 3. REDEMPTION AND PREPAYMENT.........................................36
Section 3.01. Notices to Trustee..........................................36
Section 3.02. Selection of Notes to Be Redeemed...........................36
i
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Section 3.03. Notice of Redemption........................................37
Section 3.04. Effect of Notice of Redemption..............................37
Section 3.05. Deposit of Redemption Price.................................37
Section 3.06. Notes Redeemed in Part......................................38
Section 3.07. Optional Redemption.........................................38
Section 3.08. Mandatory Redemption........................................39
Section 3.09. Offer to Purchase by Application of Excess Proceeds.........39
ARTICLE 4. COVENANTS.........................................................41
Section 4.01. Payment of Notes............................................41
Section 4.02. Maintenance of Office or Agency.............................41
Section 4.03. Reports.....................................................42
Section 4.04. Compliance Certificate......................................42
Section 4.05. Taxes.......................................................43
Section 4.06. Stay, Extension and Usury Laws..............................43
Section 4.07. Restricted Payments.........................................43
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries................................................46
Section 4.09. Incurrence of Indebtedness and Issuance of Disqualified
Stock.......................................................47
Section 4.10. Asset Sales.................................................49
Section 4.11. Transactions with Affiliates................................50
Section 4.12. Liens.......................................................50
Section 4.13. Business Activities.........................................50
Section 4.14. Corporate Existence.........................................50
Section 4.15. Offer to Repurchase Upon Change of Control..................51
Section 4.16. Limitation on Other Senior Subordinated Debt................52
ii
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Section 4.17. Sale and Leaseback Transactions.............................52
Section 4.18. Payments for Consent........................................53
Section 4.19. Additional Subsidiary Guarantees............................53
Section 4.20. Independent Directors.......................................53
Section 4.21. Activities of Finance Corp..................................53
ARTICLE 5. SUCCESSORS........................................................53
Section 5.01. Merger, Consolidation, or Sale of Assets....................53
Section 5.02. Successor Corporation Substituted...........................54
ARTICLE 6. DEFAULTS AND REMEDIES.............................................55
Section 6.01. Events of Default...........................................55
Section 6.02. Acceleration................................................56
Section 6.03. Other Remedies..............................................57
Section 6.04. Waiver of Past Defaults.....................................58
Section 6.05. Control by Majority.........................................58
Section 6.06. Limitation on Suits.........................................58
Section 6.07. Rights of Holders of Notes to Receive Payment...............59
Section 6.08. Collection Suit by Trustee..................................59
Section 6.09. Trustee May File Proofs of Claim............................59
Section 6.10. Priorities..................................................59
Section 6.11. Undertaking for Costs.......................................60
ARTICLE 7. TRUSTEE...........................................................60
Section 7.01. Duties of Trustee...........................................60
Section 7.02. Rights of Trustee...........................................61
iii
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Section 7.03. Individual Rights of Trustee................................62
Section 7.04. Trustee's Disclaimer........................................62
Section 7.05. Notice of Defaults..........................................62
Section 7.06. Reports by Trustee to Holders of the Notes..................63
Section 7.07. Compensation and Indemnity..................................63
Section 7.08. Replacement of Trustee......................................64
Section 7.09. Successor Trustee by Merger, etc............................65
Section 7.10. Eligibility; Disqualification...............................65
Section 7.11. Preferential Collection of Claims Against Issuers...........65
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE..........................65
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance....65
Section 8.02. Legal Defeasance and Discharge..............................65
Section 8.03. Covenant Defeasance.........................................66
Section 8.04. Conditions to Legal or Covenant Defeasance..................66
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions.......................68
Section 8.06. Repayment to Issuers........................................68
Section 8.07. Reinstatement...............................................69
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER..................................69
Section 9.01. Without Consent of Holders of Notes.........................69
Section 9.02. With Consent of Holders of Notes............................70
Section 9.03. Compliance with Trust Indenture Act.........................71
Section 9.04. Revocation and Effect of Consents...........................71
Section 9.05. Notation on or Exchange of Notes............................72
iv
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Section 9.06. Trustee to Sign Amendments, etc............................72
ARTICLE 10. SUBORDINATION....................................................72
Section 10.01. Agreement to Subordinate...................................72
Section 10.02. Certain Definitions........................................72
Section 10.03. Liquidation; Dissolution; Bankruptcy.......................73
Section 10.04. Default on Designated Senior Debt..........................74
Section 10.05. Acceleration of Securities.................................74
Section 10.06. When Distribution Must Be Paid Over........................74
Section 10.07. Notice by Issuers..........................................75
Section 10.08. Subrogation................................................75
Section 10.09. Relative Rights............................................75
Section 10.10. Subordination May Not Be Impaired by Issuers...............76
Section 10.11. Distribution or Notice to Representative...................76
Section 10.12. Rights of Trustee and Paying Agent.........................76
Section 10.13. Authorization to Effect Subordination......................76
Section 10.14. Amendments.................................................77
ARTICLE 11. SUBSIDIARY GUARANTEES............................................77
Section 11.01. Guarantee..................................................77
Section 11.02. Subordination of Subsidiary Guarantee......................78
Section 11.03. Limitation on Guarantor Liability..........................78
Section 11.04. Execution and Delivery of Subsidiary Guarantee.............79
Section 11.05. Consolidation, etc. by Guarantors..........................79
Section 11.06. Releases Following Sale of Assets..........................80
v
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ARTICLE 12. MISCELLANEOUS....................................................80
Section 12.01. Trust Indenture Act Controls...............................80
Section 12.02. Notices....................................................80
Section 12.03. Communication by Holders of Notes with Other Holders of
Notes......................................................82
Section 12.04. Certificate and Opinion as to Conditions Precedent.........82
Section 12.05. Statements Required in Certificate or Opinion..............82
Section 12.06. Rules by Trustee and Agents................................82
Section 12.07. No Personal Liability of Directors, Advisors, Managers,
Officers, Employees, Incorporators, members and
Stockholders...............................................83
Section 12.08. Governing Law..............................................83
Section 12.09. No Adverse Interpretation of Other Agreements..............83
Section 12.10. Successors.................................................83
Section 12.11. Severability...............................................83
Section 12.12. Counterpart Originals......................................83
Section 12.13 Table of Contents, Headings, Etc...........................83
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E FORM OF SUBSIDIARY GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
vi
<PAGE>
INDENTURE dated as of December 24, 1997 among Production Resource Group, a
Delaware limited liability company (the "Company"), PRG Finance Corporation, a
Delaware corporation ("Finance Corp." and, together with the Company, the
"Issuers"), Attraction Management LLC, ECTS, A Scenic Technology Company, Inc.,
PRG Planning & Development Group LLC, and Showpay, L.L.C. (together, the
"Guarantors") and First Union National Bank, as trustee (the "Trustee").
The Issuers, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 11 1/2% Senior Subordinated Notes due 2008 (the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit A-1 hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with or on behalf of, and registered in the name of, the Depositary or its
nominee that will be issued in a denomination equal to the outstanding principal
amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any assets acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Equity Interests of a Person
shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Amended Credit Facility" means that certain Credit Facility, dated as of
July 31, 1997, by and among the Company, the lenders party thereto and The Bank
of New York, as Agent, as amended by Amendment No. 1, dated as of December 12,
1997, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
1
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"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback), excluding sales of services and products in the ordinary course of
business consistent with past practices (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole shall be governed by
Section 4.15 and 5.01 hereof and not by Section 4.10 hereof), and (ii) the issue
or sale by the Company or any of its Subsidiaries of Equity Interests of any of
the Company's Subsidiaries, in the case of either clause (i) or (ii), whether in
a single transaction or a series of related transactions (a) that have a fair
market value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary, (ii)
an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to the
Company or to another Wholly Owned Restricted Subsidiary, (iii) the transfer of
obsolete equipment in the ordinary course of business, (iv) the sale and
leaseback of any assets within 90 days of the acquisition of such assets and (v)
a Restricted Payment that is permitted by Section 4.07 hereof shall not be
deemed to be Asset Sales. Notwithstanding the foregoing, the Real Estate
Transaction shall not be deemed to be an Asset Sale.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessee, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Board of Directors" means (i) in respect of a limited liability company,
the board of advisors of the Company, (ii) in respect of a corporation, the
board of directors of the Company, or any authorized committee thereof, and
(iii) in respect of any other Person, the board or committee of the Company
serving a similar function.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or
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limited liability company, partnership or membership interests (whether general
or limited) and (iv) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distribution of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500.0 million and a Thompson Bank Watch Rating
of "B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above and (v) commercial paper having the highest
rating obtainable from either Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date of
acquisition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than one or more Principals or Related Parties, (ii) the adoption of
a plan relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than the Principals and their Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 35% of the Voting Equity
Interests of the Company (measured by voting power rather than number of shares)
or (iv) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors. Notwithstanding the
foregoing, the reorganization of the Company as a corporation shall not be
deemed to constitute a Change of Control, so long as such reorganization does
not result in any of the occurrences described above under clauses (i) through
(iv).
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Production Resource Group, L.L.C., a Delaware limited
liability company, and any and all successors thereto.
"Consolidated EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus, to the extent
deducted in computing such Consolidated Net Income, (i) an amount equal to any
extraordinary loss plus any
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net loss realized in connection with an Asset Sale, (ii) provision for taxes
based on income or profits, (iii) consolidated interests expense whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations); (iv) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash charges (including non-cash equity based compensation charges but
excluding any such non-cash charge to the extent that it represents an accrual
of or reserve for cash charges in any future period or amortization of a prepaid
cash expense that was paid in a prior period); (v) an amount equal to all
premiums paid on prepayments of Indebtedness; and (vi) in the case of
calculations with respect to the Company, the amount of any tax payments to its
members pursuant to clause (viii) of the second paragraph of Section 4.07 hereof
or, following the reorganization of the Company as a corporation, any tax
sharing payment made pursuant to a tax sharing agreement executed in connection
therewith, in each case, on a consolidated basis and determined in accordance
with GAAP. Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization of, a Restricted
Subsidiary of a Person shall be added to Consolidated Net Income to compute
Consolidated EBITDA only to the extent (and in the same proportion) that the Net
Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to the Company by
such Restricted Subsidiary without prior approval (that has not been obtained)
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iv) the cumulative effect of a change in accounting principles
shall be excluded, (v) the Net Income (but not loss) of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to the Company or one
of its Restricted Subsidiaries and (vi) in the case of calculations with respect
to the Company, the amount of any tax payments to its
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members pursuant to clause (viii) of the second paragraph of Section 4.07 hereof
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (a) the consolidated equity of the common stockholders or members, as
applicable, of such Person and its consolidated Subsidiaries as of such date,
plus (b) the respective amounts reported on such Person's balance sheet as of
such date with respect to any series of preferred stock (other than Disqualified
Stock) that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (i) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the date of this Indenture
in the book value of any asset owned by such Person or a consolidated Subsidiary
of such Person, (ii) all investments as of such date in unconsolidated
Subsidiaries and in Persons that are not Subsidiaries and (iii) all unamortized
debt discount and expense and unamortized deferred charges as of such date, in
each case, determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Agreements" means one or more debt facilities (including, without
limitation, the Amended Credit Facility) or commercial paper facilities with
banks or other institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time. Indebtedness under Credit Agreements outstanding on the
date on which Notes are first issued and authenticated under this Indenture
shall be deemed to have been incurred on such date in reliance on the exception
provided by clause (i) of the definition of Permitted Debt in Section 4.09
hereof.
"Custodian" means the Trustee, as custodian with respect to the Notes in
global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
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"Definitive Note" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06 hereof, in the form of
Exhibit A-1 hereto except that such Note shall not bear the Global Note Legend
and shall not have the "Schedule of Exchanges of Interests in the Global Note"
attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the Holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant to
Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness in existence on the date of this
Indenture (other than Indebtedness under the Amended Credit Facility), until
such Indebtedness is repaid.
"Finance Corp." means PRG Finance Corporation, a Delaware corporation, and
any and all successors thereto.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any)
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pursuant to Hedging Obligations), (ii) the consolidated interest expense of such
Person and its Restricted Subsidiaries that was capitalized during such period,
(iii) any interest expense on Indebtedness of another Person that is guaranteed
by such Person or one of its Restricted Subsidiaries or secured by a Lien on
assets of such Person or one of its Restricted Subsidiaries (whether or not such
guarantee or Lien is called upon) and (iv) the product of (a) all dividend
payments, whether or not in cash, on any series of preferred stock of such
Person or any of its Restricted Subsidiaries, other than dividend payments on
Equity Interests payable solely in Equity Interests of the Company, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated EBITDA of such Person for such period to
the Fixed Charges of such Person and its Restricted Subsidiaries for such
period. In the event that the Company or any of its Restricted Subsidiaries
incurs, assumes, guarantees or redeems any Indebtedness (other than revolving
credit borrowings) or issues preferred stock subsequent to the commencement of
the period for which the Fixed Charge Coverage Ratio is being calculated but
prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated EBITDA for such reference
period shall be calculated without giving effect to clause (iii) of the proviso
set forth in the definition of Consolidated Net Income, (ii) the Consolidated
EBITDA attributable to discontinued operations, as determined in accordance with
GAAP, and operations or businesses disposed of prior to the Calculation Date,
shall be excluded and (iii) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but only to the
extent that the obligations giving rise to such Fixed Charges will not be
obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"Global Notes" means, individually and collectively, each of the Restricted
Global Notes and the Unrestricted Global Notes, in the form of Exhibit A-1
hereto issued in accordance with Section 2.01, 2.06(b)(iv), 2.06(d)(ii) or
2.06(f) hereof.
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"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means each of the Company's current and future domestic
Restricted Subsidiaries other than Finance Corp.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, (i) any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, (ii) all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and (iii) to the extent not otherwise included, the
guarantee by such Person of any indebtedness of any other Person.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Note through a Participant.
"Initial Purchasers" means Bear, Stearns & Co. Inc., BT Alex. Brown
Incorporated, Morgan Stanley & Co. Incorporated and BNY Capital Markets, Inc.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests
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or other securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP (excluding
equity in undistributed earnings). If the Company or any Subsidiary of the
Company sells or otherwise disposes of any Equity Interests of any direct or
indirect Subsidiary of the Company such that, after giving effect to any such
sale or disposition, such Person is no longer a Subsidiary of the Company, the
Company shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in the
third paragraph of Section 4.07 hereof.
"Issuers" means the Company and Finance Corp.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Issuers and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"Make-Whole Premium" means, with respect to a Note, an amount equal to the
greater of (i) 5.75 % of the outstanding principal amount of such Note and (ii)
the excess of (a) the present value of the remaining interest, premium and
principal payments due on such Note as if such Note was redeemed on January 15,
2003, computed using a discount rate equal to the Treasury Rate plus 50 basis
points, over (b) the outstanding principal amount of such Note.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
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"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness: (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise) or (c) constitutes the lender; (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness (other than the Notes being
offered hereby) of the Company or any of its Restricted Subsidiaries to declare
a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Issuers.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the Issuers
by two Officers of each of the Issuers, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of such Issuer, that meets the requirements of
Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 12.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
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"Participant" means, with respect to the Depositary, Euroclear or Cedel, a
Person who has an account with the Depositary, Euroclear or Cedel, respectively
(and, with respect to The Depository Trust Company, shall include Euroclear and
Cedel).
"Participating Broker-Dealer" has the meaning set forth in the Registration
Rights Agreement.
"Permitted Business" shall mean and include products and services furnished
in the live entertainment (live theater, concert touring and special events),
corporate events (trade and industrial shows) and themed entertainment (gaming,
theme parks and themed retail) markets, including but not limited to (i) scenery
and exhibit fabrication, (ii) computerized motion and show control systems,
including the Company's proprietary Stage Command System(R), (iii) theatrical
lighting systems and related products, and (iv) project management, which
encompasses design engineering, budgeting, logistical coordination and
installation. Without limiting the foregoing, "Permitted Business" shall include
lines of businesses which are related or complementary to any of the above,
including the acquisition and ownership of firms which are principally but not
exclusively engaged in one or more of the above lines, and any businesses which
are, in the reasonable judgment of the Board of Directors, logical extensions of
any of the above.
"Permitted Investments" means (i) any Investment in the Company or in a
Wholly Owned Restricted Subsidiary of the Company; (ii) any Investment in Cash
Equivalents; (iii) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment (a) such Person
becomes a Wholly Owned Restricted Subsidiary of the Company or (b) such Person
is merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Wholly Owned Restricted Subsidiary of the Company; (iv) any Restricted
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof;
(v) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Company; (vi) advances and
loans to employees of the Company and its Restricted Subsidiaries in the
ordinary course of business; (vii) Investments acquired by the Company or any of
its Restricted Subsidiaries in exchange for any other Investments or accounts
receivable held by the Company or such Restricted Subsidiary in connection with
or as result of a bankruptcy, workout, reorganization or recapitalization of the
issuer of such Investment or accounts receivable; (viii) any Hedging Obligation;
and (ix) other Investments in any Person, when taken together with all other
Investments made pursuant to this clause (ix) that are at the time outstanding,
not to exceed $5.0 million.
"Permitted Liens" means (i) Liens securing Senior Debt or Guarantor Senior
Debt of the Company and its Restricted Subsidiaries that was permitted by the
terms of this Indenture to be incurred; (ii) Liens in favor of the Company or
any of its Restricted Subsidiaries; (iii) Liens on property of a Person existing
at the time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary of the Company; provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company; (iv) Liens
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on property existing at the time of acquisition thereof by the Company or any
Restricted Subsidiary of the Company, provided that such Liens were in existence
prior to the contemplation of such acquisition; (v) Liens to secure the
performance of statutory obligations, surety or appeal bonds, performance bonds
or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens to secure Indebtedness (including Capital Lease
Obligations) incurred in connection with the acquisition of assets by the
Company or its Restricted Subsidiaries permitted by Section 4.09 hereof;
provided that (a) such Indebtedness was incurred by the prior owner of such
assets prior to such acquisition and was not incurred in connection with, or in
contemplation of, such acquisition and (b) such Lien covers only the assets
acquired with such Indebtedness; (vii) Liens existing on the date of this
Indenture; (viii) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefore; (ix) Liens of landlords or
of mortgagees of landlords arising by operation of law, provided that the rental
payments secured thereby are not yet due and payable; (x) Liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (xi)
easements, rights-of-way, restrictions, minor defects or irregularities in title
and other similar charges or encumbrances not interfering in any material
respect with the business of the Company or any of its Restricted Subsidiaries;
(xii) judgment or attachment Liens not giving rise to an Event of Default;
(xiii) Liens arising out of the purchase, consignment, shipment or storage of
inventory or other goods in the ordinary course of business; (xiv) any interest
or title of a lessor in property subject to any Capital Lease Obligation or
other lease; (xv) Liens arising from filing Uniform Commercial Code financing
statements regarding leases; (xvi) leases or subleases permitted by this
Indenture that are granted to others and do not interfere in any material
respect with the business of the Company or any Restricted Subsidiary, (xvii)
any interest or title of a lessor in the property subject to any lease, whether
characterized as capitalized or operating other than any such interest or title
resulting from or arising out of a default by the company or any Restricted
Subsidiaries of its obligations under such lease; and (xviii) Liens incurred in
the ordinary course of business of the Company or any Restricted Subsidiary of
the Company with respect to obligations that do not exceed $2.0 million at any
one time outstanding and that (a) are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other than trade
credit in the ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or such Restricted
Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (ii) such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity
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equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness is subordinated in right of payment to
the Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Restricted Subsidiary that is the
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock Issuers, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Principals" means Jeremiah J. Harris, his spouse, his issue and any of
their respective spouses, including any trust with respect to which any such
individual is a beneficiary, and the descendants and heirs of Jeremiah J.
Harris.
"Private Placement Legend" means the legend set forth in Section 2.06(g)(i)
to be placed on all Notes issued under this Indenture except where otherwise
permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Real Estate Transaction" means that certain transaction whereby on or
prior to the consummation of the Offering, (i) the Company shall transfer
certain real estate and the related mortgage debt obligations to Scenic
Properties, L.L.C. ("SPLLC") in exchange for 500,000 SPLLC Units held by SPLLC
and (ii) SPLLC shall subsequently lease such real estate back to the Company.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of December 24, 1997, by and among the Issuers, the Guarantors, and the
Initial Purchasers, as such agreement may be amended, modified or supplemented
from time to time.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means the Regulation S Temporary Global Note or
the Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in the
form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
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"Regulation S Temporary Global Note" means a temporary global Note in the
form of Exhibit A-2 hereto bearing the Private Placement Legend and deposited
with or on behalf of and registered in the name of the Depositary or its
nominee, issued in a denomination equal to the outstanding principal amount of
the Notes initially sold in reliance on Rule 903 of Regulation S.
"Related Party" with respect to any Principal means (i) any controlling
stockholder or member, 80% (or more) owned Subsidiary, or spouse or immediate
family member (in the case of an individual) of such Principal or (ii) any
trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such Principal and/or such other
Persons referred to in the immediately preceding clause (i).
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the Private
Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement
Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
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"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person.
"Subsidiary Guarantee" means the Guarantee by each Guarantor of the
Issuers' payment obligations under this Indenture and the Notes, executed
pursuant to the provisions of this Indenture.
"Tax Sharing Agreement" means the tax sharing agreement dated as of the
date of this Indenture between the Company and its members.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb), as amended, as in effect on the date of original issuance of the
Notes.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519))
which has become publicly available at least two business days prior to the date
fixed for redemption (or, if such Statistical Release is no longer published,
any publicly available source of similar market data)) most nearly equal to the
then remaining average life to the first date on which the Notes as subject to
optional redemption by the Issuers; provided, however, that, if such period is
not equal to the constant maturity of a United States Treasury security for
which a weekly average yield is given, the Treasury Rate shall be obtained by
linear interpolation (calculated to the nearest one-twelfth of a year) from the
weekly average yields of United States Treasury securities for which such yields
are given, except that if the average life of such Notes is less than one year,
the weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note in the form of
Exhibit A-1 attached hereto that bears the Global Note Legend and that has the
"Schedule of Exchanges of Interests in the Global Note" attached thereto, and
that is deposited with or on
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behalf of and registered in the name of the Depositary, representing a series of
Notes that do not bear the Private Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that do
not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary (other than Finance
Corp.) that is designated by the Board of Directors as an Unrestricted
Subsidiary pursuant to a Board Resolution, but only to the extent that such
Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (1) to subscribe for additional Equity Interests or (2) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries and has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Equity Interests" of any Person as of any date means the Equity
Interests of such Person that is at the time, or would be if such Person were a
Delaware corporation, entitled to vote in the election of the board of
directors, executive committee or other governing body of such Person.
"Voting Stock" means Capital Stock that is at the time entitled to vote in
the election of the Board of Directors.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that shall elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person, 99% or more of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such
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Person or by one or more Wholly Owned Restricted Subsidiaries of such Person and
one or more Wholly Owned Restricted Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
Term Defined in Section
"Affiliate Transaction"......................................4.11
"Asset Sale".................................................4.10
"Asset Sale Offer"...........................................4.10
"Authentication Order".......................................2.02
"Change of Control Offer"....................................4.15
"Change of Control Payment"..................................4.15
"Change of Control Payment Date" ............................4.15
"Covenant Defeasance"........................................8.03
"Designated Senior Debt".....................................10.02
"Event of Default"...........................................6.01
"Excess Proceeds"............................................4.10
"Guarantor Senior Debt"......................................10.02
"Incur"......................................................4.09
"Legal Defeasance" ..........................................8.02
"Offer Amount"...............................................3.09
"Offer Period"...............................................3.09
"Paying Agent"...............................................2.03
"Permitted Debt".............................................4.09
"Permitted Junior Securities"................................10.02
"Purchase Date"..............................................3.09
"Registrar"..................................................2.03
"Representative".............................................10.02
"Senior Debt"................................................10.02
"Restricted Payments"........................................4.07
SECTION 1.03. TRUST INDENTURE ACT DEFINITIONS
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
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"obligor" on the Notes and the Subsidiary Guarantees means the Issuers and
the Guarantors, respectively, and any successor obligor upon the Notes and the
Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement of successor sections or rules
adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A-1 hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Issuers, the Guarantors
and the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby. However, to the
extent any provision of any Note conflicts with the express provisions of this
Indenture, the provisions of this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form shall be substantially in the
form of Exhibits A-1 or A-2, as applicable, attached hereto (including the
Global Note
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Legend thereon and the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Notes issued in definitive form shall be substantially in the
form of Exhibit A-1 attached hereto (but without the Global Note Legend thereon
and without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S Temporary
Global Note, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary, and registered in the name of the Depositary or the nominee of
the Depositary for the accounts of designated agents holding on behalf of
Euroclear or Cedel Bank, duly executed by the Issuers and authenticated by the
Trustee as hereinafter provided. The Restricted Period shall be terminated upon
the receipt by the Trustee of (i) a written certificate from the Depositary,
together with copies of certificates from Euroclear and Cedel Bank certifying
that they have received certification of non-United States beneficial ownership
of 100% of the aggregate principal amount of the Regulation S Temporary Global
Note (except to the extent of any beneficial owners thereof who acquired an
interest therein during the Restricted Period pursuant to another exemption from
registration under the Securities Act and who will take delivery of a beneficial
ownership interest in a 144A Global Note bearing a Private Placement Legend, all
as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers'
Certificate from the Issuers. Following the termination of the Restricted
Period, beneficial interests in the Regulation S Temporary Global Note shall be
exchanged for beneficial interests in Regulation S Permanent Global Notes
pursuant to the Applicable Procedures. Simultaneously with the authentication of
Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S
Temporary Global Note. The aggregate principal amount of the Regulation S
Temporary Global Note and the Regulation S Permanent Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee, as the case may be, in connection
with transfers of interest as hereinafter provided.
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(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for each Issuer by manual or facsimile
signature. The Company's seal shall be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Issuers signed by two
Officers of each of the Issuers (an "Authentication Order"), authenticate Notes
for original issue up to the aggregate principal amount stated in paragraph 4 of
the Notes. The aggregate principal amount of Notes outstanding at any time may
not exceed such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Issuers
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with Holders or an Affiliate of the Issuers.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Issuers shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Issuers may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar and the term "Paying
Agent" includes any additional paying agent. The Issuers may change any Paying
Agent or Registrar without notice to any Holder. The Issuers shall notify the
Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Issuers fail to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Issuers initially appoint The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
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The Issuers initially appoint the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Issuers shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal
or premium, interest or Liquidated Damages, if any, on the Notes, and will
notify the Trustee of any default by the Issuers in making any such payment.
While any such default continues, the Trustee may require a Paying Agent to pay
all money held by it to the Trustee. The Issuers at any time may require a
Paying Agent to pay all money held by it to the Trustee. Upon payment over to
the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall
have no further liability for the money. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy
or reorganization proceedings relating to either of the Issuers, the Trustee
shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Issuers shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Issuers shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, by the Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary. All Global Notes will be exchanged by the
Issuers for Definitive Notes if (i) the Company delivers to the Trustee notice
from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 90 days after the date of such notice from the Depositary or (ii)
the Issuers in their sole discretion determine that the Global Notes (in whole
but not in part) should be exchanged for Definitive Notes and deliver a written
notice to such effect to the Trustee; provided that in no event shall the
Regulation S Temporary Global Note be exchanged by the Issuers for Definitive
Notes prior to (x) the expiration of the Restricted Period and (y) the receipt
by the Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B)
under the Securities Act. Upon the occurrence of either of the preceding events
in (i) or (ii) above, Definitive Notes shall be issued in
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such names as the Depositary shall instruct the Trustee. Global Notes also may
be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b),(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The
transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period, transfers of
beneficial interests in the Regulation S Temporary Global Note may not be
made to a U.S. Person or for the account or benefit of a U.S. Person (other
than an Initial Purchaser). Beneficial interests in any Unrestricted Global
Note may be transferred to Persons who take delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect
the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause
to be issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Note shall be registered to effect the transfer
or exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued
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upon the transfer or exchange of beneficial interests in the Regulation S
Temporary Global Note prior to (x) the expiration of the Restricted Period
and (y) the receipt by the Registrar of any certificates required pursuant
to Rule 903 under the Securities Act. Upon consummation of an Exchange
Offer by the Issuers in accordance with Section 2.06(f) hereof, the
requirements of this Section 2.06(b)(ii) shall be deemed to have been
satisfied upon receipt by the Registrar of the instructions contained in
the Letter of Transmittal delivered by the Holder of such beneficial
interests in the Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in Global
Notes contained in this Indenture and the Notes or otherwise applicable
under the Securities Act, the Trustee shall adjust the principal amount of
the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or the
Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications and certificates and Opinion of Counsel required by
item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Issuers;
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(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D) above
at a time when an Unrestricted Global Note has not yet been issued, the Issuers
shall issue and, upon receipt of an Authentication Order in accordance with
Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted
Global Notes in an aggregate principal amount equal to the aggregate principal
amount of beneficial interests transferred pursuant to subparagraph (B) or (D)
above.
Beneficial interests in an Unrestricted Global Note cannot be exchanged
for, or transferred to Persons who take delivery thereof in the form of, a
beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation:
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(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such beneficial interest is being transferred pursuant to
an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(G) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Issuers shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive Note
issued in exchange for a beneficial interest in a Restricted Global Note
pursuant to this Section 2.06(c) shall be registered in such name or names
and in such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions from
the Depositary and the Participant or Indirect Participant. The Trustee
shall deliver such Definitive Notes to the Persons in whose names such
Notes are so registered. Any Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant to this Section
2.06(c)(i) shall
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bear the Private Placement Legend and shall be subject to all restrictions
on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act, except in the case of a transfer pursuant to an exemption
from the registration requirements of the Securities Act other than Rule
903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive
Note or may transfer such beneficial interest to a Person who takes
delivery thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (1)(b)
thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a Definitive Note that does not bear the Private Placement
Legend, a certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
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and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause
the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Issuers shall
execute and the Trustee shall authenticate and deliver to the Person
designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iv) shall be registered in such
name or names and in such authorized denomination or denominations as the
holder of such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Notes to the Persons
in whose names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest pursuant to this Section 2.06(c)(iv)
shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or
to transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule
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904 under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case of
clause (B) above, the 144A Global Note, and in the case of clause (c)
above, the Regulation S Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note
only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
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(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (1)(c)
thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof
in the form of a beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a beneficial
interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above
at a time when an Unrestricted Global Note has not yet been issued, the Issuers
shall issue and, upon receipt of an Authentication Order in accordance with
Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted
Global Notes in an aggregate principal amount equal to the principal amount of
Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.06(e), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the
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Registrar the Definitive Notes duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing. In addition, the
requesting Holder shall provide any additional certifications, documents and
information, as applicable, required pursuant to the following provisions of
this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name
of Persons who take delivery thereof in the form of a Restricted Definitive
Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Issuers;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
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(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive Note,
a certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Issuers to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes.
A Holder of Unrestricted Definitive Notes may transfer such Notes to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note. Upon receipt of a request to register such a transfer, the Registrar
shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance
with the Registration Rights Agreement, the Issuers shall issue and, upon
receipt of an Authentication Order in accordance with Section 2.02, the Trustee
shall authenticate (i) one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of the beneficial interests in
the Restricted Global Notes tendered for acceptance by Persons that certify in
the applicable Letters of Transmittal that (x) they are not broker-dealers, (y)
they are not participating in a distribution of the Exchange Notes and (z) they
are not affiliates (as defined in Rule 144) of the Issuers, and accepted for
exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate
principal amount equal to the principal amount of the Restricted Definitive
Notes accepted for exchange in the Exchange Offer. Concurrently with the
issuance of such Notes, the Trustee shall cause the aggregate principal amount
of the applicable Restricted Global Notes to be reduced accordingly, and the
Issuers shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form
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THIS NOTE AND THE GUARANTEES HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THE SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR
OTHERWISE TRANSFERRED, IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES (A) TO OFFER,
SELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY ONLY (1) TO THE ISSUERS,
(2) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (3) TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A, (4) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT, (5) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH A(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT, OR
(6) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION RIGHTS
REQUIREMENTS UNDER THE SECURITIES ACT (AND BASED ON AN OPINION OF COUNSEL
IS THE ISSUERS SO REQUEST), SUBJECT IN EACH OF THE FOREGOING CASES TO
APPLICABLE JURISDICTION AND (B) THAT IT WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCE HEREBY
OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
(B) Notwithstanding the foregoing, any Global Note or Definitive
Note issued pursuant to subparagraphs (b)(iv), (c)(iii), (c)(iv),
(d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and
all Notes issued in exchange therefor or substitution thereof) shall
not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF
THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER
ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS
HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 AND 9.05 OF THE
INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART
PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE
DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE
INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
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TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE
ISSUERS."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE. NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Issuers
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Issuers' order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Issuers may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
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(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Issuers, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global Notes
or Definitive Notes surrendered upon such registration of transfer or
exchange.
(v) The Issuers shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business on
the day of selection, (B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part or (c) to register the transfer
of or to exchange a Note between a record date and the next succeeding
Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Issuers may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent
or the Issuers shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes
in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
SECTION 2.07. REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee or the Issuers and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Issuers shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Issuers, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Issuers to protect the Issuers, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Issuers may charge for their expenses in replacing a Note.
Every replacement Note is an additional obligation of the Issuers and shall
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
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The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section 2.08
as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not
cease to be outstanding because the Issuers or an Affiliate of the Issuers holds
the Note;
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Issuers, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Issuers, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES
Until certificates representing Notes are ready for delivery, the Issuers
may prepare and the Trustee, upon receipt of an Authentication Order, shall
authenticate temporary Notes. Temporary Notes shall be substantially in the form
of certificated Notes but may have variations that the Issuers consider
appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Issuers shall prepare and the Trustee
shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of this
Indenture.
SECTION 2.11. CANCELLATION.
The Issuers at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act).
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Certification of the destruction of all canceled Notes shall be delivered to the
Issuers. The Issuers may not issue new Notes to replace Notes that they have
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Issuers default in a payment of interest on the Notes, they shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Issuers shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Issuers shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Issuers (or, upon
the written request of the Issuers, the Trustee in the name and at the expense
of the Issuers) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Issuers elect to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, they shall furnish to the Trustee, at least
30 days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed or purchased in an offer
to purchase at any time, selection of Notes for redemption shall be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed, or, if the Notes are not so
listed, on a pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate. In the event of partial redemption by lot, the particular
Notes to be redeemed shall be selected, unless otherwise provided herein, not
less than 30 nor more than 60 days prior to the redemption date by the Trustee
from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Issuers in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
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SECTION 3.03. NOTICE OF REDEMPTION
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Issuers shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption
date upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion shall be issued upon cancellation of the
original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Issuers default in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Issuers' request, the Trustee shall give the notice of redemption in
the Issuers' name and at its expense; provided, however, that the Issuers shall
have delivered to the Trustee, at least 45 days prior to the redemption date, an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price. A notice of redemption may not be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Issuers shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued
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interest on all Notes to be redeemed on that date. The Trustee or the Paying
Agent shall promptly return to the Issuers any money deposited with the Trustee
or the Paying Agent by the Issuers in excess of the amounts necessary to pay the
redemption price of, and accrued interest on, all Notes to be redeemed.
If the Issuers comply with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Issuers to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Issuers shall issue
and, upon the Issuers' written request, the Trustee shall authenticate for the
Holder at the expense of the Issuer a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the Notes shall
not be redeemable at the Issuers' option prior to January 15, 2003. Thereafter,
the Notes shall be subject to redemption at any time at the option of the
Issuers, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest and Liquidated Damages, if
any, thereon to the date fixed for redemption, if redeemed during the
twelve-month period beginning on January 15 of the years indicated below:
Year Percentage
---- ----------
2003..............................................._______%
2004..............................................._______%
2005..............................................._______%
2006 and thereafter................................100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07,
prior to January 15, 2001, the Issuers may redeem up to 35% of the aggregate
principal amount of the Notes originally issued at a redemption price of 110% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date fixed for redemption, with the net cash
proceeds of one or more public offerings of Capital Stock of the Company (other
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than Disqualified Stock), provided that (i) at least 65% of the aggregate
principal amount of the Notes originally issued remains outstanding immediately
after the occurrence of such redemption and (ii) each such redemption shall
occur within 90 days after the date of the closing of any such offering of
Capital Stock of the Company.
(c) In addition, at any time prior to January 15, 2003, the Issuers may, at
their option, redeem the Notes, in whole or in part, at a redemption price equal
to 100% of the principal amount thereof plus the applicable Make-Whole Premium.
(d) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth in Section 4.10 and 4.15 hereof, the Issuers shall not
be required to make mandatory redemption payments with respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Issuers shall be
required to commence an Asset Sale Offer, it shall follow the procedures
specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Issuers shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Issuers shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
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(c) that any Note not tendered or accepted for payment shall continue
to accrete or accrue interest;
(d) that, unless the Issuers default in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete or accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may
not elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Issuers, a
depositary, if appointed by the Issuers, or a Paying Agent at the address
specified in the notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Issuers, the depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Trustee shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Issuer so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Issuers shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Notes tendered, and
shall deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Issuers in accordance with the
terms of this Section 3.09. The Issuers, the Depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Notes tendered by such Holder and accepted by the
Issuers for purchase, and the Issuers shall promptly issue a new Note, and the
Trustee, upon written request from the Issuers, shall authenticate and mail or
deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Issuers to
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the Holder thereof. The Issuers shall publicly announce the results of the Asset
Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Issuers shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Issuers shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
The Issuers shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; they shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Issuers shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Issuers in respect of the Notes and this Indenture may be served. The
Issuers shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Issuers
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Issuers may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Issuers
of their obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York, for such purposes. The Issuers shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
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The Issuers hereby designate the Corporate Trust Office of the Trustee as
one such office or agency of the Issuers in accordance with Section 2.03.
SECTION 4.03. REPORTS.
(a) Upon the consummation of the Exchange Offer or the effectiveness of the
Shelf Registration Statement (as defined in the Registration Rights Agreement),
as the case may be, whether or not required by the rules and regulations of the
SEC, so long as any Notes are outstanding, the Issuers shall furnish to the
Holders of Notes (i) all quarterly and annual financial information that would
be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
the Issuers were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of the Company and
its consolidated Subsidiaries (showing in reasonable detail, either on the face
of the financial statements or in the footnotes thereto, the consolidated
financial condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial information and results of operations
of the Unrestricted Subsidiaries of the Company) and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the SEC on Form 8-K if the Company were required to file such reports. In
addition, whether or not required by the rules and regulations of the SEC, the
Company shall file a copy of all such information and reports with the SEC for
public availability (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. The Issuers shall at all times comply with TIA ss. 314(a).
(b) For so long as any Notes remain outstanding, the Issuers shall furnish
to the Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Issuers and each Guarantor (to the extent that such Guarantor is so
required under the TIA) shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Issuers or such Guarantors, as applicable, have kept,
observed, performed and fulfilled their obligations under this Indenture and
further stating, as to each such Officer signing such certificate, that, to the
best of his or her knowledge, the Issuers and the Guarantors have kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Issuers or such
Guarantors, as applicable, are taking or propose to
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take with respect thereto) and that, to the best of his or her knowledge, no
event has occurred and remains in existence by reason of which payments on
account of the principal of or interest, if any, on the Notes is prohibited or
if such event has occurred, a description of the event and what action the
Issuers or such Guarantors, as applicable. are taking or propose to take with
respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) hereof shall be accompanied by
a written statement of the Company's independent public accountants (who shall
be a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Issuers have violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Issuers shall, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any Officer becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Issuers are taking or propose to take with respect
thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Issuers and each of the Guarantors covenant (to the extent that it may
lawfully do so) that they shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Issuers and
each of the Guarantors (to the extent that they may lawfully do so) hereby
expressly waive all benefit or advantage of any such law, and covenant that they
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiary's Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the
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Company or any Restricted Subsidiary) or to any direct or indirect holders of
the Company's Equity Interests in their capacity as such (other than dividends
or distributions (a) payable in Equity Interests (other than Disqualified Stock)
of the Company or (b) to the Company or any Wholly Owned Restricted Subsidiary
of the Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company (other than any such Equity Interests owned by
the Company or any Wholly Owned Restricted Subsidiary of the Company); (iii)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness of the Company or any
Restricted Subsidiary that is subordinated to the Notes, except a payment of
interest or principal at Stated Maturity; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture (excluding Restricted
Payments permitted by clause (ii) through (v) of the next succeeding
paragraph), is less than the sum of (i) 50% of the Consolidated Net Income
of the Company for the period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing after the date of this
Indenture to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is
a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net
cash proceeds received by the Company as a contribution to its common
equity capital or from the issue or sale since the date of this Indenture
of Equity Interests of the Company (other than Disqualified Stock) or of
Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of
the Company and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), plus (iii)
50% of any dividends received by the Company or a Wholly Owned Restricted
Subsidiary after the date of this Indenture from an Unrestricted Subsidiary
of the Company, to the extent that such dividends were not otherwise
included in Consolidated Net Income of the Company for such period, plus
(iv) to the extent that any Restricted Investment that was made after the
date of this Indenture is sold for cash or otherwise liquidated or repaid
for cash, the lesser of (A) the cash return
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of capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted
Investment, plus (v) $5.0 million.
The foregoing provisions shall not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at the date of
declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Equity Interests of the Company or subordinated Indebtedness
of the Company or any Guarantor in exchange for, or out of the net cash proceeds
of the substantially concurrent sale (other than to a Subsidiary of the Company)
of, other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (c)(ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness; (iv) the payment of any dividend by a Restricted
Subsidiary of the Company to the holders of its Equity Interests on a pro rata
basis; (v) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Restricted Subsidiary of the
Company held by any member of the Company's (or any of its Restricted
Subsidiaries') management or board of directors pursuant to any management
equity subscription agreement, stock option agreement or other similar agreement
or any successor arrangement entered into in connection with the reorganization
of the Company as a corporation (provided that such successor arrangement is on
terms substantially similar to the of the arrangement so replaced); provided
that the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $500,000 in any twelve-month period
and no Default or Event of Default shall have occurred and be continuing
immediately after such transaction; (vi) Investments in non-Wholly Owned
Restricted Subsidiaries of the Company in an aggregate amount at any time
outstanding not to exceed $5.0 million; (vii) cash distributions to members of
the Company as described under "Use of Proceeds" and the distribution of real
estate in connection with the Real Estate Transaction; (viii) so long as the
Company is treated as a partnership for United States federal income tax
purposes, payments by the Company to members of the Company to satisfy tax
obligations to the extent such obligations are then due and owing, and in
accordance with the Tax Sharing Agreement as in effect on the date of this
Indenture; provided that such amounts do not exceed the amounts that would
otherwise be due and owing if the Company and its Subsidiaries were an
independent taxpayer; and (ix) at any time the Company has $15.0 million of
availability under the Amended Credit Facility, a one-time cash distribution by
the Company to its members not to exceed $10.0 million; provided that the
Company shall have delivered to the Trustee, at the time of such distribution,
an Officers' Certificate stating that, in management's reasonable judgment,
based on the Company's operations and cash flow projections the Company will
continue to have $15.0 million of availability under the Amended Credit Facility
for at least the succeeding four quarters..
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be
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determined in good faith by the Board of Directors whose resolution with respect
thereto shall be delivered to the Trustee (which shall certify that such
valuation has been approved by a majority of the Independent Directors). Not
later than the date of making any Restricted Payment, the Company shall deliver
to the Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this Section 4.07 were computed.
The Board of Directors may designate any Restricted Subsidiary (other than
Finance Corp.) to be an Unrestricted Subsidiary if such designation would not
cause a Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated shall be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this Section 4.07. All such
outstanding Investments shall be deemed to constitute Investments in an amount
equal to the greatest of (i) the net book value of such Investments at the time
of such designation, (ii) the fair market value of such Investments at the time
of such designation and (iii) the original fair market value of such Investments
at the time they were made. Such designation shall only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
Any such designation by the Board of Directors shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions. If, at any time, any
Unrestricted Subsidiary would fail to meet the definition of an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of this Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date under
Section 4.09 hereof, the Issuers shall be in default of such Section). The Board
of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
Section 4.09 hereof, calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (ii) no
Default or Event of Default would be in existence immediately following such
designation.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer
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any of its properties or assets to the Company or any of its Restricted
Subsidiaries, except for such encumbrances or restrictions existing under or by
reason of (a) Existing Indebtedness as in effect on the date of this Indenture,
(b) the Amended Credit Facility as in effect as of the date of this Indenture,
and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive with respect to
such dividend and other payment restrictions than those contained in the Amended
Credit Facility as in effect on the date of this Indenture, (c) this Indenture,
the Notes and the Subsidiary Guarantees, (d) applicable law, (e) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, provided that,
in the case of Indebtedness, such Indebtedness was permitted by the terms of
this Indenture to be incurred, (f) by reason of customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, or (h)
Permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) or issue any
shares of Disqualified Stock; provided, however, that, so long as no Default or
Event of Default has occurred and is continuing, the Company and any Guarantor
may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least 2.0 to 1,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred or the
Disqualified Stock had been issued at the beginning of such four-quarter period.
The provisions of the first paragraph of this Section 4.09 shall not apply
to the incurrence of any of the following (collectively, "Permitted Debt"):
(i) the incurrence by the Company and the Guarantors of Indebtedness
under Credit Agreements in an aggregate amount not to exceed $75 million at
any time outstanding (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company
and the Guarantors thereunder), less
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the aggregate amount of all Net Proceeds of Asset Sales applied to repay
any such Indebtedness pursuant to clause (i) of the second paragraph of
Section 4.10 hereof.;
(ii) the incurrence by the Company and the Guarantors of Indebtedness
represented by the Notes and the Subsidiary Guarantees;
(iii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iv) the incurrence of Indebtedness between or among the Company and
any of its Wholly Owned Restricted Subsidiaries; provided, however, that
(a) if the Company is the obligor on such Indebtedness, such Indebtedness
is expressly subordinated to the prior payment in full of all Obligations
with respect to the Notes and (b) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Wholly Owned Restricted Subsidiary, and
any sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Wholly Owned Restricted Subsidiary, shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by
the Company or such Restricted Subsidiary, as the case may be;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding;
(vi) the guarantee by the Company or any of the Guarantors of
Indebtedness that is permitted to be incurred by another provision of this
Section 4.09;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding under this
clause (vii), including all Permitted Refinancing Indebtedness incurred
pursuant to clause (ix) below to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (vii), not to exceed $15
million;
(viii) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (viii); and
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Indebtedness
(other than intercompany Indebtedness) that was permitted by this Indenture
to be incurred by the first paragraph of this Section 4.09, or by clauses
(ii), (iii), (v), (vi) and (vii) of this Section 4.09.
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For purposes of determining compliance with this Section 4.09, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (ix) above or is
entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09 and such item of Indebtedness
will be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph hereof. Accrual of interest, the accretion of
accreted value and the payment of interest in the form of additional
Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes
of this Section 4.09.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash;
provided that the amount of (a) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet) of the Company or such
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Notes or any guarantee thereof) that are
assumed by the transferee of any such assets pursuant to a customary novation
agreement that releases the Company or such Restricted Subsidiary from further
liability and (b) any securities, notes or other obligations received by the
Company or such Restricted Subsidiary from such transferee that are
substantially concurrently converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received) shall be deemed to be
cash for purposes of this provision.
Within 270 days of the receipt of any Net Proceeds from an Asset Sale, the
Company may apply such Net Proceeds, at its option, (i) to repay Senior Debt
(and to correspondingly reduce commitments with respect thereto in the case of
revolving borrowings) or (ii) to the acquisition of a controlling interest in a
Permitted Business, the making of a capital expenditure or the acquisition of
other long-term assets, in each case, used or useful in a Permitted Business.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce Senior Debt or otherwise invest such Net Proceeds in any
manner that is not prohibited by this Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Excess Proceeds" When the aggregate
amount of Excess Proceeds exceeds $5.0 million, the Issuers will be required to
make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds at an offer price in cash in an amount equal to 100% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date fixed for purchase, in accordance with the procedures set
forth in this Indenture. To the extent that the aggregate amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for any purpose not otherwise
prohibited by this Indenture. If the aggregate principal amount of Notes
surrendered by Holders thereof
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exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased as provided in Section 3.02 hereof. Upon completion of an Asset Sale
Offer, the amount of Excess Proceeds shall be reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or such Restricted Subsidiary than those that would have been obtained
in a comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (a) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of the
Board of Directors and a majority of the Independent Directors and (b) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $7.5 million, an opinion as to
the fairness to Company of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of national
standing. The foregoing provisions shall not prohibit (i) any employment
agreement entered into by the Company or any of its Restricted Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Restricted Subsidiary, (ii) transactions between or among the
Company and/or its Restricted Subsidiaries and/or Finance Corp. and (iii) any
Restricted Payment that is permitted by Section 4.07 hereof.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness or trade payables on any asset now owned or
hereafter acquired, or any income or profits therefrom or assign or convey any
right to receive income therefrom, except Permitted Liens.
SECTION 4.13. BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses.
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its limited
liability company existence, and the limited liability company, corporate,
partnership or other existence of each of its Subsidiaries, in accordance with
the respective organizational documents (as the same may be amended from time to
time) of the Company or any such Restricted Subsidiary and (ii) the rights
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(charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the limited liability company,
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Issuers shall make an
offer (a "Change of Control Offer") to each Holder of Notes to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of such Holder's
Notes at an offer price in cash equal to 101% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
date fixed for repurchase (the "Change of Control Payment"). Within ten business
days following a Change of Control, the Issuers shall mail a notice to each
Holder describing the transaction or transactions that constitute the Change of
Control and stating: (i) that the Change of Control Offer is being made pursuant
to this Section 4.15 and that all Notes tendered will be accepted for payment;
(ii) the purchase price and the date fixed for purchase, which shall be no later
than 30 business days from the date such notice is mailed (the "Change of
Control Payment Date"); (iii) that any Note not tendered will continue to accrue
interest; (iv) that, unless the Issuers default in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control Payment
Date; (v) that Holders electing to have any Notes purchased pursuant to a Change
of Control Offer will be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their election if the Paying
Agent receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes delivered for purchase, and a statement that such Holder is
withdrawing his election to have the Notes purchased; and (vii) that Holders
whose Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or an integral
multiple thereof. The Issuers shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Issuers shall, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted
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together with an Officers' Certificate stating the aggregate principal amount of
Notes or portions thereof being purchased by the Issuers. The Paying Agent shall
promptly mail to each Holder of Notes so tendered the Change of Control Payment
for such Notes, and the Trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided
that each such new Note will be in a principal amount of $1,000 or an integral
multiple thereof. Prior to complying with the provisions of this Section 4.15,
but in any event within 90 days following a Change of Control, the Issuers shall
either repay all outstanding Senior Debt or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Debt to permit the
repurchase of Notes required by this Section 4.15. The Issuers shall publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.15, the
Issuers shall not be required to make a Change of Control Offer following a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Section 4.15 and Section 3.09 hereof and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
SECTION 4.16. LIMITATION ON OTHER SENIOR SUBORDINATED DEBT.
Notwithstanding the provisions of Section 4.09 hereof, (i) the Company
shall not directly or indirectly incur any Indebtedness that is subordinate or
junior in right of payment to any Senior Debt and senior in any respect in right
of payment to the Notes and (ii) no Guarantor shall incur any Indebtedness that
is subordinate or junior in right of payment to its Guarantor Senior Debt and
senior in any respect in right of payment to such Guarantor's Subsidiary
Guarantee.
SECTION 4.17. SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company and the Guarantors may enter into a sale and leaseback transaction
if (i) the Company or such Guarantor could have (a) incurred Indebtedness in an
amount equal to the Attributable Debt relating to such sale and leaseback
transaction pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof and (b) incurred a Lien to secure such
Indebtedness pursuant to the provisions of Section 4.12 hereof, (ii) the gross
cash proceeds of such sale and leaseback transaction are at least equal to the
fair market value (as determined in good faith by the Board of Directors and set
forth in an Officers' Certificate delivered to the Trustee, which shall certify
that such valuation has been approved by a majority of the Independent
Directors) of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and leaseback
transaction is permitted by, and the proceeds of such transaction are applied in
compliance with Section 4.10 hereof. The foregoing provisions shall not prohibit
the sale and leaseback of real estate in connection with the Real Estate
Transaction.
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SECTION 4.18. PAYMENTS FOR CONSENT.
Neither the Company, Finance Corp. nor any of Company's Restricted
Subsidiaries shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of this Indenture or the Notes unless such consideration
is offered to be paid or is paid to all Holders of the Notes that consent, waive
or agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
SECTION 4.19. ADDITIONAL SUBSIDIARY GUARANTEES.
If the Company or any of its Restricted Subsidiaries shall acquire or
create another Restricted Subsidiary after the date of this Indenture, or any
Unrestricted Subsidiary shall cease to be an Unrestricted Subsidiary, then such
Subsidiary shall execute a Subsidiary Guarantee of the Notes and deliver an
Opinion of Counsel, in accordance with the terms of this Indenture.
SECTION 4.20. INDEPENDENT DIRECTORS.
From and after the earlier of 30 days after the consummation of the
Exchange Offer or 180 days after the date of this Indenture, so long as any of
the Notes are outstanding, the Company shall have at least two-thirds of its
Board of Directors who are neither an officer nor an employee of the Company or
any of its Affiliates (the "Independent Directors"). Any transaction requiring
the approval of the majority of the Independent Directors shall be prohibited at
any time that at least two-thirds of the Company's Board of Directors are not
Independent Directors.
SECTION 4.21. ACTIVITIES OF FINANCE CORP.
Finance Corp. shall not hold any material assets, become liable for any
material obligations or engage in any significant business activities; provided,
however, that Finance Corp. may be a co-obligor or guarantor with respect to
Indebtedness of which the Company is an obligor. Notwithstanding the foregoing,
Finance Corp. shall at all times prior to the reorganization of the Company as a
corporation remain a Wholly Owned Restricted Subsidiary of the Company.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
(a) Neither the Company nor Finance Corp. may consolidate or merge with or
into (whether or not the Company or Finance Corp., as the case may be, is the
surviving entity), or sell, assign, transfer, lease, convey or otherwise dispose
of all or substantially all of its properties or assets in one or more related
transactions, to another corporation, Person or entity unless (i) the Company or
Finance Corp., as the case may
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be, is the surviving corporation or the entity or the Person formed by or
surviving any such consolidation or merger (if other than the Company or Finance
Corp.) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company or Finance Corp.) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company or Finance
Corp., as the case may be, under the Notes and this Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) except in the case of a merger of the Company with or into a Wholly Owned
Restricted Subsidiary of the Company (including the merger of Finance Corp. with
or into the Company at any time when the Company is a corporation), the Company
or the entity or Person formed by or surviving any such consolidation or merger
(if other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (a) will have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction and
(b) will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof.
(b) Notwithstanding the provisions of this Section 5.01, the Company may
reorganize as a corporation in accordance with the procedures established in
this Indenture provided that such reorganization is not materially adverse to
holders of Notes (it being recognized that such reorganization shall not be
considered materially adverse to holders of Notes solely because (i) of the
accrual of deferred tax liabilities resulting from such reorganization or (ii)
the successor or surviving corporation (a) is subject to income taxation as an
entity or (b) is considered to be an "includible corporation" of an affiliated
group of corporations within the meaning of Section 1504(a)(1) of the Code or
any similar state or local law) and certain other conditions are satisfied.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company or Finance Corp. in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company or
Finance Corp. is merged or to which such sale, assignment, transfer, lease,
conveyance or other disposition is made shall succeed to, and be substituted for
(so that from and after the date of such consolidation, merger, sale, lease,
conveyance or other disposition, the provisions of this Indenture referring to
the "Company" or "Finance Corp." shall refer instead to the successor
corporation and not to the Company or Finance Corp.), and may exercise every
right and power of the Company or Finance Corp. under this Indenture with the
same effect as if such successor Person had been named as the Company or Finance
Corp. herein; provided, however, that the predecessor Company or Finance Corp.
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shall not be relieved from the obligation to pay the principal of and interest
on the Notes except in the case of a sale of all of the Company's or Finance
Corp.'s assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Issuers default in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes and such default
continues for a period of 30 days (whether or not prohibited by Article 10
hereof);
(b) the Issuers default in the payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by Article 10
hereof);
(c) the Company or any Restricted Subsidiary fails to comply with any
of the provisions of Section 4.07, 4.09, 4.10, 4.15 or 5.01 hereof;
(d) the Company or any Restricted Subsidiary fails to comply with any
of their other agreements in this Indenture or the Notes for 30 days after
written notice by the Trustee or the Holders of at least 25% in principal
amount of the then outstanding Notes;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Restricted Subsidiaries), whether such Indebtedness or guarantee now
exists, or is created after the date of this Indenture, which default (i)
is caused by a failure to pay principal of or premium, if any, or interest
on such Indebtedness prior to the expiration of the grace period provided
in such Indebtedness on the date of such default (a "Payment Default") or
(ii) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more;
(f) the Company or any of its Restricted Subsidiaries fails to pay
final judgments aggregating in excess of $5.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days;
(g) except as permitted by this Indenture, any Subsidiary Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or
shall cease for any reason to be in full force and effect or any Guarantor,
or any Person acting on behalf
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of any Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee; and
(h) the Issuers, any of the Company's Restricted Subsidiaries that
constitutes a Significant Subsidiary or any group of Restricted
Subsidiaries of the Company that, taken together, would constitute a
Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors,
or
(v) generally is not paying its debts as they become due;
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Issuers, any of the Company's
Restricted Subsidiaries that constitutes a Significant Subsidiary or
any group of Restricted Subsidiaries of the Company that, taken
together, would constitute a Significant Subsidiary in an involuntary
case;
(ii) appoints a custodian of the Issuers, any of the Company's
Restricted Subsidiaries that constitutes a Significant Subsidiary or
any group of Restricted Subsidiaries of the Company that, taken
together, would constitute a Significant Subsidiary or for all or
substantially all of the property of the Issuers, any of the Company's
Restricted Subsidiaries that constitutes a Significant Subsidiary or
any group of Restricted Subsidiaries of the Company that, taken
together, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Issuers, any of the Company's
Restricted Subsidiaries that constitutes a Significant Subsidiary or
any group of Restricted Subsidiaries of the Company that, taken
together, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60
consecutive days.
SECTION 6.02. ACCELERATION.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, if an Event of Default specified in
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clause (h) or (i) of Section 6.01 hereof occurs with respect to the Issuers, any
Restricted Subsidiary of the Company that constitutes a Significant Subsidiary
or any group of Restricted Subsidiaries of the Company that, taken together,
would constitute a Significant Subsidiary, all outstanding Notes shall become
due and payable without further action or notice. Notwithstanding the foregoing,
if an Event of Default specified in clause (h) or (i) of Section 6.01 hereof
occurs with respect to the Issuers or any of the Company's Restricted
Subsidiaries that constitutes a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes shall be due and payable immediately without
further action or notice. Holders of the Notes may not enforce this Indenture or
the Notes except as provided herein. Holders of a majority in aggregate
principal amount of the then outstanding Notes by written notice to the Trustee
may on behalf of all of the Holders rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree and if all
existing Events of Default (except nonpayment of principal, interest or premium
that has become due solely because of the acceleration) have been cured or
waived.
If any Event of Default occurs on or after January 15, 2003 by reason of
any willful action (or inaction) taken (or not taken) by or on behalf of the
Issuers with the intention of avoiding payment of the premium that the Issuers
would have had to pay if the Issuers then had elected to redeem the Notes
pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to January 15,
2003 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Issuers with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then, upon acceleration of the
Notes, an additional premium shall also become and be immediately due and
payable in an amount, for each of the years beginning on January 15 of the years
set forth below, as set forth below:
Year Percentage
---- ----------
1998............................................115.435%
1999............................................113.418%
2000............................................111.501%
2001............................................109.584%
2002............................................107.667%
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default shall
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not impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment interest on, or the principal of, the Notes (including in connection
with an offer to purchase) (provided, however, that the Holders of a majority in
aggregate principal amount of the then outstanding Notes may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration). Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it. However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture that the Trustee determines may be unduly prejudicial
to the rights of other Holders of Notes or that may involve the Trustee in
personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any
loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
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A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Issuers for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Issuers
(or any other obligor upon the Notes), their creditors or their property and
shall be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof out
of the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. PRIORITIES.
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If the Trustee collects any money pursuant to this Article 6, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any and
interest, respectively; and
Third: to the Issuers or to such party as a court of competent jurisdiction
shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant
to Section 6.07 hereof, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
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(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section. 7.01
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Issuers. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and
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protection from liability in respect of any action taken, suffered or omitted by
it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Issuers shall be sufficient if signed by
an Officer of each of the Issuers.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Issuers, the Guarantors, or any
Affiliate of the Issuers or the Guarantors with the same rights it would have if
it were not Trustee. However, in the event that the Trustee acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the SEC for permission to continue as trustee or resign. Any Agent may do the
same with like rights and duties. The Trustee is also subject to Sections 7.10
and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture, the Notes or the Subsidiary
Guarantees, it shall not be accountable for the Company's use of the proceeds
from the Notes or any money paid to the Issuers or upon the Issuers' direction
under any provision of this Indenture, it shall not be responsible for the use
or application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and
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so long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA ss. 313(a) (but if no event described in TIA ss.
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA ss.
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Issuers and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA ss. 313(d). The Issuers shall
promptly notify the Trustee when the Notes are listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Issuers and the Guarantors shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Issuers and the Guarantors
shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Issuers and the Guarantors shall indemnify the Trustee against any and
all losses, liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of enforcing this Indenture against
the Issuers and Guarantors (including this Section 7.07) and defending itself
against any claim (whether asserted by either Issuer, any Guarantor or any
Holder or any other person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent any
such loss, liability or expense may be attributable to its negligence or bad
faith. The Trustee shall notify the Issuers and Guarantors promptly of any claim
for which it may seek indemnity. Failure by the Trustee to so notify the Issuers
and the Guarantors shall not relieve the Company of its obligations hereunder.
The Issuers and the Guarantors shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Issuers
and the Guarantors shall pay the reasonable fees and expenses of such counsel.
The Issuers and the Guarantors need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
The obligations of the Issuers and the Guarantors under this Section 7.07
shall survive the satisfaction and discharge of this Indenture.
To secure the Issuers' and the Guarantors' payment obligations in this
Section 7.07, the Trustee shall have a Lien prior to the Notes on all money or
property held or collected
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by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the satisfaction and discharge of this
Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to the
extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Issuers. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Issuers in writing. The Issuers may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Issuers shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Issuers.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10,
such Holder of a Note may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
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A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Issuers. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders of the Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Issuers' and the Guarantors' obligations under Section 7.07 hereof
shall continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUERS.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Issuers may, at the option of their Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Issuers' exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Issuers and each Guarantor shall, subject
to the satisfaction of the
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conditions set forth in Section 8.04 hereof, be deemed to have been discharged
from their obligations with respect to all outstanding Notes and Subsidiary
Guarantees on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that
the Issuers and each Guarantor shall be deemed to have paid and discharged the
entire Indebtedness represented by the outstanding Notes, which shall thereafter
be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and
the other Sections of this Indenture referred to in (a) and (b) below, and to
have satisfied all its other obligations under such Notes, the Subsidiary
Guarantees and this Indenture (and the Trustee, on demand of and at the expense
of the Issuers, shall execute proper instruments acknowledging the same), except
for the following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of and premium, interest and Liquidated
Damages, if any, on such Notes when such payments are due, solely from the trust
fund described in Section 8.04 hereof, and as more fully set forth in such
Section, (b) the Issuers' obligations with respect to the Notes under Article 2
and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities
of the Trustee hereunder and the Issuers' obligations in connection therewith
and (d) this Article Eight. Subject to compliance with this Article Eight, the
Issuers may exercise their option under this Section 8.02 notwithstanding the
prior exercise of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Issuers' exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Issuers and each Guarantor shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
released from their obligations under the covenants contained in Sections 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20 and 4.21
hereof with respect to the outstanding Notes and Subsidiary Guarantees on and
after the date the conditions set forth in Section 8.04 are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes and Subsidiary Guarantees
shall thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes and Subsidiary Guarantees shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes and Subsidiary Guarantees, the Issuers and Guarantors may omit
to comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Section 6.01 hereof, but, except as specified above, the
remainder of this Indenture and such Notes and Subsidiary Guarantees shall be
unaffected thereby. In addition, upon the Issuers' exercise under Section 8.01
hereof of the option applicable to this Section 8.03 hereof, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(d) through 6.01(g) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
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The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Issuers must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of and
premium, interest and Liquidated Damages, if any, on the outstanding Notes
on the stated maturity or on the applicable date fixed for redemption, as
the case may be, and the Issuers must specify whether the Notes are being
defeased to maturity or to a particular date fixed for redemption;
(b) in the case of an election under Section 8.02 hereof, the Issuers
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (i) the Issuers
have received from, or there has been published by, the Internal Revenue
Service a ruling or (ii) since the date of this Indenture, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon, such Opinion of Counsel shall confirm that,
the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Issuers
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of
the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance
had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Sections 6.01(h) or 6.01(i) hereof is concerned, at
any time in the period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Issuers shall have delivered to the Trustee an Opinion of
Counsel to the effect that on the 91st day following the deposit, the trust
funds will not be
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subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Issuers shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers with the
intent of preferring the Holders of Notes over any other creditors of the
Issuers or with the intent of defeating, hindering, delaying or defrauding
creditors of the Issuers or others; and
(h) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Issuers shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the Trustee
shall deliver or pay to the Issuers from time to time upon the request of the
Issuers any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO ISSUERS.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Issuers, in trust for the payment of the principal of, or premium, interest
and Liquidated Damages, if any, on any Note and remaining unclaimed for two
years after such principal, and premium, interest and Liquidated Damages, if
any, has become due and payable shall be paid to the Issuers on their request or
(if then held by the Issuers) shall be discharged from such trust;
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and the Holder of such Note shall thereafter, as a secured creditor, look only
to the Issuers for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of the Issuers
as trustee thereof, shall thereupon cease; provided, however, that the Trustee
or such Paying Agent, before being required to make any such repayment, may at
the expense of the Issuers cause to be published once, in the New York Times and
The Wall Street Journal (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such notification or publication, any unclaimed balance
of such money then remaining will be repaid to the Issuers.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non-callable Government Securities in accordance with Section 8.02 or 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Issuers' and the Guarantors' obligations under this
Indenture, the Notes and the Subsidiary Guarantees shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03
hereof until such time as the Trustee or Paying Agent is permitted to apply all
such money in accordance with Section 8.02 or 8.03 hereof, as the case may be;
provided, however, that, if the Issuers make any payment of principal of, or
premium, interest or Liquidated Damages, if any, on any Note following the
reinstatement of their obligations, the Issuers shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money held
by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Issuers, a Guarantor
(with respect to a Subsidiary Guarantee or the Indenture to which it is a party)
and the Trustee may amend or supplement this Indenture, the Notes or any
Subsidiary Guarantee without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Company's, Finance Corp.'s or
any Guarantor's obligations to Holders of Notes pursuant to Article 5
hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the
legal rights under this Indenture of any such Holder or;
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(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the Trust Indenture Act.
Upon the request of the Issuers accompanied by a resolution of the Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company, Finance Corp. and the
Guarantors in the execution of any amended or supplemental Indenture authorized
or permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations that may be therein contained, but the Trustee shall
not be obligated to enter into such amended or supplemental Indenture that
affects its own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company, Finance Corp.,
the Guarantors and the Trustee may amend or supplement this Indenture (including
Sections 3.09, 4.10 and 4.15 hereof), the Subsidiary Guarantees and the Notes
with the consent of the Holders of at least a majority in principal amount of
the Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer, for Notes),
and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of
Default or compliance with any provisions of this Indenture, the Subsidiary
Guarantees or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
Upon the request of the Issuers accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company, Finance Corp. and the Guarantors in the execution of such
amended or supplemental Indenture unless such amended or supplemental Indenture
directly affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Issuers shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Issuers to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Issuers or Guarantors with any
provision of this
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Indenture, the Notes or the Subsidiary Guarantees. However, without the consent
of each Holder affected, an amendment or waiver under this Section 9.02 may not
(with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes except
as provided above with respect to Section 3.09, 4.10 and 4.15 hereof;
(c) reduce the rate of or change the time for payment of interest on
any Note;
(d) waive a Default or Event of Default in the payment of principal of
or premium, interest or Liquidated Damages, if any, on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, interest or Liquidated Damages, if
any, on the Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Section 3.09, 4.10 or 4.15 hereof);
(h) release any Guarantor from its Subsidiary Guarantee; or
(i) make any change in the foregoing amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture, the Notes or the
Subsidiary Guarantees shall be set forth in a amended or supplemental Indenture
that complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder of a Note or
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subsequent Holder of a Note may revoke the consent as to its Note if the Trustee
receives written notice of revocation before the date the waiver, supplement or
amendment becomes effective. An amendment, supplement or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Issuers in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article Nine if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Issuers
may not sign an amendment or supplemental Indenture until the Board of Directors
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, in addition to the documents required by Section
11.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10.
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Issuers agree, and each Holder by accepting a Note agrees, that the
Indebtedness evidenced by the Notes is subordinated in right of payment, to the
extent and in the manner provided in this Article 10, to the prior payment in
full of all Senior Debt (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Debt.
SECTION 10.02. CERTAIN DEFINITIONS.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Amended Credit Facility and (ii) any other Senior Debt or Guarantor Senior Debt
permitted under this Indenture the principal amount of which is $25.0 million or
more and that has been designated by the Company as "Designated Senior Debt."
"Guarantor Senior Debt" means with respect to any Guarantor (i) all
Indebtedness of such Guarantor outstanding under Credit Agreements and all
Hedging Obligations with respect thereto, (ii) any other Indebtedness of such
Guarantor permitted to be
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incurred under the terms of this Indenture, unless the instrument under which
such Indebtedness is incurred expressly provides that it is subordinated in
right of payment to the Subsidiary Guarantee of such Guarantor and (iii) all
Obligations of such Guarantor with respect to the foregoing. Notwithstanding
anything to the contrary in the foregoing, Guarantor Senior Debt shall not
include (a) any liability for federal, state, local or other taxes owed or owing
by such Guarantor, (b) any Indebtedness of such Guarantor to any of its
Subsidiaries or other Affiliates, (c) any trade payables or (d) any Indebtedness
that is incurred in violation of this Indenture.
"Permitted Junior Securities" means Equity Interests in the Company or debt
securities of the Company or the relevant Guarantor that are subordinated to all
Senior Debt (and any debt securities issued in exchange for Senior Debt) or
Guarantor Senior Debt (and any debt securities issued in exchange for Guarantor
Senior Debt), as applicable, to substantially the same extent as, or to a
greater extent than, the Notes are subordinated to Senior Debt or the Subsidiary
Guarantees are subordinated to Guarantor Senior Debt, as applicable, pursuant to
this Indenture.
"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Debt or Guarantor Senior Debt, as applicable.
"Senior Debt" of an Issuer means (i) all Indebtedness of such Issuer
outstanding under Credit Agreements and all Hedging Obligations with respect
thereto, (ii) any other Indebtedness of such Issuer permitted to be incurred
under the terms of this Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is subordinated in right of
payment to the Notes and (iii) all Obligations of such Issuer with respect to
the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Debt of an Issuer shall not include (a) any liability for federal, state, local
or other taxes owed or owing by such Issuer, (b) any Indebtedness of such Issuer
to any of its Subsidiaries or other Affiliates, (c) any trade payables or (d)
any Indebtedness that is incurred in violation of this Indenture.
A "distribution" may consist of cash, securities or other property, by
set-off or otherwise.
SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of either Issuer in a liquidation or
dissolution of such Issuer or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Issuer or its property, an
assignment for the benefit of creditors or any marshalling of either Issuer's
assets and liabilities:
(1) holders of Senior Debt of such Issuer shall be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the
rate specified in the applicable Senior Debt) before the Holders of Notes
will be entitled to receive any payment with respect to the Notes; and
(2) until all Obligations with respect to Senior Debt are paid in
full, any distribution to which the Holders of Notes would be entitled
shall be made to the holders of Senior Debt (except that Holders of Notes
may receive Permitted Junior Securities and payments made any defeasance
trust created pursuant to Section 8.01 hereof, as their interests may
appear.
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SECTION 10.04. DEFAULT ON DESIGNATED SENIOR DEBT.
The Issuers may not make any payment or distribution to the Trustee or any
Holder in respect of Obligations with respect to the Notes and may not acquire
from the Trustee or any Holder any Notes for cash or property (other than (i)
Permitted Junior Securities and (ii) payments and other distributions made from
any defeasance trust created pursuant to Section 8.01 hereof) until all
principal and other Obligations with respect to the Senior Debt have been paid
in full if:
(a) a default in the payment of the principal of or premium, or
interest on any Designated Senior Debt occurs and is continuing beyond any
applicable period of grace; or
(b) any other default occurs and is continuing with respect to any
Designated Senior Debt that permits holders of the Designated Senior Debt
as to which such default relates to accelerate its maturity and the Trustee
receives a notice of such default (a "Payment Blockage Notice") from the
holders of such Designated Senior Debt.
The Issuers may and shall resume payments on and distributions in respect
of the Notes and may acquire them upon the earlier of:
(1) in the case of a payment default, upon the date on which such
default is cured or waived and
(2) in the case of a nonpayment default, the earlier of the date on
which such nonpayment default is cured or waived or 179 days after the date
on which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated.
No new period of payment blockage may be commenced unless and until 360
days have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice. No nonpayment default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such nonpayment
default shall have been cured or waived for a period of not less than 90
consecutive days.
SECTION 10.05. ACCELERATION OF SECURITIES.
If payment of the Notes is accelerated because of an Event of Default, the
Trustee or the Holders of the Notes shall promptly notify holders of Senior Debt
of the acceleration.
SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Notes at a time when the Trustee or such Holder,
as applicable, has actual knowledge that such payment is prohibited by Section
10.04 hereof, such payment
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shall be held by the Trustee or such Holder, in trust for the benefit of, and
shall be paid forthwith over and delivered, upon written request, to, the
holders of Senior Debt of the Issuers as their interests may appear or their
Representative under this Indenture or other agreement (if any) pursuant to
which such Senior Debt may have been issued, as their respective interests may
appear, for application to the payment of all Obligations with respect to Senior
Debt remaining unpaid to the extent necessary to pay such Obligations in full in
accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt of the Issuers, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt, and shall not be liable to any
such holders if the Trustee shall pay over or distribute to or on behalf of
Holders or the Issuers or any other Person money or assets to which any holders
of Senior Debt shall be entitled by virtue of this Article 10, except if such
payment is made as a result of the willful misconduct or gross negligence of the
Trustee.
SECTION 10.07. NOTICE BY ISSUERS.
The Issuers shall promptly notify the Trustee and the Paying Agent of any
facts known to them that would cause a payment of any Obligations with respect
to the Notes to violate this Article 10, but failure to give such notice shall
not affect the subordination of the Notes to the Senior Debt as provided in this
Article 10.
SECTION 10.08. SUBROGATION.
After all Senior Debt of the Issuers is paid in full and until the Notes
are paid in full, Holders of Notes shall be subrogated (equally and ratably with
all other Indebtedness pari passu with the Notes) to the rights of holders of
Senior Debt to receive distributions applicable to Senior Debt to the extent
that distributions otherwise payable to the Holders of Notes have been applied
to the payment of Senior Debt. A distribution made under this Article 10 to
holders of Senior Debt of the Issuers that otherwise would have been made to
Holders of Notes is not, as between the Issuers and Holders, a payment by the
Issuers on the Notes.
SECTION 10.09. RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of Notes and holders
of Senior Debt of the Issuers. Nothing in this Indenture shall:
(1) impair, as between the Issuers and Holders of Notes, the
obligation of the Issuers, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders of Notes and creditors of
the Issuers other than their rights in relation to holders of Senior Debt
of the Issuers; or
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(3) prevent the Trustee or any Holder of Notes from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Debt of the Issuers to receive
distributions and payments otherwise payable to Holders of Notes.
If the Issuers fail because of this Article 10 to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY ISSUERS.
No right of any holder of Senior Debt of the Issuers to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Issuers or any Holder or by the failure of the
Issuers or any Holder to comply with this Indenture.
SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt of the Issuers, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets of either Issuer referred to in
this Article 10, the Trustee and the Holders of Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders of Notes
for the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt of the Issuers and other
Indebtedness of the Issuers, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article 10.
SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment or distribution by
the Trustee, and the Trustee and the Paying Agent may continue to make payments
on the Notes, unless the Trustee shall have received at its Corporate Trust
Office at least five Business Days prior to the date of such payment written
notice of facts that would cause the payment of any Obligations with respect to
the Notes to violate this Article 10. Only the Issuers or a Representative may
give the notice. Nothing in this Article 10 shall impair the claims of, or
payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to
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effectuate the subordination as provided in this Article 10, and appoints the
Trustee to act as such Holder's attorney-in-fact for any and all such purposes.
If the Trustee does not file a proper proof of claim or proof of debt in the
form required in any proceeding referred to in Section 6.09 hereof at least 30
days before the expiration of the time to file such claim, the Representative of
Senior Debt is hereby authorized to file an appropriate claim for and on behalf
of the Holders of the Notes.
SECTION 10.14. AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified without
the written consent of the holders of all Senior Debt of the Issuers.
Notwithstanding the foregoing, any amendment to the provisions of this Article
10 shall require the consent of the Holders of at least 75% in aggregate
principal amount of the Notes then outstanding if such amendment would adversely
affect the rights of Holders of Notes and the written consent of Holders of
Designated Senior Debt.
ARTICLE 11.
SUBSIDIARY GUARANTEES
SECTION 11.01. GUARANTEE.
Subject to this Article 11, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Issuers hereunder or thereunder, that: (a) the principal
of and premium, interest, and Liquidated Damages, if any, on the Notes, if
lawful, and all other Obligations of the Issuers to the Holders or the Trustee
hereunder or thereunder shall be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (b) in case of any extension
of time of payment or renewal of any Notes or any of such other Obligations, the
same will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise. Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Guarantors shall be jointly
and severally obligated to pay the same immediately. Each Guarantor agrees that
this is a guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against either of the Issuers,
any action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a Guarantor. Each
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of either of the
Issuers, any right to require a proceeding first against the Issuers, protest,
notice and all demands whatsoever and covenant that this Subsidiary
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Guarantee shall not be discharged except by complete performance of the
Obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Issuers, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Issuers or the
Guarantors, any amount paid by either to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any Obligations guaranteed
hereby until payment in full of all Obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
Obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Subsidiary Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article 6 hereof, such
Obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Subsidiary Guarantee. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Guarantee.
SECTION 11.02. SUBORDINATION OF SUBSIDIARY GUARANTEE.
The Obligations of each Guarantor under its Subsidiary Guarantee pursuant
to this Article 11 shall be junior and subordinated to the Guarantor Senior Debt
of such Guarantor on the same basis as the Notes are junior and subordinated to
Senior Debt of the Issuers. For the purposes of the foregoing sentence, the
Trustee and the Holders shall have the right to receive and/or retain payments
by any of the Guarantors only at such times as they may receive and/or retain
payments in respect of the Notes pursuant to this Indenture, including Article
10 hereof.
SECTION 11.03. LIMITATION ON GUARANTOR LIABILITY.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor under its Subsidiary Guarantee and this
Article 11 shall be limited to the maximum amount as will, after giving effect
to such maximum amount and all other contingent and fixed liabilities of such
Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article 11, result in the obligations of such Guarantor
under its Subsidiary Guarantee not constituting a fraudulent transfer or
conveyance.
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SECTION 11.04. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section 11.01 hereof,
each Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in Exhibit E shall be endorsed by an Officer
of such Guarantor on each Note authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of such Guarantor by an Officer
of such Guarantor.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in
Section 11.01 hereof shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the Subsidiary
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall
be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth
in this Indenture on behalf of the Guarantors.
In the event that the Company or any of its Restricted Subsidiaries
acquires or creates another Restricted Subsidiary subsequent to the date of this
Indenture or any Unrestricted Subsidiary shall cease to be an Unrestricted
Subsidiary and, if required by Section 4.19 hereof, the Issuers shall cause such
Subsidiary to execute a supplemental indenture to this Indenture and a
Subsidiary Guarantee in accordance with Section 4.19 hereof and this Article 11,
to the extent applicable.
SECTION 11.05. CONSOLIDATION, ETC. BY GUARANTORS.
No Guarantor may consolidate with or merge with or into (whether or not
such Guarantor is the surviving Person), another corporation, Person or entity
whether or not affiliated with such Guarantor unless:
(i) subject to the provisions Section 11.06 hereof, the Person formed
by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Registration Rights
Agreement;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default exists; and
(iii) the Company would be permitted by virtue of the Company's pro
forma Fixed Charge Coverage Ratio, immediately after giving effect to such
transaction, to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.09 hereof;
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provided that the merger of any Guarantor with or into the Company or
another Guarantor under circumstances where the Company or such Guarantor, as
applicable, is the surviving Person shall not be subject to the foregoing
provisions.
In case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the
Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor Person thereupon may cause to be signed
any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Issuers
and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in
all respects have the same legal rank and benefit under this Indenture as the
Subsidiary Guarantees theretofore and thereafter issued in accordance with the
terms of this Indenture as though all of such Subsidiary Guarantees had been
issued at the date of the execution hereof.
SECTION 11.06. RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the assets of any
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all of the assets of such Guarantor) shall be released and
relieved of any obligations under its Subsidiary Guarantee; provided that the
Net Proceeds of such sale or other disposition are applied in accordance with
the applicable provisions of the Indenture, including, without limitation,
Section 4.10 hereof. Upon delivery by the Issuers to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Issuers in accordance with the applicable provisions
of this Indenture, including without limitation Section 4.10 hereof, the Trustee
shall execute any documents reasonably required in order to evidence the release
of any Guarantor from its obligations under its Subsidiary Guarantee.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this Indenture
as provided in this Article 11.
ARTICLE 12.
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA ss. 318(c), the imposed duties shall control.
SECTION 12.02. NOTICES.
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Any notice or communication by the Company, Finance Corp., any Guarantor or
the Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telexed, telecopied or sent by overnight air courier guaranteeing next day
delivery, to the others' address.
If to the Company, Finance Corp. and/or any Guarantor:
Production Resource Group, L.L.C.
539 Temple Hill Road
New Windsor, NY 12553
Telecopier No.: (914) 567-5804
Attention: Chief Financial Officer
With a copy to:
Morrison & Foerster L.L.P.
1290 Avenue of the Americas
New York, NY 10104
Telecopier: No.(212) 468-7900
Attention: Joseph W. Bartlett, Esq.
If to the Trustee:
First Union National Bank
10 Statehouse Square
Hartford, CT 06103
Telecopier No.: (860) 247-1356
Attention: Corporate Trust Administration
The Company, Finance Corp., any Guarantor or the Trustee, by notice to the
others may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA ss. 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
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If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Issuers mail a notice or communication to Holders, they shall mail a
copy to the Trustee and each Agent at the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Issuers, the
Guarantors, the Trustee, the Registrar and anyone else shall have the protection
of TIA ss. 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Issuers to the Trustee to take any
action under this Indenture, the Issuers shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss.
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
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The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, ADVISORS, MANAGERS, OFFICERS,
EMPLOYEES, INCORPORATORS, MEMBERS AND STOCKHOLDERS.
No director, advisor, manager, officer, employee, incorporator, member or
stockholder of either Issuer or any Guarantor, as such, shall have any liability
for any obligations of the Issuers or any Guarantor under the Notes, the
Subsidiary Guarantees, this Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
SECTION 12.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 12.10. SUCCESSORS.
All agreements of the Issuers and the Guarantors in this Indenture, the
Notes and the Subsidiary Guarantees shall bind their successors. All agreements
of the Trustee in this Indenture shall bind its successors.
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture, the Notes or the Subsidiary
Guarantees shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.13 TABLE OF CONTENTS, HEADINGS, ETC.
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The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms of provisions hereof.
[Signature pages to follow]
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EXHIBIT 10.1
ACQUISITION AGREEMENT
AMONG
PRODUCTION RESOURCE GROUP, L.L.C.
Buyer
AND
BASH THEATRICAL LIGHTING, INC.
BASH THEATRICAL LIGHTING SERVICES, INC.
BASH LIGHTING SERVICES, INC.
BASH LIGHTING SERVICES MID-ATLANTIC, INC.
BASH EXPOSITION SERVICES, INC.
Sellers
AND
DONALD STERN
AND
ROBERT CANNON
Shareholders
July 3, 1997
<PAGE>
TABLE OF CONTENTS
RECITALS ......................................................................1
ARTICLE I -- PURCHASE AND SALE.................................................2
1.1 Agreement to Sell................................................2
1.2 Agreement to Purchase............................................5
1.3 Purchase Price...................................................5
1.4 Allocation of Purchase Price.....................................5
1.5 Assumption of Liabilities........................................6
1.6 Closing Financial Statements.....................................8
1.7 Holdback........................................................11
ARTICLE II -- CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS,
CHANGE IN NAME AND FURTHER ASSURANCES......................................11
2.1 Closing.........................................................11
2.2 Items to be Delivered at Closing................................11
2.3 Third Party Consents............................................12
2.4 Change in Name..................................................12
2.5 Further Assurances..............................................12
ARTICLE III -- REPRESENTATIONS AND WARRANTIES.................................13
3.1 Representations and Warranties of the Sellers...................13
3.2 Representations and Warranties of PRG...........................26
3.3 Survival of Representations and Warranties......................26
ARTICLE IV -- AGREEMENTS PENDING CLOSING......................................27
4.1 Agreements of Seller Pending the Closing........................27
4.2 Agreements of PRG Pending the Closing...........................29
ARTICLE V -- CONDITIONS PRECEDENT TO THE CLOSING..............................30
5.1 Conditions Precedent to PRG's Obligations.......................30
5.2 Conditions Precedent to the Obligations of Seller...............33
ARTICLE VI -- INDEMNIFICATION.................................................34
6.1 General Indemnification Obligation of Seller....................34
6.2 General Indemnification Obligation of PRG.......................35
6.3 Limit on Indemnification Liability..............................35
6.4 Method of Asserting Claims, etc.................................36
<PAGE>
6.5 Payment.........................................................37
6.7 Compliance with Bulk Sales Laws.................................37
6.8 Exclusive Remedy................................................37
ARTICLE VII -- POST CLOSING MATTERS...........................................37
7.1 Offers of Employment............................................37
7.2 Employee Benefits...............................................38
7.3 Maintenance of Books and Records................................38
7.4 Payments Received. ............................................39
7.5 Use of Name.....................................................39
7.6 UCC Matters.....................................................39
7.7 Covenant Not To Compete.........................................39
ARTICLE VIII -- MISCELLANEOUS.................................................40
8.1 Termination.....................................................40
8.2 Brokers' and Finders' Fees......................................40
8.3 Sales, Transfer and Documentary Taxes, etc......................41
8.4 Expenses........................................................41
8.5 Contents of Agreement; Parties in Interest; etc.................41
8.6 Assignment and Binding Effect...................................41
8.7 Waiver..........................................................41
8.8 Notices.........................................................41
8.9 Choice of Law...................................................42
8.10 No Benefit to Others............................................42
8.11 Headings, Gender and "Person"...................................43
8.12 Schedules and Exhibits..........................................43
8.13 Severability....................................................43
8.14 Counterparts....................................................43
<PAGE>
Exhibit A Inventory Schedule
Exhibit B Form of Employment Agreement -- D. Stern
Exhibit C Form of Employment Agreement -- R. Cannon
Exhibit D Form of Lease
Exhibit E Form of Option
Exhibit F Form of Escrow Agreement
Exhibit G Form of Shareholder Release
Exhibit H Form of Assignment and Assumption Agreement
<PAGE>
ACQUISITION AGREEMENT
ACQUISITION AGREEMENT, dated as of July 3, 1997, by and among BASH
THEATRICAL LIGHTING, INC., a New Jersey corporation ("BTLI"), BASH THEATRICAL
LIGHTING SERVICES, INC., a Nevada corporation ("BTLS"), BASH LIGHTING SERVICES,
INC., a Florida corporation ("BLSI"), BASH LIGHTING SERVICES MID-ATLANTIC, INC.,
a Maryland corporation ("BLSMA"), and BASH EXPOSITION SERVICES, INC., a Nevada
corporation ("BES") (each a "Seller" and collectively, the "Sellers"), and
DONALD STERN ("Stern") and ROBERT CANNON ("Cannon"; Stern and Cannon each
sometimes being referred to herein as a "Shareholder" and collectively as the
"Shareholders") and PRODUCTION RESOURCE GROUP, L.L.C., a Delaware limited
liability company ("PRG").
RECITALS
A. Sellers are engaged in the business of providing, renting and selling
specialized lighting equipment and payroll and labor services (the "Business").
Such business operations of Sellers have been carried on under the respective
names of "Bash Theatrical Lighting, Inc.", "Bash Theatrical Lighting Services,
Inc.", "Bash Lighting Services, Inc.", "Bash Lighting Services Mid-Atlantic,
Inc." and "Bash Exposition Services, Inc.". Each of the Sellers has a principal
place of business as specified on Schedule A-1 hereto. Shareholders are the sole
owners, of record and beneficially, of all of Sellers' issued and outstanding
capital stock, except for the persons on Schedule A-2 hereto, who hold options
to acquire stock in BTLI.
B. PRG is engaged in business as an integrated provider of goods and
services in a variety of related markets, including production management,
theatrical rental, scenery, rigging, supply of physical production elements
(including lighting, scenery, sound and costumes), promotion, themed
attractions, Broadway and touring shows, special events and exhibits and film
and television production, and desires to acquire all of the above-described
business operations of Sellers, except for certain Excluded Assets (as
hereinafter defined).
C. Subject only to the limitations and exclusions contained in this
Agreement and on the terms and conditions hereinafter set forth, Sellers desire
to sell and PRG desires to purchase all of the assets associated with the
Business and its operations, and, on the terms and conditions hereinafter set
forth, PRG desires to assume certain of the liabilities associated with the
Business.
NOW, THEREFORE, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements herein contained, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
<PAGE>
ARTICLE 1. -- PURCHASE AND SALE
1.1 Agreement to Sell. At the Closing (as defined in Section 2.1 hereof),
except as otherwise specifically provided in this Section 1.1, Sellers shall
sell, convey, assign, transfer and deliver to PRG, upon and subject to the terms
and conditions of this Agreement, all of their respective rights, titles and
interests in and to the Assets (as defined in Section 1.1.1 below), free and
clear of all mortgages, liens, pledges, security interests, charges, claims,
restrictions and encumbrances of any nature whatsoever (except for Permitted
Liens as defined in subsection 3.1.12 hereof).
1.1.1 Included Assets. Except as otherwise expressly set forth in
subsection 1.1.3 hereof, the "Assets" shall mean the following assets,
properties and rights of Sellers to the extent owned by Sellers on the Closing
Date and used directly or indirectly in the conduct of, or generated by or
constituting, the Business and, except, as expressly set forth in such
subsection 1.1.3, shall constitute all of the assets other than cash reasonably
required to conduct the Business as heretofore conducted:
(1) all machinery, equipment, tools, vehicles, furniture, furnishings,
goods, and other tangible personal property;
(2) all prepaid items, utility and similar deposits, insurance return
premiums, if any to the extent shown on the Interim Balance Sheet, unbilled
costs and fees, and all accounts receivable, notes and other receivables;
(3) all supplies and inventories and office and other supplies;
(4) subject to subsection 1.1.3(c), all rights under any written or
oral contract, agreement, lease, plan, instrument, registration, license,
other permit or approval of any nature, or other document, commitment,
arrangement, undertaking, practice or authorization;
(5) all rights under any patent, trademark, service mark, trade name
or copyright, whether registered or unregistered, and any applications
therefor including, without limitation, the names "Bash Theatrical
Lighting," "Bash Theatrical Lighting Services," Bash Lighting Services,"
"Bash Lighting Services Mid Atlantic," and "Bash Exposition Services" along
with all goodwill associated therewith;
(6) all technologies, methods, formulations, data bases, trade
secrets, know-how, inventions and other intellectual property used in the
Business or under development, if any;
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(7) all rights or choses in action arising out of occurrences before
or after the Closing, including without limitation all rights under express
or implied warranties relating to the Assets;
(8) all assets and properties reflected on the Closing Balance Sheet
(as defined in Section 1.6.5) including, without limitation, all equipment
used in the Business other than assets described in Section 1.1.1 (i)
hereof;
(9) all rental and sales inventory reflected on the Inventory Schedule
attached as Exhibit A hereof (or which would be so reflected if the
Inventory Schedule reflected all of Sellers' rental and sales inventory),
except for assets sold in the ordinary course of business consistent with
past practice or with the prior written consent of PRG or the disposition
of damaged or obsolete inventory and equipment no longer useful in the
business ("Inventory").
(10) all information, files, records, data, plans, copies of written
contracts and recorded knowledge, including customer and supplier lists,
related to the foregoing, provided that the Sellers may retain for their
respective records copies of any of the foregoing; and
(11) all other assets, including all tangible and intangible property
used in the conduct of the Business and not specifically excluded pursuant
to Section 1.1.3 hereof.
1.1.2 The Facility. BTLI and PRG shall enter into a lease agreement for the
premises located at 3401 Dell Avenue, (the "Facility") substantially in the form
of Exhibit D hereof. Such lease will be effective as of the Closing Date and
shall have no force or effect if the Closing does not occur on or before August
30, 1997. BTLI agrees to grant PRG the option (the "Facility Purchase Option")
to offer to purchase the land and improvements, and all fixtures thereon located
at the Facility at a purchase price and on the terms and conditions contained in
the Option Agreement substantially in the form of Exhibit E hereof. Such Option
Agreement will be executed simultaneously with the execution of this Agreement
but will not be exercisable unless the Closing of the transactions contemplated
by this Agreement has occurred.
1.1.3 Excluded Assets. Notwithstanding the foregoing, the Assets shall not
include any of the following (collectively, the "Excluded Assets"):
(1) the corporate seals, certificates of incorporation, minute books,
stock books, tax returns, books of account or other records having to do
with corporate organizations of Sellers;
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(2) the rights which accrue or will accrue to Sellers under this
Agreement;
(3) any rights under any written or oral contract, agreement, lease,
plan, instrument, registration, license other permit or approval of any
nature, or other document, commitment, arrangement, undertaking, practice
or authorization (other than rights accruing solely to the owner of the
Facility) to the extent the transfer of such rights is prohibited by
applicable law or requires the consent of a third party, which consent has
not been obtained; provided, however, that Section 2.3 hereof shall apply
to any such contract rights;
(4) intercompany receivables or obligations owed by one or more
Sellers to one or more other Sellers, and rights of any Seller against any
other Seller under any agreements between two or more Sellers;
(5) the rights to any claims of each and any Seller for any federal,
state, local, or foreign tax refunds or prepayments of taxes; or
(6) all cash and cash equivalents, whether in transit, on hand or in
bank accounts, money market accounts, brokerage accounts or wherever
located;
(7) the Facility, including all real property, improvements and
fixtures constituting the Facility and all registrations, licenses,
permits, approvals and authorizations related solely to the Facility;
(8) any and all claims asserted by any Seller in any litigation
involving such Seller except to the extent such claim relates to an Asset
or Assets acquired by PRG or to a liability assumed by PRG hereunder;
(9) all insurance policies of any Seller and all proceeds thereof and
claims thereunder except that PRG shall be entitled to receive the proceeds
of any claim to the extent related to Assets acquired by PRG which are
included in the Closing Balance Sheet at values not reflecting the loss or
damage giving rise to such claim;
(10) rights in and to any software licenses which are not assignable
without consent and rights in the related software; provided, however, that
a minimum of four site licenses for the HITS software package will be
assigned to PRG and included in the Assets acquired by PRG;
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(11) any contract rights of any Seller with respect to which PRG has
not assumed all of the liabilities and obligations of such Seller
thereunder (other than liabilities and obligations arising out of a breach
by any Seller prior to the Closing Date);
(12) amounts owed to any Seller by officers and employees of any
Seller and set forth on Schedule 1.1.3.; and
(13) the assets, properties or rights set forth on Schedule 1.1.3.
1.2 Agreement to Purchase. At the Closing, PRG shall purchase the Assets
(other than the Excluded Assets) from Sellers, upon and subject to the terms and
conditions of this Agreement and in reliance on the representations, warranties
and covenants of Sellers contained herein, in exchange for the Purchase Price
(as defined in Section 1.3 hereof). In addition, PRG shall assume at the Closing
and agree to pay, discharge or perform when due or when required, certain
liabilities and obligations of Sellers only to the extent and as provided in
Section 1.5 of this Agreement. Except as specifically provided in Section 1.5
hereof, PRG shall not assume or be responsible for any of the respective
liabilities or obligations of Sellers, whether related to or arising under or
with respect to the Business, or otherwise.
1.3 Purchase Price.
1.3.1 Subject to the payment of any Adjustment Amount determined to be
payable pursuant to Section 1.6.4 hereof, the "Purchase Price" shall be an
amount equal to Twenty Million Dollars ($20,000,000.00).
1.3.2 In exchange for sale of the Assets and the assumption by PRG of the
Assumed Liabilities, PRG shall on the Closing Date (as defined in Section 2.1)
pay to Sellers, on account of the Purchase Price, Eighteen Million Seven Hundred
Thousand ($18,700,000) (the "Closing Payment"). The One Million Three Hundred
Thousand Dollars ($1,300,000.00) balance of the Purchase Price (the "Holdback")
shall be deposited in escrow for application pursuant to Section 1.7. The escrow
account shall be established with an escrow agent mutually acceptable to PRG and
Sellers. The escrow agreement shall be substantially in the form of Exhibit F
hereof. On January 2, 1998 PRG shall pay to the Sellers, on account of the
Purchase Price, the Adjusted Holdback (as defined in Section 1.7). The Closing
Payment and the payment of the Adjusted Holdback shall be payable by wire
transfer of immediately available funds to such accounts as Sellers shall
designate or by bank or certified check.
1.4 Allocation of Purchase Price. The parties agree upon the allocation
among the Assets of the Purchase Price, the Assumed Liabilities and any
liabilities to which any Asset is subject (together, the "Total Consideration")
set forth in Schedule 1.4 hereof with such
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adjustments as the parties reasonably agree consistent with the principles set
forth in such Schedule. Each Seller and PRG hereby covenant and agree that it
will not take a position on any tax return, before any governmental agency
charged with the collection of any income tax or sales tax, or in any judicial
proceeding that is in any way inconsistent with the terms of this Section 1.4.
Any adjustment to the Purchase Price resulting from the application of Sections
1.6.4 or 1.7 hereof shall adjust the asset or class of assets giving rise to
such adjustment or, if no such asset or class of assets is readily determinable,
shall reduce goodwill. 1.1
1.5 Assumption of Liabilities. At the Closing hereunder and except as
otherwise specifically provided in this Section 1.5, PRG shall assume and agree
to pay, discharge or perform promptly when due or required, solely the following
liabilities and obligations of Sellers (collectively, the Assumed Liabilities):
1.5.1 all liabilities and obligations of Sellers in respect of the
Business existing as of the Interim Balance Sheet Date (as defined in
subsection 3.1.6(a)), but only if and to the extent that the same arose in
the regular and ordinary course of the Business and are accrued or reserved
for on the Interim Balance Sheet and remain unpaid and undischarged on the
Closing Date;
1.5.2 all liabilities and obligations of Sellers arising in the
regular and ordinary course of the Business between the Interim Balance
Sheet Date and the Closing Date, to the extent that the same remain unpaid
and undischarged on the Closing Date;
1.5.3 all liabilities and obligations of Sellers for any taxes
(including, without limitation, gross receipts, sales, use, personal
property, real estate and stamp taxes, levies, imposts, duties, assessments
and withholdings of any nature whatsoever) imposed by any government or
taxing authority other than taxes based upon or measured by net or gross
income or receipts (including capital gains and withholding taxes)
franchise taxes, taxes based on capital, net worth or conduct of business,
minimum taxes, taxes measured by items of tax preference and similar taxes
that can increase in amount as items of deduction or credit increase in
amount or nature, withholding taxes of similar nature and including
estimated payments of such taxes (collectively "Assumed Taxes");
1.5.4 all liabilities and obligations of Sellers in respect of the
agreements, contracts, commitments and leases which are included in the
Assets, and which are either (i) identified in any schedule attached to
this Agreement or (ii) incurred in the ordinary course and which, in the
case of any agreement, do not involve the payment by Sellers, individually
or in a series of related payments, of an amount in excess of $50,000 per
year except that notwithstanding anything to the contrary contained in this
Section 1.5 but subject to Section 2.3, PRG shall not assume or agree to
pay, discharge or perform any:
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(1) liabilities or obligations accrued prior to the Interim
Balance Sheet Date which under generally accepted accounting
principles should have been accrued or reserved for on a balance sheet
or the notes thereto as a liability or obligation, if and to the
extent that the same were not accrued or reserved for on the Interim
Balance Sheet; or
(2) liabilities or obligations arising out of any breach by any
Seller of any provision of any agreement, contract, commitment or
lease, including but not limited to liabilities or obligations arising
out of a Seller's failure to perform any agreement, contract,
commitment or lease in accordance with its terms prior to the Closing,
but excluding however any liability arising out of the assignment to
PRG of such agreements, contracts, commitments or leases in violation
of the terms thereof; or
(3) liabilities or obligations relating to capital expenditures
made or incurred by any Seller after the Interim Balance Sheet Date
without the prior written consent of PRG, except for those disclosed
on Schedule 1.5.4;
1.5.5 all liabilities and obligations of Sellers for indebtedness of
the Sellers incurred by any Sellers to finance the purchase of trucks and
equipment (other than lighting equipment) included in the Assets acquired
by PRG and disclosed on Schedule 1.5.5; and
1.5.6 all liabilities and obligations of Sellers for accrued unused
vacation days to their employees who accept employment with PRG to the
extent in existence on the Interim Balance Sheet Date as set forth in
Schedule 1.5.6 or accrued at the same rates utilized in preparing Schedule
1.5.6 for the period between the Interim Balance Sheet Date and the Closing
Date.
1.5.7 In no event, however, shall PRG assume or incur any liability or
obligation under this Section 1.5 or otherwise in respect of any of the
following:
(1) except as expressly provided in subsections 1.5.4 or 1.5.5
any indebtedness for borrowed money, including without limitation, any
indebtedness arising under any note, debenture, bond, equipment trust
agreement, letter of credit agreement, loan agreement or other
contract or commitment for the borrowing or lending of money relating
to the Business or agreement or arrangement for a line of credit, or
any guaranties, in any manner, whether directly or indirectly, of any
indebtedness, dividend or other obligation of any other person or
entity relating to the Business (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or
collection);
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(2) any product liability or similar claim for injury to person
or property, regardless of when made or asserted, which arises out of
or is based upon any express or implied representation, warranty,
agreement or guarantee made by any Seller, or alleged to have been
made by any Seller, or which is imposed or asserted to be imposed by
operation of law, in each of the foregoing cases only to the extent in
connection with any service performed or product sold or leased by or
on behalf of any Seller on or prior to the Closing, including without
limitation any claim relating to any product delivered in connection
with the performance of such service and any claim seeking recovery
for consequential damage, lost revenue or income; provided, however,
that PRG shall assume such liabilities to the extent substantially all
the events (other than the making of such representation, warranty,
agreement or guarantee) giving rise to such liability occur on or
after the Closing Date;
(3) any tax payable with respect to the business, assets,
properties or operations of any Seller or any Shareholder or any
member of any affiliated group of which any Seller or any Shareholder
is a member for any period prior to the Closing Date other than
Assumed Taxes;
(4) subject to section 2.3 hereof, any liability or obligation
under or in connection with the Excluded Assets;
(5) any liability or obligation of any Seller arising prior to or
as a result of the Closing to any employees, agents or independent
contractors of any Seller, whether or not employed by PRG after the
Closing, except for obligations incurred in the ordinary course of the
Business and set forth in the Interim Balance Sheet or incurred
between the Interim Balance Sheet Date and the Closing Date, provided,
however, that in no event shall PRG assume any liability or obligation
for any multi-employer or pension liability; any liability or
obligation of any Seller relating to any employee benefit plan, fund,
program or arrangement, including without limitation any liability or
obligation arising under or relating to any multi-employer pension
plan, except for liabilities related to accrued unused vacation days
as specifically provided herein.
(6) any liability or obligation of any Seller or any Shareholder
arising or incurred in connection with the negotiation, preparation
and execution of this Agreement and the consummation of the
transactions contemplated hereby (including without limitation fees
and expenses of counsel, accountants and other experts); or
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(7) any liability or obligation of any Seller or Shareholder to
any other Seller or Shareholder.
1.6 Closing Financial Statements.
1.6.1 Not later than 45 days after the Closing Date, Sellers shall cause to
be prepared by Sellers' Accountants (as defined below) the balance sheet of the
Business at the Closing Date and accompanying notes, in accordance with
generally accepted accounting principles consistently applied by Seller in
accordance with past practice for the financial statements described in
subsection 3.1.6 hereto. Such balance sheet shall specifically identify all
assets reflected thereon which are not included in the Assets and all
liabilities reflected thereon which are not assumed by Purchaser hereunder.
1.6.2 Ernst & Young (the "Auditors"), shall review the financial statements
described in subsection 1.6.1, above as well as the December 31, 1996 financial
statements of the Sellers (collectively the "Financial Statements"), in
accordance with AICPA review provisions, and shall use reasonable efforts to
issue, within 60 days of the closing date but in any event not later than 90
days after the Closing Date, its report thereon to Sellers and PRG to the effect
that such balance sheets present fairly the financial position of the Business
as of the dates thereof in conformity with generally accepted accounting
principles applied on a consistent basis. Such report shall also include a
detailed schedule setting forth the calculation of the Adjustment Amount, if
any, calculated in accordance with subsection 1.6.4.
1.6.3 In rendering the review and report described in subsection 1.6.2, the
Auditors shall consult with Cobert & Schwartz, Sellers' independent accountants
("Sellers' Accountants") and permit Sellers' Accountants at the earliest
practicable date to review the report of the Auditors, including all work
papers, schedules and calculations related thereto, prior to the issuance
thereof. Sellers' Accountants shall commence its review of said work papers,
schedules and calculations as soon as practicable after the Auditors have
completed the field work phase of its review. Any dispute which may arise
between Seller and PRG as to the determination of the Adjustment Amount shall be
resolved in the following manner:
(1) if the Sellers dispute the Adjustment Amount or any adjustments to
the Closing Balance Sheet or December 31, 1996 Balance Sheet prepared by
Seller's Accountants which result from the Auditors' review thereof, the
Sellers shall notify PRG in writing within 30 days after the delivery to
Sellers of the report of the Auditors pursuant hereto of such dispute; such
notice shall specify in reasonable detail the nature of the dispute;
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(2) during the 15 day period following the date of such notice,
Sellers and PRG shall attempt to resolve such dispute and to determine the
appropriateness of the Closing Balance Sheet, Financial Statements or the
Adjustment Amount; and
(3) if at the end of the 15 day period specified in subsection (b)
above, Seller and PRG shall have failed to reach a written agreement with
respect to such dispute, the matter shall be referred to, an independent
firm of certified public accountants mutually acceptable to Sellers and PRG
(the "Arbitrator"), which shall act as an arbitrator and shall issue its
report as to the Closing Balance Sheet and Adjustment Amount within thirty
(30) days after such dispute is referred to the Arbitrator. Each of the
parties hereto shall bear all costs and expenses incurred by it in
connection with such arbitration, except that the fees and expenses of the
Arbitrator hereunder shall be borne equally by Seller and PRG. This
provision for arbitration shall be specifically enforceable by the parties
and the decision of the Arbitrator in accordance with the provision hereof
shall be final and binding and there shall be no right of appeal therefrom.
1.6.4 Purchase Price Adjustment.
(1) If the Net Book Value of the Business (as defined in subsection
1.6.5) on the Closing Balance Sheet is less than eight million five hundred
thirteen thousand seven hundred thirteen dollars ($8,513,713) then the
Purchase Price shall be reduced by an amount equal to the difference
between $8,513,713 and the Net Book Value of the Business on the Closing
Balance Sheet.
(2) If the Net Book Value of the Business on the December 31, 1996
Ernst & Young Balance Sheet is in excess of nine million five hundred
thirteen thousand seven hundred thirteen dollars ($9,513,713), then the
Purchase Price shall be increased by an amount equal to thirty percent
(30%) of such excess up to a maximum additional payment of one million five
hundred thousand dollars ($1,500,000) pursuant to this Section 1.6.4(b).
(3) If the Net Book Value of the Business on the Closing Balance
Sheet, as adjusted to use the same inventory and capitalization methods
used in the December 31, 1996 Ernst & Young balance sheet, exceeds the Net
Book Value on the December 31, 1996 Ernst & Young Balance Sheet, then the
Purchase Price shall be increased by an amount equal to forty-five percent
(45%) of such excess up to a maximum additional payment of one million two
hundred fifty thousand dollars ($1,250,000) pursuant to this Section
1.6.4(c).
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(4) Any net increase or decrease in the Purchase Price, as the case
may be, pursuant to Sections 1.6.4(a), (b) and (c) is referred to herein as
the "Adjustment Amount" and shall be payable to PRG, if the amount payable
pursuant to Section 1.6.4(a) exceeds the amounts payable pursuant to
Sections 1.6.4(b) and (c), or to Sellers, if the sum of the amounts payable
pursuant to Section 1.6.4(b) and (c) exceeds the amount payable pursuant to
Section 1.6.4(a) in either case within five (5) business days following the
Adjustment Date (as defined in subsection 1.6.5) by wire transfer of
immediately available funds to such account as PRG or Sellers as the case
may be shall designate or by bank or certified check.
1.6.5 References in this Agreement to (a) "Net Book Value of the Business"
shall mean an amount equal to the book value of the Assets acquired by PRG
pursuant to this Agreement, less the book value of the Assumed Liabilities, (b)
the "Closing Balance Sheet" shall mean the balance sheet of the Business at the
Closing Date, prepared and reviewed as described in this Section 1.6, (c) the
"Adjustment Date" shall mean the later of the 15th day after delivery of the
report of the Auditors pursuant hereto, or the date upon which any dispute
concerning the Financial Statements, the Closing Balance Sheet, the Adjustment
Amount or the amount of the Purchase Price is resolved, and (d) the December
31,1996 Ernst & Young Balance Sheet shall mean the balance sheet of the Sellers
as of December 31,1996 as reviewed by Ernst & Young.
1.7 Holdback. Subject to mediation as provided in Section 6.6 hereof, and
to the payment terms and claims procedures of the Escrow Agreement attached as
Exhibit F, PRG shall be entitled to make claims payable from all or any portion
of the Holdback, and any interest earned thereon from time to time towards any
and all Damages. For purposes of this Agreement "Damages" shall mean damages,
losses, deficiencies, liabilities, costs and expenses actually incurred or
suffered by one or more Indemnified PRG Parties (as such terms are defined in
Section 6.1), that result from, relate to or arise out of one or more of those
matters described in subsections 6.1.1 and 6.1.2 (collectively, the "Seller
Obligations"). Except in the case of fraud, PRG's and all other Indemnified PRG
Parties' right to recovery or indemnification under Section 6.1, in the
aggregate, is expressly limited to the amount of the Holdback. As provided in
subsection 1.3.2, on January 2, 1998, PRG shall pay to the Seller an amount (the
"Adjusted Holdback") equal to (a) the Holdback, less (b) all amounts applied to
Seller Obligations, plus (c) interest actually earned on the Holdback. In the
event that the foregoing calculation results in a negative number, the Adjusted
Holdback shall be deemed to be zero.
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ARTICLE 2. -- CLOSING, ITEMS TO BE DELIVERED, THIRD PARTY CONSENTS, CHANGE IN
NAME AND FURTHER ASSURANCES
0.1 Closing. The closing (the "Closing") of the sale and purchase of the
Assets shall take place at 10:00 A.M., local time, on such date as may be
mutually agreed upon in writing by PRG and Sellers which date shall be within
ten (10) business days of the date on which all of the closing conditions set
forth in Article V and required to be completed prior to the Closing have
occurred. The date of the Closing is sometimes herein referred to as the
"Closing Date." The closing shall take place at the New York, New York offices
of Sellers' counsel, Kronish, Lieb, Weiner & Hellman LLP, or at such other
location as the parties shall mutually agree.
0.2 Items to be Delivered at Closing. At the Closing and subject to the
terms and conditions herein contained:
2.1.1 Except for Assets set forth on Schedule 2.2.1 which, by their
terms are not assignable and which will be handled pursuant to the
provisions of Section 2.3, Sellers shall deliver to PRG such bills of sale,
assignments, endorsements, and other good and sufficient instruments and
documents of conveyance and transfer, substantially in the form of Exhibit
H, as shall be necessary and effective to transfer and assign to, and vest
in, PRG all of Sellers' respective rights, titles and interests in and to
the Assets, including without limitation, (a) good and valid title in and
to all of the Assets owned by each Seller, (b) assignments of all leasehold
interests in and to all of the Assets leased by Seller as lessee, and (c)
all of Sellers' respective rights under all agreements, contracts,
commitments, leases, plans, bids, quotations, proposals, instruments and
other documents included in the Assets to which any Seller is party or by
which it has rights on the Closing Date, and simultaneously with such
delivery, all such actions will be taken as may be reasonably required to
put PRG in actual possession and operating control of the Assets.
2.1.2 PRG shall deliver to the Sellers the Closing Payment and a
written undertaking substantially in the form of Exhibit H whereby PRG will
assume and agree to pay, discharge or perform, as appropriate, the Assumed
Liabilities to the extent and as provided in Section 1.5 hereof.
2.1.3 PRG and Stern shall mutually execute and deliver an employment
agreement substantially in the form of Exhibit B, attached hereto, PRG and
Cannon shall mutually execute and deliver an employment agreement
substantially in the form of Exhibit C attached hereto and PRG shall pay
each of Stern and Cannon a $1,000,000 non-refundable "signing-on" bonus by
wire transfer.
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2.1.4 At or prior to the Closing, the parties hereto shall also
deliver to each other the agreements, opinions, certificates and other
documents and instruments referred to in Article V hereof.
2.2 Third Party Consents. To the extent that any Seller's rights under any
agreement, contract or lease, to be assigned to PRG hereunder may not be
assigned without the consent of another person which has not been obtained, this
Agreement shall not constitute an agreement to assign the same if an attempted
assignment would constitute a breach thereof or be unlawful, and such Seller, at
its expense, shall use its reasonable efforts to obtain any such required
consent(s) as promptly as possible. If any such consent shall not be obtained or
if any attempted assignment would be ineffective or would impair PRG's rights
under the asset in question so that PRG would not in effect acquire the benefit
of all such rights, such Seller, to the maximum extent permitted by law, shall
act after the Closing as PRG's agent in order to obtain for it the benefits
thereunder and shall cooperate, to the maximum extent permitted by law, with PRG
in any other reasonable arrangement designed to provide such benefits to PRG;
and PRG shall, at its expense, perform such services or provide such facilities,
personnel, equipment and inventory (with reasonable diligence and in accordance
with the terms of the original contract and/or purchase order) to enable such
Seller to fulfill its obligations with respect to any such asset, provided that
the full economic benefit of any such asset shall accrue solely to PRG and the
full economic burdens of such asset shall be borne by PRG.
2.3 Change in Name. On the Closing Date, each Seller and the Shareholders
shall deliver to PRG all such executed documents as may be required to change
each Seller's name on that date to another name bearing no similarity to "Bash
Theatrical Lighting, Inc.", "Bash Theatrical Lighting Services, Inc.", "Bash
Lighting Services, Inc.", "Bash Lighting Services Mid-Atlantic, Inc." and "Bash
Exposition Services, Inc.", including but not limited to a name change amendment
with the Secretary of State of each state in which a Seller is organized and an
appropriate name change notice for each state where a Seller is qualified to do
business.
2.4 Further Assurances. Each of the Sellers and the Shareholders from time
to time after the Closing, at PRG's reasonable request, will execute,
acknowledge and deliver to PRG such other instruments of conveyance and transfer
and will take such other actions and execute and deliver such other documents,
certifications and further assurances as PRG may reasonably require in order to
vest more effectively in PRG, or to put PRG more fully in possession of, any of
the Assets, or to better enable PRG to complete, perform or discharge any of the
Assumed Liabilities. Each of the parties hereto will cooperate with the other
parties hereto and take other actions as may be reasonably requested from time
to time by any other party hereto as reasonably necessary to carry out, evidence
and confirm the intended purposes of this Agreement.
ARTICLE 3. -- REPRESENTATIONS AND WARRANTIES
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3.1 Representations and Warranties of the Sellers. Each Seller hereby
represents and warrants to PRG that, except as set forth on the Schedules
attached hereto (each of which exceptions shall specifically identify the
relevant section or subsection hereof to which it relates and shall be deemed to
be a representation and warranty as if made hereunder):
3.1.1 Corporate Existence. Each Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Such Seller is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction where the conduct of the Business by it requires it to be so
qualified, except where the failure to be so qualified does not have a
material adverse effect on the Business or operations of the Seller.
Schedule 3.1.1 contains a list of all jurisdictions in which each Seller is
presently qualified.
3.1.2 Corporate Power; Authorization; Enforceable Obligations. Each
Shareholder and each Seller has the power (corporate or otherwise),
authority and legal right to execute, deliver and perform this Agreement.
The execution, delivery and performance of this Agreement by each Seller
has been duly authorized by all necessary corporate and shareholder action.
This Agreement has been, and the other agreements, documents and
instruments required to be delivered by the Seller in accordance with the
provisions hereof (the "Sellers' Documents") will be, duly executed and
delivered by the appropriate Seller by duly authorized officers of such
Seller, and this Agreement constitutes, and the Sellers' Documents when
executed and delivered will constitute, the legal, valid and binding
obligations of the Sellers, enforceable against each Seller in accordance
with their respective terms.
3.1.3 No Interest in Other Entities. Other than mutual funds, money
market accounts or similar cash equivalents, no Seller owns any shares of
any corporation or any ownership or other investment interest, either of
record, beneficially or equitably, in any association, partnership, joint
venture, limited liability company or other legal entity. No Shareholder
owns any ownership or other investment interest, either of record,
beneficially or equitably, in any association, partnership, joint venture,
limited liability company or other legal entity engaged in any business
competitive with the Business other than the Seller and other than up to
five percent (5%) of the stock of any publicly traded company which may be
engaged in such business.
3.1.4 Validity of Contemplated Transactions, etc. Except as set forth
in Schedule 3.1.4, the execution, delivery and performance of this
Agreement by each Seller does not and will not violate, conflict with or
result in the breach of any term, condition or provision of, or require the
consent of, any other person under, (a) any existing law, ordinance, or
governmental rule or regulation to which any Seller is subject, (b) any
judgment, order, writ, injunction, decree or award of any court, arbitrator
or governmental or regulatory official, body or authority which is
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applicable to any Seller, (c) the charter documents of any Seller or any
securities issued by any Seller, or (d) any mortgage, indenture, agreement,
contract, commitment, lease, plan, authorization, or other instrument,
document or understanding, oral or written, to which any Seller is a party,
by which any Seller may have rights or by which any of the Assets may be
bound or affected, or give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of any Seller thereunder, except in the cases of clauses (a),
(b) and (d), as would not materially adversely impair the Assets or
otherwise materially affect the Assets or the conduct of the Business.
Except as would not materially adversely impair the Assets or otherwise
materially adversely affect the conduct of the Business, no authorization,
approval or consent of, and no registration or filing with, any
governmental or regulatory official, body or authority is required in
connection with the execution, delivery or performance of this Agreement by
any Seller. Solely for purposes of this Section 3.1.4, any diminution in
the value of the Assets which is reasonably anticipated to exceed $175,000
and any other breach of this Section 3.1.4 which would reasonably be
anticipated to cost in excess of $175,000 to cure, will be deemed material.
3.1.5 No Third Party Options. There are no existing agreements,
options, commitments, or rights with, of or to any person to acquire any of
any Seller's assets, properties or rights included in the Assets or any
interest therein, except for those contracts entered into in the normal
course of business consistent with past practice for the sale of inventory
of a Seller, except for employee stock options as set forth on Schedule A-2
hereof.
3.1.6 Financial Statements; Customer and Vendor List.
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(1) Sellers have delivered to PRG true and complete copies of the
unaudited respective balance sheets of the Sellers at December 31,
1996 and December 31, 1995, and related statements of income and cash
flow for the periods then ended (together with the balance sheets and
the related statements of income, cash flow and changes in
shareholders equity described in clause (i) of this subsection
3.1.6(a), the "Historical Financial Statements"); all of which have
been prepared in accordance with generally accepted accounting
principles consistently applied through the periods involved. The
Historical Financial Statements, including the related notes present
the respective financial positions, assets and liabilities (whether
accrued, absolute, contingent or otherwise) of Sellers at the dates
indicated and such statements of income, cash flow and changes in
shareholders equity, do not overstate the revenues of the Sellers or
overstate the inventory of Sellers for the periods indicated. The
unaudited financial statements as and for the periods ending December
31, 1995 and 1996 contain (or will contain) all adjustments, which are
of a normal recurring nature, necessary to present the respective
financial positions of the Sellers for the periods then ended. The
interim balance sheet dated June 30, 1997 will be prepared on the same
basis used by Sellers for their December 31, 1996 balance sheet (the
"Interim Balance Sheet") and will separately identify the assets and
liabilities which, if the Closing had been held on the Interim Balance
Sheet Date, would have been transferred to or assumed by PRG in
accordance herewith. References in this Agreement to the "Interim
Balance Sheet Date" shall be deemed to refer to June 30, 1997 except
with respect to the physical inventory, in which case it shall be
deemed to refer to the date set forth on Exhibit A.
(2) All data provided by Sellers to Ernst & Young is true and
complete in all material respects. PRG acknowledges that because it,
and not Sellers, has retained Ernst & Young, Sellers make no
representations regarding the compilation of the raw data provided by
Ernst &Young or the proper accounting treatment thereof.
3.1.7 Inventory. Except for damaged or obsolete inventory which is
retained for spare parts or pending disposal and which, in the aggregate,
does not exceed one percent 1% of the inventory value shown on Exhibit A,
all inventory of each Seller including resale inventory and rental
inventory used in the conduct of the Business, including without limitation
raw materials, work-in process and finished goods, reflected on Exhibit A
or acquired since the date thereof was acquired and has been maintained in
the ordinary course of the Business; is of good and merchantable quality;
consists substantially of a quality, quantity and condition usable,
leasable or saleable in the ordinary course of the Business. No Seller is
under any liability or obligation with respect to the return of any
material amount of inventory in the possession of wholesalers, retailers or
other customers. All inventory values reflected on Exhibit A have been
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calculated using values existing in Sellers' HITS as of the date indicated
thereof. Exhibit A will be updated to reflect the physical inventory to be
conducted by PRG shortly preceding the Closing Date system. Exhibit A is
and will be materially accurate and complete and fairly presents the
inventory position of the Company as of each of the dates thereof. Solely
for purposes of this Section 3.1.7, any breach of this Section 3.1.7 which
would reasonably be anticipated to cost in excess of $175,000 to cure, will
be deemed material.
3.1.8 Absence of Undisclosed Liabilities. No Seller has liabilities or
obligations with respect to the Business which are being assumed by PRG,
either direct or indirect, matured or unmatured or absolute, contingent or
otherwise, except:
(1) Assumed Liabilities; and
(2) liabilities to the extent secured by Permitted Liens.
For purposes of this Section 3.1.8, the term "liabilities" shall
include, without limitation, any indebtedness, guaranty, endorsement,
claim, loss damage, deficiency, cost, expense, obligation or
responsibility, fixed or unfixed, known or unknown asserted or unasserted,
liquidated or unliquidated, secured or unsecured.
3.1.9 Taxes. All tax returns required to be filed by each and any
Seller ("Tax Returns") in any jurisdiction with respect to Assumed Taxes
have been filed and all taxes, assessments, fees and other governmental
charges upon each and any Seller or upon any of such Seller's properties,
income or franchises, which are shown to be due and payable in such Tax
Returns have been paid except for such Assumed Taxes the payment of which
is being contested by a Seller in good faith by appropriate proceedings and
with respect to which such Seller has set aside on its books reserves
deemed by it to be adequate. There are not pending tax examinations of or
tax claims asserted against any Seller or any assets or properties of any
Seller which could adversely affect PRG. There are no tax liens (other than
any lien for current taxes not yet due and payable) on any of the assets or
properties of any Seller. Each Seller has made all deposits and payments
required by law to be made with respect to employees' withholding and other
employment taxes.
3.1.10 Books of Account. The books, records and accounts of each
Seller maintained with respect to the Business accurately and fairly
reflect, in reasonable detail, the transactions and the assets and
liabilities of such Seller with respect to the Business. No Seller has
engaged in any transaction with respect to the Business, except for
transactions reflected in the normally maintained books and records of the
Business.
3.1.11 Existing Condition. Since the Interim Balance Sheet Date,
except as set forth in Schedule 3.1.11, no Seller has:
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(1) incurred any liabilities, other than liabilities incurred in
the ordinary course of business consistent with past practice or
failed to pay or discharge when due any liabilities of which the
failure to pay or discharge has caused or will cause any material
damage or risk of material loss to it or any of its assets or
properties other than with the prior written consent of PRG;
(2) sold, encumbered, assigned or transferred any assets or
properties which would have been included in the Assets if the Closing
had been held on the Interim Balance Sheet Date or on any date since
then, except (i) for the sale of property in the ordinary course of
business consistent with past practice or with the prior written
consent of PRG or (ii) the disposition of damaged or obsolete
inventory and equipment no longer useful in the business in an amount
not exceeding $100,000;
(3) mortgaged, pledged or subjected any of its Assets (other than
any Excluded Assets) to any mortgage, lien, pledge, security interest,
conditional sales contract or other encumbrance of any nature
whatsoever, except for Permitted Liens (as defined in subsection
3.1.12), other than with the prior written consent of PRG;
(4) agreed to any amendment or received notice of termination of
any material agreement, contract, commitment, lease or plan to which
it is a party or by which it is bound (not including any rental
agreement with aggregate rentals after the date hereof reasonably
expected not to exceed $2500 per week), or canceled, modified or
waived any substantial debts or claims held by it or waived any rights
of substantial value, whether or not in the ordinary course of
business, other than with the prior written consent of PRG;
(5) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting its
business, operations, assets or properties or (ii) of any item or
items carried on its books of account individually or in the aggregate
at more than $50,000 or suffered any repeated, recurring or prolonged
shortage, cessation or interruption of supplies or utility or other
services required to conduct its business and operations;
(6) suffered any material adverse change in its business,
operations, assets, prospects, properties or financial condition;
(7) received notice or had knowledge of any actual or threatened
labor trouble, strike or other occurrence, event or condition of any
similar character
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which has had or could reasonably be expected to have a material
adverse effect on its business, operations, assets or properties;
(8) made commitments or agreements for capital expenditures or
capital additions or betterments involving expenditures of more than
$100,000 in the aggregate except such as may be involved in ordinary
repair, maintenance or replacement of its assets, other than with the
prior written consent of PRG;
(9) increased the salaries or other compensation of, or made any
advance (excluding advances for ordinary and necessary business
expenses) or loan to, any of its employees other than Donald Stern or
Robert Cannon or made any increase in, or any addition to, other
benefits to which any of its employees other than Donald Stern or
Robert Cannon may be entitled, other than with the prior written
consent of PRG;
(10) changed any of the accounting principles followed by it or
the methods of applying such principles other than with the prior
written consent of PRG; or
(11) entered into any transaction other than in the ordinary
course of business consistent with past practice, other than with the
prior written consent of PRG.
3.1.12 Title to Properties. Except as set forth in Schedule 3.1.12 or
otherwise in any schedule attached hereto , each Seller has good, valid and
marketable title to all of its properties and assets which would be
included in the Assets if the Closing took place on the date hereof, which
it purports to own, including without limitation all properties and assets
reflected in the Interim Balance Sheet (except for property sold for fair
value since the date thereof in the ordinary course of business consistent
with past practice), and all assets physically on the Business premises on
the date hereof (other than incidental personal property and furnishings),
free and clear of all mortgages, liens, pledges, security interest,
charges, claims, restrictions and other encumbrances and defects of title
of any nature whatsoever, except for the following ("Permitted Liens"): (i)
liens for current real or personal property taxes not yet due and payable,
(ii) liens disclosed in the Schedule 3.1.12, (iii) worker's, carrier's and
materialman's liens, (iv) liens that individually and in the aggregate are
immaterial in character, amount, and extent, and which do not materially
detract from the value or materially interfere with the present or proposed
use of the properties they affect (v) any lien securing indebtedness that
is assumed hereunder and identified on Schedule 3.1.12, and (vi) and lien
which arises from the failures of Sellers to comply with bulk sales laws in
any jurisdiction.
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3.1.13 Condition for Tangible Assets. All buildings, structures,
facilities, equipment and other material items of tangible property and
assets which would be included in the Assets if the Closing took place on
the date hereof other than damaged or obsolete inventory and equipment
retained for spare parts or pending disposal with an aggregate value of
less than one percent (1%) of the inventory value shown on Exhibit A are in
reasonable operating condition and repair, subject to normal wear and
maintenance, are usable in the regular and ordinary course of business, and
conform, in all material respects, to all applicable laws, ordinances,
codes, rules and regulations, and Authorizations (as defined in subsection
3.1.14) relating to their construction, use and operation. No person other
than a Seller owns any equipment or other tangible assets or properties
(other than incidental personal property and furnishings) situated on the
premises of a Seller or necessary for the operation of the Business, except
for leased items disclosed in Schedule 3.1.13 and for items that,
individually and in the aggregate, are of immaterial value. All
customer-owned equipment stored at Sellers' facilities is set forth on
Schedule 3.1.13.
3.1.14 Compliance with Law; Authorizations. Each Seller has complied
with each, and is not in violation of any, law, ordinance, or governmental
or regulatory rule or regulation, whether federal, state, local or foreign,
to which such Seller's business, operations, assets or properties is
subject ("Regulations"), except for such violations as could not reasonably
be expected to have a material adverse effect on PRG. The Schedule 3.1.14
contains a list, prepared to the knowledge of Sellers, of all material
franchises, licenses, permits, rights, applications, filings, registrations
and other authorizations ("Authorizations") held by each Seller. Sellers
have no knowledge of any impediment to PRG obtaining all such permits
material to the conduct of the Business as presently conducted by Sellers.
3.1.15 Related Party Transactions. No officer or director of any
Seller, or member of the immediate family of any officer or director of any
Seller presently has, or during the past three years has had, any direct or
indirect ownership interest in (a) any firm or corporation (other than the
Sellers) with which a Seller is or was affiliated or with which a Seller
presently has, or during the past three years has had, a business
relationship, or (b) any firm or corporation (other than the Sellers) that
competes or during the past three years has competed with a Seller, or (c)
any property which is, or during the past three years was, the subject of
any material contract, agreement, understanding or business relationship.
No officer or director of any Seller, or member of the immediate family of
any officer or director of any Seller presently has, or during the past
three years has had, any direct or indirect interest in any material
contract with any Seller except for option agreements and employment
relationships all of which will be terminated no later than the Closing
Date.
3.1.16 Litigation. Except as disclosed on Schedule 3.1.16, no
litigation, including any arbitration, investigation or other proceeding of
or before any court, arbitrator or governmental or regulatory official,
body or authority is pending or, to the best knowledge of Seller is
threatened which relates to the assets of any Seller or the transactions
contemplated by
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this Agreement, nor does any Seller know of any reasonable basis for any
such litigation, arbitration, investigation or proceeding, the result of
which could reasonably be expected to have a material adverse affect on
PRG, the Assets or the transactions contemplated hereby.
3.1.17 Contracts and Commitments.
(1) The agreements listed on Schedule 3.1.17 constitute all written
and oral agreements to which any Seller is a party that are material to the
Business as currently conducted, except that rental agreements with
aggregate rentals after the date hereof reasonably expected not to exceed
$2500 per week need not be listed on Schedule 3.1.17 and provided further
that customer identifying information will not be provided until the
Closing, including, without limitation:
.1 any agreements relating to the construction or purchase of
capital improvements, or the purchase of any materials, supplies, or
equipment, involving the expenditure by Sellers of more than $ 50,000
after the date hereof;
.2 any employment, consulting, management, or noncompetition
agreement not terminable at will by Seller without liability on less
than 30 days notice;
.3 any indemnification agreement relating to infringement of
proprietary rights;
.4 any agreement, contract, or commitment that is expected by
such Seller to be performed at or result in a loss, or which has or
would have material adverse effect upon the Business;
.5 any lease of personal property material to the operations of
such Seller;
.6 any agreement with any broker, finder, investment banker or
underwriter;
.7 any note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment
for the borrowing or lending of money relating to the Business or
agreement or arrangement for a line of credit or any guaranties, in
any manner, whether directly or indirectly, or any indebtedness,
dividend or other obligation of any other person or entity relating to
the Business (other than
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endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) but only to the extent that PRG
has assumed any obligation with respect thereto;
.8 agreements with sales representatives and distributors (the
identities of which will not be disclosed prior to Closing),
and including each amendment, modification, renewal or extension or other
material ancillary document pertaining thereto (the "Seller Agreements").
Prior to the Closing Date, the Sellers will have delivered or made
available to PRG correct and complete copies of each of the Seller
Agreements that are in writing.
(2) No Seller has received notice of cancellation or termination
(written or otherwise) under any option or right reserved to the other
party to any Seller Agreement or any notice of default (written or
otherwise) under such agreement. Except as otherwise disclosed on Schedule
3.1.17, no Seller, nor to the knowledge of any Seller, any other party, is
in breach or default of any Seller Agreement that would cause a material
adverse effect on the Business and, to the knowledge of each Seller, no
event has occurred that, with notice or lapse of time or both, would
constitute such a breach or default or permit termination, modification or
acceleration under such Seller Agreement that would cause a material
adverse effect on the Business except for the assignment of any Asset to
PRG without the consent of any third party, which will be handled pursuant
to Section 2.3 hereof. Except as separately identified in Schedule 3.1.17,
no approval or consent of any person is needed in order that the Seller
Agreements continue in full force and effect following the assignment of
such agreements to PRG. Furthermore, to the best knowledge of each Seller,
no material Seller Agreement, in the reasonable opinion of such Seller,
contains any contractual requirement with which there is a reasonable
likelihood PRG or any other party thereto will be unable to comply.
3.1.18 Additional Information. Schedule 3.1.18 contains accurate lists
and summary descriptions of the following:
(1) the names and titles of and current annual base salary or
hourly rates and date and amount of most recent raise for all
employees of each Seller engaged in the conduct of the Business,
together with a statement of the full amount and nature of any other
remuneration, whether in cash or kind, paid to each such person during
the past or current fiscal year or payable to each such person in the
future and the bonuses accrued for, the vacation and severance
benefits to which, each such person is entitled; and
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(2) all names under which each Seller has conducted any business
or which it has otherwise used during the last five years.
3.1.19 Labor Matters. Schedule 3.1.19 contains a complete list of all
written contracts, commitments or arrangements with any labor union, and no
labor union has requested in writing to any Seller or, to the best of each
Seller's knowledge, has sought to represent any of the employees,
representatives or agents of any Seller, other than as disclosed in
Schedule 3.1.19. There are no oral agreements with any labor union. There
is no strike or other labor dispute involving any Seller pending, and no
Seller has reason to believe any labor dispute to be threatened, that could
have a material adverse effect on the Business, nor is any Seller aware of
any labor organization activity involving its employees, other than as
disclosed in Schedule 3.1.19.
3.1.20 Employees and Related Matters.
(1) Schedule 3.1.20 contains a complete list of all written
employee benefit plans, whether covering one person or more than one
person, sponsored or maintained by each Seller. Schedule 3.1.20 also
contains a list of any other agreements with employees under which any
employee of any Seller is entitled to receive a percentage of profits
or revenues of all or any portion of Sellers. For the purposes hereof,
the term "employee benefit plan" includes all written plans, funds,
programs and policies, providing benefits of economic value to any
employee, former employee, or present or former beneficiary, dependent
or assignee of any such employee or former employee other than regular
salary, wages or commissions paid substantially concurrently with the
performance of the services for which paid. Without limitation, the
term "employee benefit plan" includes all employee welfare benefit
plans within the meaning of section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and all employee
pension benefit plans within the meaning of section 3(2) of ERISA.
Each plan providing benefits which are funded through a policy of
insurance is indicated by the word "insured" placed by the listing of
the plan in Schedule 3.1.20. Except as provided in Schedule 3.1.20, no
Seller nor any trade or business (whether or not incorporated) which,
together with any Seller, would be treated as a single employer under
Section 4001 of the Employee Retirement Income Security Act of 1974
(an "ERISA Affiliate") is a contributing employer to a multi-employer
plan as defined in Section 3(37) of ERISA. With respect to employee
benefit plans subject to Title IV of ERISA other than multi-employer
plans, each Seller has made full and timely payment of all
contributions required under the terms of each such plan and Section
412(m) of the Internal Revenue Code of 1986, as amended (the "Code")
and Section 302(e) of ERISA; the present fair market value of all
assets of each such plan exceeds the present value of all vested
benefits
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under each such plan, as determined on the most recent valuation date
of such plan and in accordance with the provisions of ERISA and the
regulations thereunder for calculating the potential liability of each
Seller or any ERISA Affiliate under Title IV of ERISA; and no
accumulated funding deficiency (as defined in Section 412 of the Code
and Section 302 of ERISA) exists with respect to any such plan. No
Seller nor any ERISA Affiliate has incurred any liability to the
Pension Benefit Guaranty Corporation under ERISA, nor is there a
reasonable basis to believe that any such liability will be incurred.
(2) No Seller has any obligation to provide medical, life
insurance, disability or other benefits to its or any of its
predecessors retired employees formerly engaged in the Business.
(3) Except as provided in Schedule 3.1.20, no Seller is a party
to any collective bargaining agreement.
(4) Upon execution of this Agreement, PRG shall have no liability
for any withdrawal liability with respect to any present or former
employee of any Seller under any employee benefit or pension plan.
3.1.21 Intellectual Property Matters. No Seller in the conduct of the
Business utilizes any patent, trademark, tradename, service mark,
copyright, software (other than mass market software sold through standard
retail distribution channels) except for those listed on Schedule 3.1.21
(the "Intellectual Property") under such Seller's name, all of which are
owned by such Seller free and clear of any liens, claims, charges or
encumbrances, except for software for which Seller has adequate valid
licenses. No Seller has knowledge that it infringes upon or unlawfully or
wrongfully uses any patent, trademark, tradename, service mark, copyright
or trade secret owned or claimed by another. No Seller is in default under,
and no Seller has received any notice of any claim of infringement or any
other claim or process relating to any such patent, trademark, tradename,
service mark, copyright or trade secret. No present or former employee of
any Seller and no other person owns or has any proprietary, financial or
other interest, direct or indirect, in whole or in part, in any patent,
trademark, tradename, service mark or copyright, or in any application
therefor, or in any trade secret, which any Seller owns, possesses or uses
in its operations as now or heretofore conducted. Schedule 3.1.21 lists all
confidentiality or non-disclosure agreements to which each Seller or any of
such Seller's employees engaged in the Business is a party which relates to
the Business which would be binding on PRG or enforceable by PRG.
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3.1.22 Environmental Matters. Except as set forth in Schedule 3.1.22:
(1) No Seller is required to obtain any permits, licenses and
other authorizations which are required in connection with the conduct
of the Business under Regulations relating to pollution or protection
of the environment.
(2) Each Seller is, to its knowledge, in material compliance with
all limitations, restrictions, conditions, standards, prohibitions,
requirements, and obligations, contained in Regulations relating to
pollution or protection of the environment or contained in any code,
plan, order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder.
(3) No Seller is aware of, nor has any Seller received notice of,
any past or present events, conditions, circumstances, activities,
practices, incidents, actions or plans which is reasonably likely to
interfere with or prevent compliance or continued compliance by
Sellers with those laws or any regulations, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, or which may give rise to any
common law or legal liability, or otherwise form the basis of any
claim, action, demand, suit, proceeding relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release or
threatened release into the environment, of any pollutant,
contaminant, chemical, or industrial, toxic or hazardous substance or
waste.
(4) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice or demand letter, notice or violation,
investigation, or proceeding pending or, to the Sellers' knowledge,
threatened against any Seller in connection with the conduct of the
Business relating in any way to those laws relating to pollution or
protection of the environment or any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder except for environmental matters
which, in the aggregate, could reasonably be expected to be cured for
less than $25,000.
(5) Except as set forth in Schedule 3.1.22, no filing is required
to be made in connection with the transaction contemplated by this
Agreement pursuant to the New Jersey Industrial Site Recovery Act or
any similar statute in any state in which Sellers operate.
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3.1.23 Real Property.
(1) Real Property Defined. All real property (including, without
limitation, all interests in and rights to real property) and
improvements located thereon which are owned or leased by any Seller
and used in connection with the Business or included in the Assets are
listed on Schedule 3.1.23 in response to this subsection
(collectively, the "Real Property").
(2) Title to Owned Real Property. With the exception of the
Facility, no Seller owns any Real Property.
(3) Leased Real Property. With respect to the Real Property that
is leased by Seller:
.1 Sellers have delivered to PRG a true and complete copy of
every lease and sublease to which each Seller is a tenant or
subtenant (each a "Lease" and collectively, the "Leases");
Schedule 3.1.23 describes each Lease by setting forth the name of
the Seller, the name of the landlord or sublandlord, a
description of the leased premises, the commencement and
expiration dates of the current term, the security deposited by
the applicable Seller with the landlord or sublandlord, if any,
the monthly rental (including base and all additional rents), and
whether the assignment of such Lease by such Seller to PRG
requires the consent of the landlord or sublandlord; and
.2 each Lease is, and at Closing shall be, in full force and
effect, has not been assigned, modified, supplemented or amended
except as listed on Schedule 3.1.23, and except as set forth in
Schedule 3.1.23 no Seller nor, to any Seller's knowledge, the
landlord or sublandlord under any Lease is in material default
under any of the Leases, and no circumstances or state of facts
presently exists which, with the giving of notice or passage of
time, or both, would permit the landlord or sublandlord under any
Lease to terminate any Lease.
(4) Utility Services. There is no condition known to Seller which
will result in the termination of the present access from the Real
Property or to the knowledge of Sellers which would materially
adversely affect the ability of PRG to obtain water, electric, gas,
sewer and utility services and storm drainage facilities adequate for
the present use of the Real Property by Seller in conducting the
Business.
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(5) Access. There are currently no restrictions known to any
Seller on entrance to or exit from the Real Property to adjacent
public streets and no conditions or threat of any conditions known to
any Seller which will result in the termination of the present access
from the Real Property owned or leased by it to existing highways and
roads.
(6) Absence of Notice. Except as set forth in Schedule 3.1.23, no
Seller has received notices, oral or written, with respect to matters
which would materially adversely affect the use of the Real Property
or which would require the expenditure of more than $10,000 to cure
breaches, violations or like matters relating to such Real Property
other than matters covered in Section 3.1.22 hereof.
(7) No Violations. To each Seller's knowledge, the Real Property
owned or leased by it and the present uses thereof comply in all
material respects with all Regulations of all governmental bodies
having jurisdiction over the Real Property, and Seller has received no
written notices, from any governmental body, and has no reason to
believe, that the Real Property or any improvements erected or situate
thereon, or the uses conducted thereon or therein, violate any
Regulations of any governmental body having jurisdiction over the Real
Property.
(8) No Encumbrances. Between the date of this Agreement and
Closing Seller shall not sell, mortgage or encumber the Leases.
(9) Executory Contracts. Set forth on the Schedule 3.1.23 is a
description of all executory contracts made by or on behalf of each
and any Seller, or by which any Seller is bound, with respect to the
Real Property ("Executory Contracts"), including, without limitation,
operation, management, maintenance, utility, and construction
contracts. At Closing, the Sellers shall deliver to PRG a true and
complete copy (the original execution copy, if available) of each of
the Executory Contracts.
3.1.24 Availability of Documents. Sellers have made available to PRG
copies of all documents, including, without limitation, all agreements,
contracts, commitments, insurance policies, leases, plans, instruments,
undertakings, authorizations, permits, licenses, patents, trademarks, trade
names, service marks, copyrights and applications therefor listed in the
Schedule 3.1.24 hereto or referred to herein. All such copies are true and
complete and include all amendments, supplements and modifications thereto
or waivers currently in effect thereunder.
3.1.25 Completeness of Disclosure. The representations of Sellers set
forth in this Agreement together with all information provided or made
available by Sellers to PRG in connection with this Agreement and the
transactions contemplated hereby, all taken as a whole,
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do not contain any untrue statement of a material fact or omit any fact
necessary to make the representations of Sellers set forth herein not
misleading in light of the circumstances in which they were made, except as
could not reasonably be expected to have a material adverse affect on the
value of the Business taken as a whole.
3.2 Representations and Warranties of PRG. PRG represents and warrants to
the Sellers as follows:
3.2.1 Legal Existence. PRG is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Delaware.
3.2.2 Power and Authorization. PRG has the power, authority and legal
right to execute, deliver and perform this Agreement. The execution,
delivery and performance of this Agreement by PRG have been duly authorized
by all necessary action of PRG and its members and managers. This Agreement
has been duly executed and delivered by PRG and constitutes the legal,
valid and binding obligation of PRG enforceable against PRG in accordance
with its terms.
3.2.3 Validity of Contemplated Transactions, etc. The execution,
delivery and performance of this Agreement by PRG does not and will not
violate, conflict with or result in the breach of any term, condition or
provision of, or require the consent of any other party to, (a) any
existing law, ordinance, or governmental rule or regulation to which PRG is
subject, (b) any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority
which is applicable to PRG, (c) the certificate of formation, limited
liability company agreement, other charter documents or by-laws of, or any
securities issued by, PRG, or (d) any mortgage, indenture, agreement,
contract, commitment, lease, plan or other instrument, document or
understanding, oral or written, to which PRG is a party or by which PRG is
otherwise bound. No authorization, approval or consent of, and no
registration or filing with, any governmental or regulatory official, body
or authority is required in connection with the execution, delivery and
performance of this Agreement by PRG. Neither PRG or its "ultimate parent
entities" constitute persons with assets or annual net sales (determined as
provided in 16 C.F.R. ss. 801.1.11) greater than or equal to $100 million
for purposes of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
3.2.4 PRG is not a party to any agreement which could reasonably be
expected to hinder, delay or prevent it from timely making any payment to
Sellers which may be required pursuant to Section 1.6.4. PRG currently has,
and has no reason to believe that it will not have at any time after the
Closing, the liquid assets or available financing necessary to enable it
make the maximum required payment to Sellers pursuant to Section 1.6.4.
3.3 Survival of Representations and Warranties. All representations and
warranties made by the parties in this Agreement or in any certificate,
schedule, statement, document or
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instrument furnished hereunder or in connection with negotiation, execution and
performance of this Agreement shall survive the Closing for a period ending on
January 2, 1998. Notwithstanding any investigation or audit conducted before or
after the Closing Date or the decision of any party to complete the Closing,
each party shall be entitled to rely upon the representations and warranties set
forth herein and therein
3.4 Disclaimer of Representations and Warranties. Except for the
representations and warranties set forth in this Agreement, PRG has not relied
upon any representations or warranties of the Sellers or any other person or
entity in connection with this Agreement or the transactions contemplated
hereby. It is expressly understood and agreed by PRG that, except as
specifically provided in this Agreement, the transfer by the Sellers of the
Assets as contemplated hereby shall be made on an "as is, where is" basis,
regardless of the condition of the Assets and whether PRG will have had a
reasonable opportunity to inspect and examine the condition thereof. EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED HEREIN, ALL WARRANTIES (WHETHER WRITTEN OR ORAL,
EXPRESS OR IMPLIED) IN REGARD TO MERCHANTABILITY, FITNESS FOR A PARTICULAR USE,
CONDITION, DESIGN, OPERATION, MAINTENANCE, VALUE OR OTHERWISE WITH RESPECT TO
THE ASSETS ARE EXPRESSLY EXCLUDED, AND PRG AGREES TO ACCEPT THE ASSETS IN THEIR
"AS IS, WHERE IS" CONDITION, WITH ANY AND ALL DEFECTS AND FAULTS.
ARTICLE 4. -- AGREEMENTS PENDING CLOSING
4.1 Agreements of Seller Pending the Closing. Each Seller covenants and
agrees that, until the earlier of the Closing or the termination of this
Agreement, and except as otherwise agreed to in writing by PRG:
4.1.1 Business in the Ordinary Course. The Business shall be conducted
solely in the ordinary course consistent with past practice, except that
there shall be no restriction on any Seller's payment, through dividends,
distributions or otherwise, of cash or cash equivalents to shareholders or
others and there shall be no restriction on the payment or prepayment of
any obligations or liabilities of the Sellers; provided, however, that
Schedule 4.1.1 contains a complete list of all amounts distributed to or
paid on behalf of (regardless of whether designated as salary, bonus,
dividends, loans, or otherwise) Messrs Stern and Cannon by any of the
Sellers during 1996 and 1997 through the Interim Balance Sheet Date which
Schedule shall be updated and delivered in final form at the Closing.
4.1.2 Maintenance of Physical Assets. The Sellers shall continue to
maintain and service the physical assets used in the conduct of the
Business in the same manner as has been consistent with past practice.
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4.1.3 Employees and Business Relations. The Sellers shall use
commercially reasonable efforts to keep available the services of the
present employees and agents of the Business and to maintain the relations
and goodwill with the suppliers, customers, distributors and any others
having business relations with the Business consistent with past practice;
provided, however, that the inability of PRG to obtain the services of any
employee or agent or maintain relations with and the goodwill of any
supplier, customer, distributor or other person shall not constitute a
breach hereunder. None of the Sellers shall make any changes in its
vacation policies.
4.1.4 Maintenance of Franchises, etc. The Sellers shall use their
commercially reasonable efforts to maintain in full force and effect all
franchises currently in effect used in the conduct of the business of the
Business and shall notify PRG of any changes to any material franchise
agreement.
4.1.5 Compliance with Laws, etc. The Sellers shall continue to comply
with all laws, ordinances, rules, regulations and orders applicable to the
Business, and to each Seller's operations, assets or properties in respect
thereof, the noncompliance with which could reasonably be expected to
materially adversely affect the Business or the Assets.
4.1.6 Schedules and Interim Balance Sheet. As soon as practicable, but
in no event later than August 15, 1997 Sellers shall deliver all schedules
which are referenced in this Agreement and the Interim Balance Sheet. PRG
shall have ten business days to review such schedules and the Interim
Balance Sheet. After delivery of the schedules, the Sellers shall promptly
disclose to PRG any information contained in their representations and
warranties or the Schedules which, because of an event occurring after the
date hereof would materially adversely affect the Business and shall
disclose, prior to closing, any other information which is materially
incomplete or is no longer substantially correct as of all times after the
date hereof until the Closing Date, provided, however, that to the extent
any information is disclosed to PRG prior to closing in a schedule or
otherwise pursuant to this Section 4.1.6, the representations and
warranties contained herein shall be deemed modified to reflect such new
information and PRG shall, after the Closing Date, have no claim for a
breach with respect thereto.
4.1.7 Conduct of Business. Each Seller shall cooperate with PRG and
use its commercially reasonable efforts to cause all of the conditions to
the obligations of PRG and the Sellers under this Agreement to be satisfied
on or prior to the Closing Date.
4.1.8 Sale of Assets; Negotiations. No Seller and no Shareholder will
enter into any agreement, discussion, or negotiation with, or provide
information to, any other corporation, firm or other person, or solicit,
encourage, entertain or consider any inquiries or proposals, with respect
to (a) the possible disposition of a material portion of any Seller or any
assets of any Seller, (b) any business combination involving any Seller,
whether by way of merger, consolidation, share
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exchange or other transaction or (c) the purchase of any equity security
(including without limitation any options, warrants, rights, or convertible
security) issued or to be issued by any Seller, except for the purchase or
redemption of outstanding employee stock options as set forth on Schedule
A-2. No Seller shall provide any confidential information concerning the
Business or its properties or assets to any third party other than (i) in
the ordinary course of business or (ii) in connection with the transactions
contemplated by this Agreement. No Shareholder shall, directly or
indirectly, sell or encumber all or any part of the capital stock of any
Seller.
4.1.9 Access; Audits. Upon reasonable prior notice to Seller in each
instance, each Seller shall give to PRG's officers, employees, counsel,
accountants and other representatives, including without limitation the
Auditors (collectively, the "Agents"), reasonable access to and the right
to inspect, during normal business hours (or at such other times as the
parties may agree), all of the premises, properties, assets, financial and
other records, contracts and other documents relating to the Business and
shall permit them to consult with the officers, accountants and counsel of
such Seller for the purpose of (a) making such investigation of the
Business, including, without limitation, the Interim Balance Sheet, as PRG
shall desire to make and (b) auditing the financial statements and
financial and operational condition of each such Seller, and preparing
audited financial statements with respect to, each of the fiscal years of
such Seller in the two-year period ending on December 31, 1996.
Furthermore, each Seller shall furnish to PRG and the Agents all such
documents and copies of documents and records and information with respect
to the affairs of the Business and copies of any working papers relating
thereto as PRG or such Agents shall from time to time reasonably request
and shall permit PRG and the Agents to make such physical inventories and
inspections of the Assets as PRG or such Agents may request from time to
time. PRG shall be liable for the fees, costs and out-of-pocket expenses of
the Auditors incurred in connection with the audit and the preparation of
the audited financial statements described in this subsection 4.1.11.
4.2 Agreements of PRG Pending the Closing. PRG covenants and agrees that,
pending the Closing and except as otherwise agreed to in writing by Seller:
4.2.1 Actions of PRG. PRG will not knowingly take any action which
would result in a breach of any of its representations and warranties
hereunder. Furthermore, PRG shall cooperate with each Seller and use its
commercially reasonable efforts to cause all of the conditions to the
obligations of PRG and the Sellers under this Agreement to be satisfied on
or prior to the Closing Date.
4.2.2 Ernst & Young Audit. Promptly after its receipt thereof, PRG
will provide Sellers with a copy of all financial statements of Sellers
prepared by Ernst & Young. PRG will use reasonable efforts to deliver such
financial statements within 60 days of the Closing Date and will, in all
events, deliver such statements within 90 days of the Closing Date.
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4.2.3 Confidentiality. Unless and until the Closing has been
consummated, except as specifically provided herein, PRG will hold, and
shall cause its counsel, independent certified public accountants,
appraisers and investment bankers to hold in confidence any confidential
data or information made available to PRG in connection with this Agreement
with respect to the Business, using the same standard of care to protect
such confidential data or information as is used to protect PRG's
confidential information. If the transactions contemplated by this
Agreement are not consummated, PRG agrees that it shall return or cause to
be returned to the Sellers all written materials and all copies thereof
that were supplied to PRG by the Sellers that contain any such confidential
data or information. Nothing herein is intended to or shall be deemed to
terminate, modify or limit in any way paragraph 3 of that certain letter
from PRG addressed to Stern, Cannon and BTLI dated April 16, 1997 or the
confidentiality agreement, dated as of April 16, 1997 between PRG and BTLI
(the "Confidentiality Agreement"). Sellers acknowledge that PRG may provide
information regarding the Business to The Bank of New York in connection
with the financing of the transactions contemplated by this Agreement
provided that it agrees to be bound by the terms of the Confidentiality
Agreement.
4.2.4 PRG will use reasonable efforts not to enter into or be a party
to any instrument or agreement which could hinder, delay or prevent it from
timely making any payment to Sellers required pursuant to Section 1.6.4.
Until it is determined that PRG is not required to make any payments to
Sellers pursuant to Section 1.6.4 or PRG has made all such payments which
may be required, PRG shall at all times from and after the date hereof use
reasonable efforts to maintain sufficient liquid assets or lines of credit
in amounts sufficient to enable it make the maximum required payment to
Sellers pursuant to Section 1.6.4.
4.3 Sales Taxes.
4.3.1 PRG will not make, and has not made, any election with respect
to sales and use taxes which would materially adversely affect any Seller
or any Seller's right to claim an exemption from the payment of sales or
use tax in any state in connection with the sale of Assets pursuant to this
Agreement.
4.3.2 On or prior to the Closing, PRG will provide each Seller with
resale certificates for the states of New York, New Jersey, Florida,
Maryland, Nevada, California and Arizona with respect to those Assets
consisting of rental equipment and sales inventory sold to PRG pursuant to
this Agreement and shall cooperate with each Seller in complying with any
filing or other requirements related to such Seller's claim for exemption
from the payment of sales and use tax in connection with the sale of Assets
pursuant to this Agreement, including but not limited to, providing such
information as may be necessary for any Sellers to make any required
filings in connection with such exemption.
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ARTICLE 5. -- CONDITIONS PRECEDENT TO THE CLOSING
5.1 Conditions Precedent to PRG's Obligations. All obligations of PRG under
this Agreement are subject to the fulfillment or satisfaction, prior to or at
the Closing, of each of the following conditions precedent:
5.1.1 Representations and Warranties True as of the Closing Date. The
representations and warranties of each Seller contained in this Agreement
or in any schedule, certificate or document delivered by each Seller to PRG
pursuant to the provisions hereof shall have been true in all material
respects on the date hereof and shall be true in all material respects on
the Closing Date with the same effect as though such representations and
warranties were made as of such date, except for those representations and
warranties which were made solely as of another date, which shall be true
in all material respects as of such other date.
5.1.2 Delivery of Schedules. Sellers shall have delivered each of the
schedules required to be attached hereto and such schedules shall have been
reviewed by PRG and determined in PRG's reasonable discretion not to
contain information which materially adversely affects the financial
condition, value or prospects of the Business.
5.1.3 Compliance with this Agreement. Each Seller shall have performed
and complied in all material respects with all agreements required by this
Agreement to be performed or complied with by it prior to or at the
Closing.
5.1.4 Delivery of Employment Agreements. Stern shall have executed and
delivered an employment agreement substantially identical to that set forth
as Exhibit B hereof and Cannon shall have executed and delivered an
employment agreement substantially identical to that set forth as Exhibit C
hereof.
5.1.5 Closing Certificate. PRG shall have received a certificate from
each Seller dated the Closing Date, certifying that the conditions
specified in subsections 5.1.1 and 5.1.3 hereof have been fulfilled
("Seller Closing Certificates").
5.1.6 No Threatened or Pending Litigation. On the Closing Date, no
suit, action or other proceeding, or injunction or judgment relating
thereto, shall be threatened or pending before any court or governmental or
regulatory official, body or authority in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby, and
no investigation by any governmental authority that might result in any
such suit, action or proceeding shall be pending.
5.1.7 Consents and Approvals. Except for consents required by the
terms of the contracts, commitments, agreements or franchises listed in
Schedule 5.1.7 hereto, the holders of
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any indebtedness of any Seller, the lessors or lessees of any real or
personal property or assets leased by any Seller, the parties (other than a
Seller) to any contract, commitment or agreement to which a Seller is a
party or subject, any governmental or regulatory official, body or
authority or any other person which owns or has authority to grant any
franchise and any governmental, judicial or regulatory official, body or
authority having jurisdiction over any Shareholder, any Seller or PRG to
the extent that their consent or approval is required or necessary under
the pertinent debt, lease, contract, commitment or agreement or other
document or instrument or under applicable orders, laws, rules or
regulations, for the consummation of the transactions contemplated hereby
in the manner herein provided, shall have granted such consent or approval.
5.1.8 Leases. BTLI, as landlord, shall, on the Closing Date, execute
and deliver to PRG, as tenant, a lease agreement substantially in the form
of Exhibit E with respect to the Facility. In addition, on the Closing
Date, each Seller shall assign to PRG all right, title and interest of such
Seller in and to all Leases (and shall deliver to PRG original copies of
all consents required for such assignments) and all security deposits made
by such Seller pursuant to any of the Leases, including, but not limited
to, the security deposits listed on Schedule 5.1.8, together with all
interest earned on such deposits.
5.1.9 Material Adverse Changes. The business, operations, assets or
prospects of the Business shall not have been and shall not reasonably be
threatened to be materially adversely affected in any way as a result of
any event or occurrence.
5.1.10 Legal Opinion. Kronish, Lieb, Weiner & Hellman LLP, counsel for
Sellers, shall have delivered to PRG a written opinion, dated the Closing
Date, in form and substance reasonably satisfactory to PRG and its counsel.
Such opinion may, to the extent reasonably necessary, rely on the opinions
of other counsel reasonably acceptable to PRG.
5.1.11 Approval of Counsel; Corporate Matters. All actions,
proceedings, resolutions, instruments and documents on the part of Sellers
required to carry out this Agreement or incidental hereto and all other
related legal matters shall have been approved on the Closing Date by Pepe
& Hazard, LLP, counsel for PRG, in the exercise of their reasonable
judgment. Each Shareholder and each Seller shall also have delivered to PRG
such other documents, instruments, certifications and further assurances as
such counsel may reasonably require.
5.1.12 Shareholder Releases. PRG shall have been provided with copies
of releases, substantially in the form of Exhibit G hereof, from all
shareholders and option holders of Sellers other than Messrs. Stern and
Cannon. Such releases shall provide that PRG shall be a third-party
beneficiary thereof.
5.1.13 Customer and Vendor Lists. At Closing each Seller will deliver
to PRG true and complete copies of all customer and vendor lists and all
historic data in its possession
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with respect to prior sales to customers and purchases from vendors. The
customer and vendor concentration lists provided by each Seller to PRG are
true and correct in all material respects. At Closing, such lists will be
reproduced with customer and vendor names and identifying information.
5.1.14 Contracts Prior to the Closing Date, the Sellers will have
delivered or made available to PRG correct and complete copies of each of
the Seller Agreements that are in writing.
5.1.15 Multiemployer Plans Sellers shall have provided PRG with a
letter from an authorized representative of each multi-employer plan to
which Sellers are required to make contributions confirming that there is
no unfunded pension liability with respect to such plan.
5.2 Conditions Precedent to the Obligations of Seller. All obligations of
each Seller under this Agreement are subject to the fulfillment or satisfaction,
prior to or at the Closing, of each of the following conditions precedent:
5.2.1 Representations and Warranties True as of the Closing Date. The
representations and warranties of PRG contained in this Agreement or in any
schedule, certificate or document delivered by PRG to Sellers pursuant to
the provisions hereof shall have been true in all material respects on the
date hereof and shall be true in all material respects on the Closing Date
with the same effect as though such representations and warranties were
made as of such date, except for those representations and warranties which
were made solely as of another date, which shall be true in all material
respects as of such other date.
5.2.2 Compliance with this Agreement. PRG shall have performed and
complied in all material respects with all agreements required by this
Agreement to be performed or complied with by it prior to or at the
Closing.
5.2.3 Delivery of Employment Agreements. PRG shall have executed and
delivered an employment agreement substantially identical to that set forth
in Exhibit B hereof, an employment agreement substantially identical to
that set forth as Exhibit C hereof, and an Investment Option Agreement
substantially identical to Exhibit A of such employment Agreements.
5.2.4 Delivery of LLC Agreement, Etc. PRG shall have delivered copies
of its current limited liability company agreement and Owners' Agreement
and the provisions of such agreements which could reasonably be expected to
materially affect the rights of the Shareholders if they exercise their
option to purchase Units in PRG, shall be reasonably satisfactory to the
Shareholders.
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5.2.5 Payment of Purchase Price. PRG shall have paid the Purchase
Price as provided in Section 1.3.2 and shall have paid the signing-on
bonuses to Messrs. Stern and Cannon as provided in Section 2.2.3.
5.2.6 Closing Certificates. The Sellers shall have received a
certificate from PRG dated the Closing Date certifying that the conditions
specified in subsections 5.2.1 and 5.2.2 hereof have been fulfilled.
5.2.7 No Threatened or Pending Litigation. On the Closing Date, no
suit, action or other proceeding, or injunction or judgment relating
thereto, shall be threatened or pending before any court or governmental or
regulatory official, body or authority in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby, and
no investigation by any governmental authority that might result in any
such suit, action or proceeding shall be pending.
5.2.8 Consents and Approvals. The holders of any indebtedness of any
Seller, the lessors or lessees of any real or personal property or assets
leased by any Seller, the parties (other than a Seller) to any contract,
commitment or agreement to which a Seller is a party or subject, any
governmental or regulatory official, body or authority or any other person
which owns or has authority to grant any franchise and any governmental,
judicial or regulatory official, body or authority having jurisdiction over
any Shareholder, any Seller or PRG to the extent that their consent or
approval is required or necessary under the pertinent debt, lease,
contract, commitment or agreement or other document or instrument or under
applicable orders, laws, rules or regulations, for the consummation of the
transactions contemplated hereby in the manner herein provided, shall have
granted such consent or approval.
5.2.9 Leases. PRG, as tenant, shall, on the Closing Date, execute and
deliver to BTLI, as landlord, a lease agreement substantially in the form
of Exhibit E with respect to the Facility. In addition, on the Closing
Date, PRG shall assume all obligations of each Seller under all Leases.
5.2.10 Legal Opinion. Pepe & Hazard LLP, counsel for PRG, shall have
delivered to BTLI a written opinion, dated the Closing Date, in form and
substance reasonably satisfactory to BTLI and its counsel. Such opinion
may, to the extent reasonably necessary, rely on the opinions of other
counsel reasonably acceptable to BTLI.
5.2.11 Approval of Counsel; Corporate Matters. All actions,
proceedings, resolutions, instruments and documents on the part of PRG
required to carry out this Agreement or incidental hereto and all other
related legal matters shall have been approved on the Closing
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Date by Kronish, Lieb, Weiner & Hellman LLP, counsel for BTLI, in the
exercise of their reasonable judgment.
ARTICLE 6. -- INDEMNIFICATION
6.1 General Indemnification Obligation of Seller. From and after the
Closing, each of the Sellers and the Shareholders, jointly and severally, will
reimburse, indemnify and hold harmless PRG, its officers, directors, employees,
agents, successors and assigns (each an "Indemnified PRG Party") against and in
respect of:
6.1.1 any and all damages, losses, deficiencies, liabilities, costs
and expenses incurred or suffered by any Indemnified PRG Party that result
from, relate to or arise out of:
(1) any and all liabilities and obligations of any Seller of any
nature whatsoever, except for the Assumed Liabilities;
(2) any and all actions, suits, claims, or legal, administrative,
arbitration, governmental or other proceedings or investigations
against any Indemnified PRG Party that relate to any Seller or the
Business in which the principal event giving rise thereto occurred
prior to the Closing Date or which result from or arise out of any
action or inaction prior to the Closing Date of any Seller or any
director, officer, employee, agent, representative or subcontractor of
any Seller, except for the Assumed Liabilities;
(3) any breach of any representation, warranty, agreement or
covenant on the part of any Seller under this Agreement to the extent
affirmed in a Seller Closing Certificate;
(4) any sales or use or similar tax liability of Sellers for
which PRG would not be responsible if Sellers and PRG had complied
fully with applicable bulk sales laws providing notice of the sale of
the Assets to state and local taxing authorities; or
(5) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments costs
and other expenses (including, without limitation, reasonable legal
fees and expenses) incident to any of the foregoing.
6.2 General Indemnification Obligation of PRG. From and after the Closing,
PRG will reimburse, indemnify and hold harmless the Sellers and their respective
officers, directors,
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employees, agents, successors and assigns (each an "Indemnified Seller Party")
against and in respect of:
6.2.1 Any and all damages, losses, deficiencies, liabilities costs and
expenses incurred or suffered by any Indemnified Seller Party that result
from, relate to or arise out of:
(1) the Assumed Liabilities;
(2) any breach of any representation, warranty, agreement or
covenant on the part of PRG under this Agreement;
(3) the conduct of the Business by PRG after the Closing Date;
(4) any and all actions, suits, claims, proceeding,
investigations, demands, assessments, audits, fines, judgments, costs
and other expenses (including, without limitation, reasonable legal
fees and expenses) incident to any of the foregoing.
6.3 Limit on Indemnification Liability. Notwithstanding anything contained
in Section 6.1 to the contrary, the aggregate liability of the Sellers under
Section 6.1 shall be limited to the funds held in escrow pursuant to Section 1.7
except that such limitation shall not apply to indemnification pursuant to
Section 6.1.1(d). Any funds released from escrow shall no longer be subject to
claims for indemnity by any Indemnified PRG Party. In addition, Sellers shall
not have any liability to pay any claims for indemnification under Section 6.1
to the extent the aggregate of the losses sustained by the Indemnified PRG
Parties does not exceed $50,000 and such indemnity obligation shall exclude the
amount of all such losses not in excess of $50,000; provided that sales taxes
indemnified pursuant to Section 6.1.1(d) shall be indemnified fully.
6.4 Method of Asserting Claims, etc.
6.4.1 Promptly after receipt by an Indemnified PRG Party or an
Indemnified Seller Party (the "Indemnified Party") of notice of a claim or
demand (an "Asserted Liability") that may result in indemnification
pursuant to Sections 6.1 or 6.2 of this Agreement, the Indemnified Party
shall give written notice thereof (the "Claims Notice") to the party or
parties against whom indemnification is or may be claimed (individually an
"Indemnifying Party", and collectively the "Indemnifying Parties"). The
Claims Notice shall describe the Asserted Liability in reasonably
sufficient detail, based on the information then available, to allow the
Indemnifying Party to evaluate the Asserted Liability. The failure of the
Indemnified Party to deliver a Claims Notice to the Indemnifying Party
shall not relieve the Indemnifying Party from its obligation to indemnify
the Indemnified Party except to the extent the Indemnifying Party is
materially prejudiced by the failure to receive such Claims Notice. The
Indemnifying Party may elect to
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compromise or defend, at its own expense and by its own counsel, reasonably
acceptable to the Indemnified Party, any Asserted Liability; provided,
however, that the Indemnifying Party may not compromise or settle any
Asserted Liability without the consent of the Indemnified Party or Parties
unless such compromise or settlement requires no more than a monetary
payment for which the Indemnified Party or Indemnified Parties hereunder
are fully indemnified or involves other matters not binding upon the
Indemnified Party or Indemnified Parties. If the Indemnifying Party elects
to compromise or defend such Asserted Liability, it shall within thirty
(30) calendar days of notice of the Asserted Liability provided to it under
this Subsection (or sooner, if the nature of the Asserted Liability so
requires) notify the Indemnified Party or Indemnified Parties in writing of
its intent to do so, and the Indemnified Party or Indemnified Parties shall
cooperate, at the expense of the Indemnifying Party with respect to
out-of-pocket expenses of the Indemnified Party or Indemnified Parties, in
the compromise of, or defense against, such Asserted Liability. If the
Indemnifying Party elects not to compromise or defend the Asserted
Liability, fails to notify the Indemnified Party or Indemnified Parties of
its election as herein provided or contests its obligation to indemnify
under this Section, the Indemnified Party or Indemnified Parties may pay,
compromise or defend such Asserted Liability in respect of any Asserted
Liability for which the Indemnifying Party may have an indemnification
obligation under this Agreement. Notwithstanding the foregoing, the
Indemnified Party or Indemnified Parties and the Indemnifying Party may
participate, at its/their own expense, in the defense of such Asserted
Liability in respect of any Asserted Liability for which the Indemnifying
Party may have an indemnification obligation under this Agreement.
Notwithstanding anything in the foregoing to the contrary, the party that
would be responsible under the terms of this Agreement for paying the
underlying claim in connection with any Asserted Liability (should that
claim ultimately prevail) shall bear the cost of the defense of the claim
(with the exception of the costs incurred by any party that voluntarily
participates in such defense) regardless of which party actually provides
the defense.
6.5 Payment. Upon the determination of the liability hereunder, if any
party (a "Paying Party") is required to make a payment to another party (the
"Receiving Party"), the Paying Party shall make such payment within ten (10)
business days after such determination of the amount of any claim for
indemnification made hereunder.
6.6 Mediation. If a dispute arises out of or relates to this Agreement, and
if such dispute cannot be settled within 20 days through direct discussions
between PRG and Sellers, the parties agree to first endeavor to settle the
dispute in an amicable manner by mediation administered by the American
Arbitration Association under the Commercial Mediation Rules. The parties will
use their reasonable best efforts to have such mediation concluded within 90
days of the date on which the parties have written knowledge of such dispute.
Unless the parties agree otherwise, or unless such mediation is not concluded
within 90 days of the date on which the parties have written knowledge of such
dispute, such mediation shall be required prior to a party commencing any action
hereunder. The mediation shall be
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conducted in New York City. Nothing in this paragraph shall preclude the parties
from agreeing to settle any dispute through binding arbitration.
6.7 Compliance with Bulk Sales Laws. PRG and each Seller hereby waive
compliance by PRG and such Seller with the bulk sales law and any other similar
laws in any applicable jurisdiction in respect of the transactions contemplated
by this Agreement.
6.8 Exclusive Remedy. Absent fraud, PRG acknowledges that indemnification
as provided herein is the exclusive remedy for breach of any representation or
warranty made herein or affirmed in Seller Closing Certificates or failure to
fulfill any agreement or covenant hereunder on the part of Sellers.
ARTICLE 7. -- POST CLOSING MATTERS
7.1 Offers of Employment. As of the Closing Date, PRG shall offer
employment to, and Seller shall use its best efforts to assist PRG in employing
as new employees of PRG, all senior executives and substantially all other
persons presently engaged in the Business prior to the Closing Date (the
"Employees"). Each Seller shall agree to terminate effective as of the Closing
Date all employment agreements it has with any of the Employees who accept
employment with PRG. Until the third anniversary of the Closing Date, no Seller
will directly or indirectly solicit or offer employment to any Employee;
provided that Messrs. Stern and Cannon may remain as officers and directors of
Sellers provided that Sellers cease active business operations (it being
understood that ownership and operation of the Facility and any other actions
specifically contemplated herein including compliance with Section 2.3 hereof
shall not constitute an active business operation for this purpose). 1.1
7.2 Employee Benefits. Except for accrued vacation pay as otherwise
provided in this Agreement, Sellers shall pay directly to each employee of the
Business that portion of all benefits (including the arrangements, plans and
programs set forth in Schedule 3.1.20 which has been accrued on behalf of that
employee (or is attributable to expenses properly incurred by that employee) as
of the Closing Date to the extent legally required to pay it, and PRG shall
assume no liability therefor. Except with respect to accrued vacation pay for
former employees of Seller who become employees of PRG, as set forth in Section
1.5.6, no portion of the assets of any plan, fund, program or arrangement,
written or unwritten, heretofore sponsored or maintained by any Seller (and no
amount attributable to any such plan, fund, program or arrangement) shall be
transferred to PRG, and PRG shall not be required to continue any such plan,
fund, program or arrangement after the Closing Date. The amounts payable on
account of all benefit arrangements (other than as specified in the following
subsections) shall be determined with reference to the date of the event by
reason of which such amounts become payable, without regard to conditions
subsequent, and PRG shall not be liable for any claim for insurance
reimbursement or other
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benefits payable by reason of any event which occurs prior to the Closing Date.
All amounts payable directly to employees, or to any fund, program, arrangement
or plan maintained by any Seller therefor shall be paid by such Seller within 30
days after the Closing Date to the extent that such payment is not inconsistent
with the terms of such fund, program, arrangement or plan. PRG shall not assume
any obligation to any former employees of Sellers without its express consent or
as otherwise expressly set forth herein.
7.3 Maintenance of Books and Records. Each of the Sellers and PRG shall
preserve until the seventh anniversary of the Closing Date all records possessed
or to be possessed by such party relating to any of the assets, liabilities or
business of the Business prior to the Closing Date. After the Closing Date,
where there is a legitimate purpose, such party shall provide the other parties,
and their respective agents, with access, upon prior reasonable written request
specifying the need therefor, during regular business hours, to (i) the officers
and employees of such party and (ii) the books of account and records of such
party, but, in each case, only to the extent relating to the assets, liabilities
or business of the Business prior to the Closing Date, and the other parties and
their representatives shall have the right, at their own expense, to make copies
of such books and records; provided, however, that the foregoing right of access
shall not be exercisable in such a manner as to interfere unreasonably with the
normal operations and business of such party; and further, provided, that, as to
so much of such information as constitutes trade secrets or confidential
business information of such party, the requesting party and its officers,
directors and representatives will use due care to not disclose such information
except (i) as required by law, (ii) with the prior written consent of such
party, which consent shall not be unreasonably withheld, or (iii) where such
information becomes available to the public generally, or becomes generally
known to competitors of such party, through sources other than the requesting
party, its affiliates or its officers, directors or representatives. Such
records may nevertheless be destroyed by a party after the third anniversary of
the Closing Date if such party sends to the other parties written notice of its
intent to destroy records, specifying with particularly the contents of the
records to be destroyed. Such records may then be destroyed after the 30th day
after such notice is given unless another party objects to the destruction in
which case the party seeking to destroy the records shall deliver such records
to the objecting party.
7.4 Payments Received. Sellers and PRG each agree that after the Closing
they will hold and will promptly transfer and deliver to the other, from time to
time as and when received by them, any cash, checks with appropriate
endorsements (using their best efforts not to convert such checks into cash), or
other property that they may receive on or after the Closing which properly
belongs to the other party and will account to the other for all such receipts.
From and after the Closing, PRG shall have the right and authority to endorse
without recourse the name of each Seller on any check or any other evidences of
indebtedness received by PRG on account of the Business and the Assets
transferred to PRG hereunder.
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7.5 Use of Name. From and after the Closing Date, each Seller will sign
such consents and take such other action as PRG shall reasonably request in
order to permit PRG to use the names "Bash Theatrical Lighting, Inc.", "Bash
Theatrical Lighting Services, Inc.", "Bash Lighting Services, Inc.", "Bash
Lighting Services Mid-Atlantic, Inc." and "Bash Exposition Services, Inc." and
variants thereof. From and after the Closing Date, no Seller will itself use any
such names or any names similar thereto or variants thereof in connection with
any ongoing business.
7.6 UCC Matters. From and after the Closing Date, Seller will promptly
refer all inquiries with respect to ownership of the Assets or the Business to
PRG. In addition, Seller will execute such documents and financing statements as
PRG may request from time to time to evidence transfer of the Assets to PRG,
including any necessary assignments of financing statements.
7.7 Covenant Not To Compete. Each Seller and Messrs. Stern and Cannon
agrees that for a period of five years after the Closing Date, it or he will
not, directly or indirectly, own, manage, operate, join, control or participate
in the ownership, management, operation or control of any business, whether in
corporate, proprietorship or partnership form or otherwise where such business
is competitive with the Business, including, without limitation, any business
which provides trade show exhibit products and services. The parties hereto
specifically acknowledge and agree that the remedy at law for any breach of the
foregoing will be inadequate and that the PRG, in addition to any other relief
available to it, shall be entitled to temporary and permanent injunctive relief
without the necessity of proving actual damage. In the event that the provisions
of this Section 7.7 should ever be deemed to exceed the limitation provided by
applicable law, then the parties hereto agree that such provisions shall be
reformed to set forth the maximum limitations permitted.
ARTICLE 8. -- MISCELLANEOUS
8.1 Termination. (a) Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated by written notice of
termination at any time before the Closing Date only as follows:
8.1.1 by mutual consent of the Sellers and PRG;
8.1.2 by PRG, (a) at any time if the representations and warranties of
any Seller contained in Section 3.1 hereof were incorrect in any material
respect when made or (b) upon written notice to the Sellers given at any
time after August 30, 1997 (or such later date as shall have been specified
in a writing authorized on behalf of the Sellers and PRG) if for any reason
the Closing shall not have occurred by that date; or
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8.1.3 by the Sellers, (a) at any time if the representations and
warranties of PRG contained in Section 3.2 hereof were incorrect in any
material respect when made, or (b) upon written notice to PRG given at any
time after August 30, 1997 (or such later date as shall have been specified
in a writing authorized on behalf of each Seller and PRG) if for any reason
the Closing shall not have occurred by that date.
8.1.4 In the event of the termination and abandonment hereof pursuant
to the provisions of this Section 8.1, this Agreement (except for Section
4.2.3 which shall continue) shall become void and have no effect, without
any liability on the part of any of the parties or their directors or
officers or stockholders in respect of this Agreement. In the event of such
termination, the confidentiality agreement, dated as of April 16, 1997,
between BTLI and PRG shall continue in full force and effect.
8.2 Brokers' and Finders' Fees.
8.2.1 Each Seller represents and warrants to PRG that all negotiations
relative to this Agreement have been carried on by it directly without the
intervention of any person, who may be entitled to any brokerage or
finder's fee or other commission in respect of this Agreement or the
consummation of the transactions contemplated hereby and each Seller
jointly and severally agrees to indemnify and hold harmless PRG against any
and all claims, losses, liabilities and expenses which may be asserted
against or incurred by it as a result of any Seller's dealings,
arrangements or agreements with any such person.
8.2.2 PRG represents and warrants that all negotiations relative to
this Agreement have been carried on by it directly without the intervention
of any person who may be entitled to any brokerage or finder's fee or other
commission in respect of this Agreement or the consummation of the
transactions contemplated hereby, and PRG agrees to indemnify and hold
harmless the Sellers against any and all claims, losses, liabilities and
expenses which may be asserted against or incurred by it as a result of
PRG's dealings, arrangements or agreements with any such person.
8.3 Sales, Transfer and Documentary Taxes, etc. The Sellers shall pay all
federal, state and local sales, documentary and other transfer taxes, if any,
due as a result of the purchase, sale or transfer of the Assets and the
assumption of the Assumed Liabilities in accordance herewith whether imposed by
law on Seller or PRG and the Sellers, jointly and severally, shall indemnify,
reimburse and hold harmless PRG in respect of the liability for payment of or
failure to pay any taxes or the filing of or failure to file any reports
required in connection therewith. No Sellers' obligation to pay sales tax shall
include any taxes which PRG must collect from its customers as a consequence of
having provided such Seller with a resale certificate.
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8.4 Expenses. Except as otherwise provided in this Agreement, each party
hereto shall pay its own expenses incidental to the negotiation and preparation
of this Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby. PRG shall be liable for
Sellers' filing fees and reasonable legal and accounting fees and costs incurred
in connection with any Hart-Scott-Rodino filing relating to the transactions
contemplated in this Agreement.
8.5 Contents of Agreement; Parties in Interest; etc. Except for the
confidentiality agreement, dated as of April 16, 1997, between BTLI and PRG (the
"Confidentiality Agreement"), this Agreement sets forth the entire understanding
of the parties hereto with respect to the transactions contemplated hereby. It
shall not be amended or modified except by written instrument duly executed by
each of the parties hereto. Any and all previous agreements and understandings
between or among the parties regarding the subject matter hereof, whether
written or oral, are superseded by this Agreement, except for the
Confidentiality Agreement.
8.6 Assignment and Binding Effect. This Agreement may not be assigned prior
to the Closing by any party hereto without the prior written consent of the
other parties. Subject to the foregoing, all of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the successors and assigns of each Shareholder, each Seller and PRG.
8.7 Waiver. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof by a written instrument duly
executed by such party.
8.8 Notices. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telegram or by
registered or certified mail, postage prepaid, as follows:
If to PRG, to:
Production Resource Group, L.L.C.
539 Temple Hill Road
New Windsor, New York 12553
Attention: Kenneth W. Cabarle
fax (914) 567-5804
With a required copy to:
Pepe & Hazard LLP
Goodwin Square
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Hartford, Connecticut 06103
Attention: Robert A. Manners, Esq.
fax (860) 522-2796
If to a Seller or a Shareholder, to:
c/o Bash Theatrical Lighting, Inc.
3401 Dell Avenue
North Bergen, New Jersey 07047
Attention: Donald Stern
fax (201) 863-6364
With a required copy to:
Kronish, Lieb, Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036-7798
Attention: Chet F. Lipton, Esq.
fax (212) 479-6275
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as of
the date so delivered, telegraphed or mailed.
8.9 Choice of Law. This Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the State of New York as applied to
agreements among New York residents entered into and to be performed entirely
within the State of New York.
8.10 No Benefit to Others. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto and, in the case of Article VI hereof, the other Indemnified Parties, and
their heirs, executors, administrators, legal representatives, successors and
assigns, and they shall not be construed as conferring any rights on any other
persons.
8.11 Headings, Gender and "Person". All section headings contained in this
Agreement are for convenience of reference only, do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement. Words used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or neuter, as the context
requires. Any reference to a "person" herein shall include an individual, firm,
corporation,
45
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partnership, trust, governmental authority or body, association, unincorporated
organization or any other entity.
8.12 Schedules and Exhibits. All Exhibits and Schedules referred to herein
are intended to be and hereby are specifically made a part of this Agreement.
8.13 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
8.14 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument notwithstanding that not all parties hereto are signatories to the
same counterpart. This Agreement shall become binding when one or more
counterparts taken together shall have been executed and delivered by the
parties. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts.
8.15 Effect of Shareholder Signatures. PRG acknowledges that Messrs. Stern
and Cannon are signing this Agreement solely with respect to the second sentence
of Section 3.1.3 and Sections 4.1.8 and 7.7 hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the date first written.
BUYER:
PRODUCTION RESOURCE GROUP, L.L.C.
By: ____________________________________
Name: __________________________________
Its: ___________________________________
SELLERS:
BASH THEATRICAL LIGHTING, INC.
By: ____________________________________
Name: __________________________________
Its: ___________________________________
BASH THEATRICAL LIGHTING SERVICES, INC.
By: ____________________________________
Name: __________________________________
Its: ___________________________________
BASH LIGHTING SERVICES, INC.
By: ____________________________________
Name: __________________________________
Its: ___________________________________
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BASH LIGHTING SERVICES MID-ATLANTIC, INC.
By: ____________________________________
Name: __________________________________
Its: ___________________________________
BASH EXPOSITION SERVICES, INC.
By: ____________________________________
Name: __________________________________
Its: ___________________________________
SHAREHOLDERS:
________________________________________
DONALD STERN
________________________________________
ROBERT CANNON
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Schedule 1.4
The amount of the Purchase Price and Assumed Liabilities shall be allocated
among the Assets as follows:
(a) an amount equal to the aggregate historical cost net of depreciation of all
of the Assets consisting of tangible property as shown by Ernst & Young on the
Closing Balance Sheet shall be allocated to the tangible property of the Sellers
(with each item thereof being allocated its historical cost net of
depreciation);
(b) an amount equal to the book value, as shown by Ernst & Young on the Closing
Balance Sheet, of all Assets other than tangible property and goodwill shall be
allocated to all such Assets (with each item thereof being allocated an amount
proportionate to its book value, as shown by Ernst & Young on the Closing
Balance Sheet);
(c) up to $500,000 of the balance shall be allocated to the covenant not to
compete contained in the Agreement, and divided among the Sellers in the ratio
of 50% to BTLI, 20% to BTLS, 20% to BLSI, 5% to BLSMA and 5% to BES; and
(d) the balance shall be allocated to goodwill, and divided among the Sellers in
the ratio of 50% to BTLI, 20% to BTLS, 20% to BLSI, 5% to BLSMA and 5% to BES.
The Purchase Price shall be divided among the Sellers in proportion to the
excess of (i) the amount of Purchase Price and Assumed Liabilities allocated to
each Seller's Assets as set forth above over (ii) the amount of liabilities of
each Seller included in the Assumed Liabilities.
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EXHIBIT A
INVENTORY SCHEDULE
50
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is between PRODUCTION RESOURCE GROUP, L.L.C., a Delaware
Limited Liability Company with its principal place of business at 4170 West
Harmon Avenue, Las Vegas, Nevada (hereinafter referred to as the "Company") and
Jeremiah J. Harris, residing at 8189 Pinnacle Peak Avenue, Las Vegas, Nevada
89113 (hereinafter referred to as the "Employee").
RECITALS
1. The Company has been formed to engage in business as an integrated
provider of goods and services in a variety of related markets,
including production management, theatrical rental, scenery, rigging,
supply of physical production elements (including lighting, scenery,
sound and costumes), promotion, themed attractions, Broadway and
touring shows, special events and exhibits and film and television
production (such activities are hereinafter collectively referred to
as the ("PRG Business").
2. The Employee has special knowledge and expertise and unique and
extraordinary skills which will be of benefit to the Company's
business and the Employee is a direct or indirect owner of the
Company.
3. The Company wishes to employ the Employee.
NOW, THEREFORE in consideration of the mutual and dependent promises
hereinafter set forth, the parties, intending to be legally bound, do hereby
agree as follows:
ARTICLE I
Employment and Term
1.1 Employment. The Company hereby agrees to employ the Employee and the
Employee hereby accepts employment under the terms and conditions set forth in
this Agreement. Employee shall have such title or titles as the Managers of the
Company may provide.
1.2 Effective Date. This Agreement shall take effect as of January 1, 1996
(such date is referred to as the "Effective Date").
1.3 Term. This Agreement is effective from the Effective Date and shall run
for a period of 3 years therefrom (the "Initial Term"). Subject to Section 7.1
hereof, the term of this Agreement shall automatically thereafter be extended
for successive one (1) year terms on the same terms and conditions unless either
party gives at least thirty (30) days prior written notice that the Agreement
will not be renewed (the Initial Term and any and all such extended terms are
<PAGE>
hereinafter collectively referred to as the "Term").
ARTICLE II
Compensation
2.1 Base Salary. For each 12 month period during the Term of this
Agreement, the Employee shall be paid an annual base salary of Three Hundred
Fifty Thousand ($350,000) Dollars in a manner consistent with the usual pay
practices of the Company.
2.2 Bonus. The Employee shall be eligible for a bonus in accordance with
the customary practice of the Company. The payment of bonuses will be based on
the performance of the Company and or the performance of the Employee or the
division(s) of the Company for which the Employee performs services, and shall
be solely within the discretion of the Company.
2.3 Incentive Compensation Arrangements. Employee shall be eligible to
participate in such incentive compensation and similar arrangements as may be
established by the Company from time to time.
2.4 Automobile. The Company shall reimburse the Employee for the lease of
an automobile for the Employee's use during the Term of this Agreement
comparable to that currently driven by Employee. The Company shall reimburse the
Employee for all reasonable automobile expenses including, but not limited to,
gasoline, insurance and repairs.
2.5 Benefits. The Company shall during the Term provide the Employee with
such standard benefits as are generally provided by the Company to other
full-time senior executives of the Company, including but not limited to
pension, health, dental, life and disability insurance.
ARTICLE III
Duties
3.1 General Duties. During the Term, the Company shall employ Employee, and
Employee agrees to serve as a key Employee of the Company in such capacity as
may be determined by the Managers of the Company. Employee shall have
responsibility for such duties as are assigned by the Company's Managers,
officers or their delegatees. During the Term, Employee shall devote
substantially all of his working time, attention and skill to the business
affairs of the Company. Employee shall report to the Company's Managers or such
person as the Managers may designate.
3.2 Insurance. In addition to any life insurance provided by the Company to
the Employee, the Company may, at its discretion and at any time after the
execution of this Agreement, apply for and procure, as owner and for its own
benefit, insurance on the life of the Employee, in such amounts and in such form
of forms as the Company may choose. Unless otherwise agreed, the Employee shall
have no interest whatsoever in any such policy or policies, but shall, at the
request of the Company, subject himself to such medical examinations, supply
such
<PAGE>
information and execute such documents as may be required by the insurance
company or companies to which it has applied for such insurance.
ARTICLE IV
Confidential Information
4.1 Confidential and Proprietary Information. Employee acknowledges that
the Company possesses or will come into possession of information that has been
created, discovered, developed, acquired or otherwise become known to the
Company (including, without limitation, information that is created, discovered,
developed, acquired or made known by Employee in the course of his employment)
and in which the Company has rights of indeterminable commercial value (all of
the aforementioned information is hereinafter collectively referred to as
"Proprietary Information"). By way of illustration, Proprietary Information
includes, but is not limited to, trade secrets, processes, formulas, data and
know-how, marketing plans, strategies, forecasts, market information, contacts,
customer lists, business plans, financial information, and all information
collected from the Company's clients and customers. Employee further
acknowledges that Proprietary Information is in part set forth in the Company's
manuals, memoranda, drawings and designs, specifications, accounting and sales
records, and other documents and records of the Company whether or not otherwise
identified as "Proprietary," some of which documents may be actually prepared in
full or in part by Employee. Proprietary Information shall exclude information
that has become public, except (i) when and to the extent that such public
information, when applied to or combined with other information, is non-public
and proprietary; or (ii) where such information became public through its
disclosure by Employee. Employer acknowledges that the definition of Proprietary
Information is not intended to prevent Employee from practicing the skill of his
calling provided that such exercise does not utilize any trade secrets of
Employer.
4.2 Non-Disclosure. Employee acknowledges that all Proprietary Information
shall be the sole property of the Company and its successors and assigns. At all
times, both during the course of employment by the Company and after Employee
ceases to be employed by the Company, whether such cessation of employment shall
be for any reason or for no reason, with or without cause, voluntary or
involuntary, or by termination, resignation, disability, retirement or
otherwise, Employee agrees to keep in confidence and trust all Proprietary
Information, and not to use, disclose, disseminate, publish, copy, or otherwise
make available, directly or indirectly, any Proprietary Information except as
expressly authorized in writing by the Company, provided Employee shall be
relieved of his obligation of nondisclosure hereunder if Proprietary Information
is required to be disclosed by any applicable judgment, order or decree of any
court or governmental body or agency having jurisdiction or by any law, rule or
regulation, provided that in connection with any such disclosure, Employee shall
give the Company reasonable prior written notice of the disclosure of such
information pursuant to this exception and shall obtain, to the maximum extent
possible, confidential treatment for such information by any authority requiring
delivery of such information.
4.3 Return of Proprietary Information. Employee agrees that when he ceases
to be
<PAGE>
employed by the Company, whether such cessation of employment shall be for any
reason or for no reason, with or without cause, voluntary or involuntary, or by
termination, resignation, disability, retirement or otherwise, Employee shall
(i) deliver to the Company all documents and data of any nature owned by the
Company pertaining either to the Proprietary Information or to Employee's work
with the Company (ii) abstain from taking or removing any documents, data or
information, or any reproduction thereof, containing or pertaining to the
Proprietary Information or to Employee's work for the Company.
4.4 Disclosure and Assignment of Information. Employee agrees promptly to
disclose to the Company all information pertaining to the Company's business and
collected or learned by Employee, either alone or jointly with others, in the
course of his employment with the Company. In addition, Employee hereby assigns
to the Company any rights that he may have or acquire in the information
referred to in this subsection, and promises that during the duration of his
employment with the Company and thereafter, he will assist the Company in the
enforcement and protection of the Proprietary Information. The Company shall
promptly reimburse Employee for any reasonable expenses incurred in complying
with the provisions of this Section 4.4.
4.5 Innovations and Improvements. Employee agrees that all inventions,
innovations or improvements in the Company's method of conducting its business
conceived by him during his employment with the Company, belong to the Company.
Employee will promptly disclose such inventions, innovations or improvements to
the Company, and perform all actions reasonably requested by the Company to
establish and confirm such ownership. Any such actions required to be performed
by Employee shall be at the expense of the Company. Without limiting the
foregoing, Employee agrees that
(a) It is the intention of the parties hereto that all rights, including
without limitation copyright, in any product, software (including source code,
object code, models and algorithms) reports, surveys, marketing, promotional and
collateral materials prepared by Employee pursuant to the terms of this
Agreement, or otherwise for Company (hereinafter the "Work") vest in Company.
The parties expressly acknowledge that the Work was specially ordered or
commissioned by Company, and further agree that it shall be considered a "Work
Made for Hire" within the meaning of the patent and copyright laws of the United
States and that Company is entitled, as author, to the copyright and all other
rights therein, throughout the world, including, but not limited to, the right
to make such changes therein and such uses thereof, as it may determine in its
sole and absolute discretion.
(b) If for any reason the Work is not considered a work made for hire under
the copyright law, then Employee grants and assigns to Company, its successors
and assigns, all of his rights, title, and interest in and to the Work,
including, but not limited to, the patent or copyright therein throughout the
world (and any renewal, extension or reversion copyright now or hereafter
provided), and all other rights therein of any nature whatsoever, whether now
known or hereafter devised, including, but not limited to the right to make such
changes therein, and such uses thereof, as Company may determine in its sole and
absolute discretion.
<PAGE>
ARTICLE V
Competition
5.1 Noncompetition Covenant. Employee covenants and agrees with the Company
that during the "Noncompete Term" as hereinafter defined he will not in any
geographic area in which the Company does business or makes sales during the
Term engage in any of the following activities: (i) either directly or
indirectly, solely or jointly with any person or persons, as an employee,
consultant, or advisor (whether or not engaged in business for profit) or as an
individual proprietor, owner, partner, shareholder, director, officer, joint
venturer, investor, lender or in any other capacity, compete with the Company
in, or engage in, the themed entertainment business including, without
limitation, the business of production management, theatrical rental, scenery,
rigging, supply of physical product elements, theatrical equipment business or
design and build business, the theatrical equipment software business, or any
other business which directly competes with any other business conducted by the
Company or any of its affiliates or any other business if the Company or such
affiliate took substantial steps in anticipation of commencing such business
prior to the termination of the Employee and the Employee was aware of such
steps, provided Employee may own up to one percent (1%) of the stock of any
publicly traded company which may be engaged in such business; (ii) request or
advise any past or present customer or customer prospect of the Company to
withdraw, curtail or cancel its business with the Company; (iii) sell any
products which compete with any Company products to any customer who has
purchased goods from the Company in the one year period prior to the
commencement of the Noncompete Term; or (iv) directly or indirectly recruit or
hire or attempt to recruit or hire any employee of the Company or assist any
person or persons in recruiting or hiring any employee of the Company or any
person who was an employee of the Company in the one year period prior to the
commencement of the Noncompete Term.
5.2 Noncompete Term. The "Noncompete Term" shall commence on the Effective
date and end on the later of (a) the time period following expiration or
termination of the Employee's employment for which the Employee is entitled to
any compensation or payments under this Agreement or (b) one year following
expiration or termination of Employee's employment with the Company. Upon the
termination of this Agreement pursuant to Section 7.1 or 7.2 hereof, the Company
shall have the option of paying or continuing to pay severance at 50% of
Employee's base salary as of the effective date of termination as consideration
for any portion of the one year following termination in which the Employee is
not otherwise entitled to compensation or payments under this Agreement as
further consideration for the noncompetition agreement contained herein. If not
earlier terminated, the Noncompete Term will terminate, after ten days written
notice and an opportunity to cure upon a material breach of the Employer's
obligations, if any, pursuant to any purchase note given in accordance with
Section 4.3 of the Owners' Agreement; provided, however, that Employer shall not
be deemed in material breach of its obligatations if it has a good faith belief
that Employee is in violation of Article IV or V hereof. Employee further agrees
that, in addition to any other remedies, Employer may offset any amounts
otherwise payable to Employee pursuant to this agreement or any other agreement
between the parties on account of such breach.
5.3 Blue Pencil Rule. The Employee and the Company desire that the
provisions of this Article V be enforced to the fullest extent permissible under
the laws and public policies applied in
<PAGE>
each jurisdiction in which enforcement is sought. The parties agree that
Employee is an owner of the Company and that the non-competition covenant is
given in connection with the organization of a business granting the Employee
substantial rights pursuant to a certain Owners Agreement being executed
contemporaneously with this Agreement. The parties further agree that the
non-competition agreement is accordingly given in connection with the sale of a
business and should be enforced as such. If a court of competent jurisdiction,
however, determines that any restrictions imposed on the Employee in this
Article V are unreasonable or unenforceable because of duration, geographic area
or otherwise, the Employee and Company agree and intend that the court shall
enforce this Article V to the maximum extent the court deems reasonable and that
the court shall have the right to strike or change any provisions of this
Article V and substitute therefore different provisions to effect the intent of
this Article V to the maximum extent possible.
ARTICLE VI
Indemnification
6.1 Indemnification of Employee. The Company agrees to indemnify Employee
in connection with the performance of his duties and obligations hereunder to
the maximum extent permitted by applicable law. In addition, expenses of defense
which may be indemnifiable under applicable law shall be paid by the Company in
advance of the final disposition of a proceeding, provided Employee agrees to
repay such amount if he is later found not entitled to be indemnified as
authorized by applicable law. A condition to the Company's obligation of
indemnification hereunder is that Employee provide the Company immediate written
notice of any claim for which indemnification will be sought, stating the
identity of the claimant, the nature and basis of the claim and the amount
thereof, and copies of all notices and documents received by Employee in
connection with the claim. Thereafter Employee, as a condition of the Company's
obligation of indemnification, shall cooperate in the defense of the claim by
the Company, and shall provide the Company with all additional information and
copies of documents received by him, or otherwise in his possession, related to
the claim. The Company will notify Employee of its election to assume the
defense of a claim against Employee, in which event the Company will defend
utilizing counsel of the Company's choice and at the Company's sole expense, and
in the event the Company makes such election, Employee may also participate in
the defense utilizing his own counsel at Employee's sole expense. In the event
the Company does not elect to defend, the Company will advance Employee's
reasonable expenses of counsel, subject to Employee's contingent obligation to
repay such expenses as provided above. Employee will not independently consent
to the settlement of any claim without the prior written consent of the Company,
which will not be unreasonably withheld.
ARTICLE VII
Termination
7.1 Events of Termination by Company.
(a) Notwithstanding anything to the contrary set forth in Section 1.3,
prior to the disability, retirement or death of the Employee, this Agreement may
be terminated by the Company for cause, immediately after written notice has
been given or sent (as defined in Section 8.7) to the Employee. A termination
shall be deemed to be "for cause" if, in the sole and conclusive determination
of the Company's Managers, the Employee either (i) materially breaches this
<PAGE>
agreement (and fails to cure within fifteen (15) days after notice) or (ii) the
Employee has committed acts which, in the sole discretion of two-thirds of the
Managers of the Company are seriously detrimental to the best interests of the
Company. In the event of such termination, the Employee shall receive no
benefits under any severance plan of the Company and his benefits under any
other plans and programs of the Company shall be as provided for under the terms
of such plans and programs.
(b) Notwithstanding anything to the contrary set forth in Section 1.3, the
Company, acting only with the approval of its Managers, may terminate this
Agreement at any time without cause, by giving or sending (pursuant to section
8.6) the Employee written notice at least forty-five (45) days prior to the
termination date. In the event of termination without cause by the Company, the
Company shall pay the Employee his regular salary and benefits for a period
equal to the longer of (i) the period through the remainder of the Term or (ii)
the sum of (x) six (6) months from the termination date and (y) one additional
month for each year of service with the Company or a predecessor in entity up to
a maximum of six additional months. This post employment severance shall be paid
on a regular salary schedule for the termination benefit period.
7.2 Termination by Employee. This Agreement may be terminated by the
Employee by the Employee's giving or sending the Company ninety (90) days
advance written notice. In such event, the Employee shall be paid his regular
compensation through and including such termination date. If the Employee
terminates his employment, he shall not be entitled to severance or similar
payments.
7.3 Termination of this Agreement. Notwithstanding anything to the contrary
set forth elsewhere in this Agreement, including but not limited to Sections
1.3, 7.1 and 7.2, this Agreement and any payments being made or to be made in
accordance with this Agreement shall terminate, with the exception of severance
payments, upon the occurrence of any of the following events:
(a) Cessation of active Company business unless the Company business
is continued by a successor in interest to the Company;
(b) The death of Employee, in which event the Employee shall receive
his regular salary and benefits through and including the date of death;
(c) A disabling event which, as determined in the judgment of the
Managers of the Company, is likely to adversely affect the Employee's
ability to carry out his responsibilities for a period of more than six
months, in which case the Employee will receive no severance or similar
payments but shall receive his regular salary and benefits during the
lesser period of (a) six months or (b) the remainder of the Term;
(d) The voluntary agreement of the parties who are bound by the terms
of this Agreement at that time.
ARTICLE VIII
Concluding Provisions
8.1 Entire Agreement. This Agreement contains the entire understanding of
the parties. There are no oral understandings, terms, or conditions, and no
party has relied upon any
<PAGE>
representation, express or implied, not contained in this Agreement.
8.2 Amendments. This Agreement may not be amended in any respect
whatsoever, nor may any provision hereof be waived by any party, except by a
further agreement, in writing, fully executed by each of the parties.
8.3 Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective heirs, personal representatives,
successors and assigns, executors and/or administrators, provided that Employee
may not assign its rights hereunder (except by will or the laws of descent)
without the prior written consent of the Company.
8.4 Joint Effort. Preparation of this Agreement has been a joint effort of
the parties, and the resulting document shall not be construed more severely
against one of the parties than the other.
8.5 Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision contained in this
Agreement.
8.6 Notice. Any notice, demand, offer or other written instrument
("Notice") required or permitted to be given shall be in writing signed by the
party giving such Notice and shall be hand delivered or sent, postage prepaid,
by Certified or Registered Mail, Return Receipt Requested, to the parties at the
addresses as set forth in this Agreement. Any Notice to be given to the estate
of any deceased person all be addressed to the personal representative of such
deceased person at his address as set forth in this Agreement. Any party shall
have the right to change the place to which such Notice shall be sent or
delivered by similar notice sent in like manner to all other parties hereto.
8.7 Effective Date of Notice. The effective date of any offer, demand,
notice or instrument shall be the date of delivery to the addressee.
8.8 Counterparts. This Agreement may be executed in one or more copies,
each of which shall be deemed an original. This agreement may be executed by
facsimile signature and each party may fully rely upon facsimile execution; this
agreement shall be fully enforceable against a party which has executed the
agreement by facsimile.
8.9 Partial Invalidity. The invalidity of one or more of the phrases,
sentences, clauses, sections or Articles contained in this Agreement shall not
affect the validity of the remaining portions so long as the material purposes
of this Agreement can be determined and effectuated.
8.10 Applicable Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Nevada.
8.11 Resolution of Disputes
(a) Subject to the provisions of Section 8.11(b), any dispute, difference
or controversy arising under this Agreement regarding the payment of money shall
be settled by arbitration. Any arbitration pursuant to this Section 8.11 shall
be held before a panel of three arbitrators, one of which shall be selected by
each of the Employee and the Company and the third of which shall be selected by
the mutual election of such two arbitrators. Each party shall bear its own
expenses for counsel and other out-of-pocket costs in connection with any
resolution of a dispute, difference or
<PAGE>
controversy. Any arbitration shall take place in New York, New York or in Las
Vegas, Nevada at the election of the Company, or at such other location as the
parties may agree upon, according to the American Arbitration Association's
Commercial Arbitration Rules now in force and hereafter adopted. The parties
agree that, in any arbitration the Members shall, to the maximum extent
possible, have such rights as to the scope and manner of discovery as are
permitted in the Federal Rules of Civil Procedure and consent to the entry of
any order of any court of competent jurisdiction necessary to enforce such
discovery. The arbitrators shall make their award in accordance with and based
upon all the provisions of this Agreement and judgment upon any award rendered
by the arbitrators shall be entered in any court having jurisdiction thereof.
The fees and disbursements of such arbitrators shall be borne equally by the
parties, with each party bearing its own expenses for counsel and other
out-of-pocket costs. The arbitrators are specifically authorized to award costs
and attorney's fees to the party prevailing in the arbitration and shall do so
in any case in which they believe the arbitration was not commenced in good
faith.
(b) The parties acknowledge that in the case of disputes regarding matters
other than the payment of money, damages may be insufficient to remedy a breach
of this Agreement and that irreparable harm will result from a breach of this
Agreement. Accordingly, the parties consent to the award of preliminary and
permanent injunctive relief and specific performance to remedy any breach of
this Agreement, regarding disputes other than the payment of money, without
limiting any other rights or remedies to which the parties may be entitled under
law or equity.
8.12 Genders. Any reference to the masculine gender shall be deemed to
include feminine and neuter genders, and vice versa, and any reference to the
singular shall include the plural, and vice versa, unless the context otherwise
requires.
8.13 Initialing. Each page which contains handwritten or typewritten
changes and each exhibit which is not attached to this Agreement shall be
initialed or signed by each party.
8.14 No Conflicts. The parties represent and warrant that the terms of this
agreement will not at the Closing violate any existing agreements with other
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the first day of January, 1996.
PRODUCTION RESOURCE GROUP, L.L.C.
--------------------------------------
By:
Name:
Title
--------------------------------------
Jeremiah J. Harris
<PAGE>
EXHIBIT 10.4
BRADLEY G. MILLER
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of July 7, 1997 is
between PRODUCTION RESOURCE GROUP, L.L.C., a Delaware limited liability company
with its principal place of business at 4170 West Harmon Avenue, Las Vegas,
Nevada (the "Company"), and Bradley G. Miller, an individual residing at 140
Thompson Street, Apt. 5D, New York, N.Y. 10012 (the "Employee").
RECITALS
The Company is engaged in business as an integrated provider of
goods and services in a variety of related markets, including production
management, theatrical rental, scenery, rigging, supply of physical production
elements (including lighting, scenery, sound and costumes), promotion, themed
attractions, Broadway and touring shows, special events and exhibits and film
and television production.
The Employee has special knowledge and expertise in corporate finance,
mergers and acquisitions and related fields and is being employed as Executive
Vice President, Chief Operating Officer and Chief Financial Officer of the
Company. Employee will be expected to work closely on a "project team" basis
with the other managers of the Company and its divisions.
NOW, THEREFORE in consideration of the mutual and dependent promises
hereinafter set forth, the parties, intending to be legally bound, do hereby
agree as follows:
ARTICLE I
Employment and Term
1.1 Employment/Duties. The Company hereby agrees to employ the Employee and the
Employee hereby accepts employment as the Company's Chief Operating Officer and
Chief Financial Officer under the terms and conditions set forth in this
Agreement. Employee shall be responsible to the Chairman of the Company or his
designee for the performance of his duties. Employee shall have responsibility
for all Company mergers and acquisitions, all Company financial relationships
(banks, Wall Street, investors, etc.), creating and monitoring budgets and
profitability and cash flow analyses, and assisting in making capital
expenditure decisions and such other duties and responsibilities as may be
assigned by the Company's Chairman. Employee understands that although he will
have the title of Chief Operating Officer he will function as a chief strategic
officer unless otherwise notified by the Chairman of the Company. During the
Term (as hereinafter defined), Employee shall devote substantially all of his
working time, attention and skill to the business affairs of the Company.
Employee's primary office will be in the Company's New York,
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New York location or such other office of the Company as is mutually determined
between the parties.
1.2. Effective Date. This Agreement commenced on July 7, 1997, the date Employee
commenced full-time work for the Company, such date being referred to as the
"Effective Date".
1.3. Term. This Agreement is effective from the Effective Date and shall run for
an initial period of five (5) years, subject to early termination as provided in
Section 6.1. Thereafter, the Agreement will be automatically renewed for
successive one-year terms unless the Company provides Employee a minimum of six
months notice of non-renewal prior to expiration of the Term. The initial term
and any renewal terms are collectively referred to as the "Term".
ARTICLE II
Compensation
2.1. Base Salary. For each twelve (12) month period during the Term of this
Agreement, the Employee shall be paid an annual base salary of no less than One
Hundred Seventy-Five Thousand Dollars ($175,000) ("Base Salary") in a manner
consistent with the usual pay practices of the Company. Base Salary will be
reviewed annually but may not be reduced during the Term.
2.2. Bonuses.
(a) Employee will be eligible for a bonus in accordance with the customary
practice of the Company. The payment of bonuses will be based on the performance
of the Company and or the performance of Employee, and shall be solely within
the discretion of the Chairman or the Compensation Committee of the Company, but
will generally be representative of bonuses paid to other senior executives
except for non-performance by Employee or extraordinary performance by other
senior executives.
(a) In the event the Company effects a "leveraged recapitalization,"
Employee shall receive a fee, as agreed by the parties, for services provided in
connection therewith.
(c) Unless otherwise agreed, Employee will not be entitled to receive any
fee with respect to any public offering of the Company's securities.
(d) All fees payable to Employee pursuant to subsections (c), (d) and (e)
of this Section 2.2 will be paid within 30 days of the date on which the fee is
earned hereunder.
2.4 Equity Provisions
(a) The Company currently has 10,000,000 limited liability company ("LLC")
units authorized and 5,199,413 issued and outstanding on a fully diluted basis.
Employee will receive 452,000 Company LLC Capital Appreciation Units ("Units")
which will entitle Employee
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to receive annual distributions of $0.05 per year per Unit and which will
entitle Employee to share in the realized appreciation of the Company upon a
sale of the Company, an initial public offering or a similar event as follows:
(i) for 113,000 Units, Employee will share in appreciation above $55
million;
(ii) for 113,000 Units, Employee will share in appreciation above $70
million;
(iii) for 113,000 Units, Employee will share in appreciation above $85
million; and
(iv) for 113,000 Units, Employee will share in appreciation above $95
million.
The $55 million, $70 million, $85 million and $95 million figures referred
to in subsections (i) through (iv) above are referred to herein as "Thresholds."
The Company agrees to negotiate in good faith with Employee regarding the
mechanics for realization of value upon a change of control, death, disability
or termination without "Cause" or with "Good Reason" (as defined in Sections 2.6
and 6.1(b) hereof respectively).
(b) Eighteen thousand eight hundred thirty-four (18,834) of each Threshold
of Employee's Units will be fully vested at the time of grant, an additional
eighteen thousand eight hundred thirty-four (18,834) of each Threshold of
Employee?s Units will vest on the first anniversary of the Effective Date and an
additional eighteen thousand eight hundred thirty-three (18,833) of each
Threshold of Employee's Units will vest on the second, third, fourth and fifth
anniversaries of the Effective Date provided, that Employee has not been
terminated for "Cause" and has not voluntarily departed his employment without
Good Reason.
(c) The Thresholds will be reduced on a dollar for dollar basis for
extraordinary distributions of funds to the Founders if Employee does not
receive his pro rata share of such distributions. For purposes of this
Agreement, the term "Founders" means Jeremiah J. Harris, Roy Sears, John Wolf,
Fred Gallo and Kevin Baxley.
(d) Calculations illustrating the operation of subsections (c) and (d)
above are attached as Exhibit A hereto.
2.4 Reclassification, Etc.
(a) In case of: (i) any reclassification or change of outstanding
securities by the Company; (ii) any consolidation or merger of the Company with
or into another limited liability company or corporation (other than a merger
with another limited liability company or limited partnership in which the
Company is a continuing limited liability company and which does not result in
any reclassification, change or exchange of its outstanding securities); or
(iii) any sale or transfer to another entity of all, or substantially all, of
the property of the Company, then, and in each such event, the Company or such
successor or purchasing entity, as the case may be, shall adjust the rights and
privileges of the Units in a manner designed to make Employee as nearly as may
be practicable economically indifferent to such change vis a vis the Founders.
The provisions of this subparagraph shall similarly apply to successive
reclassifications, changes, consolidations, mergers, sales and transfers.
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<PAGE>
(b) If the Company shall at any time while Employee?s Units remain
outstanding in whole or in part: (i) divide its LLC units, the Thresholds shall
be proportionately reduced; or (ii) combine its LLC units, the Thresholds shall
be proportionately increased.
2.5 Founders' Interests. The grant of units pursuant to this Agreement
shall not affect in any way the right or power of the Company (i) to make
adjustments, reclassifications, spin offs, reorganizations or changes of its
capital or business structure, to merge or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or assets; (ii) to
issue, redeem or repurchase units or securities convertible into or exchangeable
for units, including units preferred in rights of liquidation, dividends, etc.,
to the Employee's units; (iii) otherwise to deal in interests in its equity or
profits, provided that the Employee's units shall be appropriately adjusted in
case equity securities of any nature (including interests in profits) are issued
to the Founders, or any of them, in such a way as to dilute the Employee's
interest vis a vis such Founder or Founders by more than ten percent.
2.6 Owners' and Operating Agreements. Employee will be required to become a
party to, and agree to be bound by the terms of the operating agreement of the
Company and the "Owners' Agreement" among the direct and indirect owners of PRG;
provided that notwithstanding anything to the contrary in section 4.3 of the
Owners' Agreement: (i) upon a termination for "Cause", Employee's unvested Units
will be repurchased by the Company at a price of $1.00 per Unit and PRG will
have the option to purchase his vested Units for their fair market value as of
the date of termination, (ii) if Employee voluntarily leaves his employment with
PRG, Employee's unvested Units will be repurchased by the Company at a price of
$1.00 per Unit and PRG will have the option to purchase all of his Units for
their fair market value as of the date of termination and (iii) if Employee is
terminated other than for "Cause" PRG will have the option to acquire Employee's
Units for their fair market value as of the first anniversary of such
termination. Fair market value will be determined as set forth in the Owners'
Agreement. It is further anticipated that, for these purposes, "Cause" will be
defined to include only:
(a) Falsification of the accounts of PRG, embezzlement of funds of PRG
or other material dishonesty with respect to PRG or any of its affiliates;
(b) Conduct engaged in or action taken or omitted to be taken by an
employee which is in material breach of any employment agreement to which
such employee is bound, which breach continues for more than thirty (30)
days after written notice of such breach to employee;
(c) Gross or willful misconduct with respect to PRG or any subsidiary
or affiliate thereof which breach continues for more than ten (10) days
after written notice of such breach to employee; or
(d) Conviction of a crime involving moral turpitude or the violation
of any law which could reasonably be believed to materially adversely
affect the Company.
2.7 Leveraged Recapitalization. If PRG effects a "leveraged
recapitalization" transaction, Employee will be entitled to buy stock of the
"Newco" formed to effect the transaction at the price paid by other investors on
terms designed to preserve the economic arrangements set
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forth in paragraph 2.3(a) adjusted for any reduction in the aggregate ownership
interest of the Founders; provided, that up to one-half of the shares or options
acquired by Employee may be subject to a vesting or similar schedule over a
three-year period commencing on the date the stock is first acquired. The
parties agree to negotiate the terms of such buy-in in good faith consistent
with the foregoing principles.
2.8 Conversion to C Corporation. If PRG is converted to a C corporation,
Employee will receive options to the extent necessary to preserve his
proportionate interest in PRG adjusted for any reduction in the aggregate
ownership interest of the Founders or will receive other securities designed to
maintain (but not to improve or reduce) such economic terms on a tax-efficient
basis.
2.9 Benefits. The Company shall during the Term provide the Employee with
such standard benefits as are generally provided by the Company to other
full-time senior executives of the Company, including but not limited to
pension, health, dental, life and disability insurance. Participation shall be
subject to the terms of the applicable plan documents. To the extent, if any,
that there is a waiting period before Employee is entitled to participate in the
Company's medical plan, the Company shall reimburse COBRA payments made by
Employee to Schroder Wertheim & Company. The Company may alter, modify, add to
or delete its employee benefit plans as they apply to the Company's management
at such times and in such manner as the Company determines appropriate, without
recourse by Employee.
2.10 Automobile. The Company shall reimburse the Employee for the lease of
a new automobile mutually acceptable to Employee and the Company and all
expenses related to the use thereof for the Employee's use during the Term of
this Agreement, including but not limited to, insurance, maintenance, repairs,
mobile telephone and gasoline. Reimbursable lease costs will not exceed five
hundred dollars per month.
2.11 Business Expenses. The Company will pay or reimburse Employee for all
reasonable business expenses incurred or paid by him in the performance of his
duties and responsibilities hereunder subject to and in accordance with a
pre-approved budget, subject further to any restrictions on such expenses set by
the Managers or Chairman with respect to reasonable substantiation requirements
as may be specified by the Company from time to time.
2.12 Insurance. In addition to any life insurance provided by the Company
to the Employee, the Company may, at its discretion and at any time after the
execution of this Agreement, apply for and procure, as owner and for its own
benefit, insurance on the life of the Employee, in such amounts and in such form
or forms as the Company may choose. Unless otherwise agreed, the Employee shall
have no interest whatsoever in any such policy or policies, but shall, at the
request of the Company, subject himself to such medical examinations, supply
such information and execute such documents as may be required by the insurance
company or companies to which it has applied for such insurance.
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<PAGE>
ARTICLE III
Proprietary Information
3.1 Confidential and Proprietary Information. Employee acknowledges that
the Company possesses or will come into possession of information that has been
created, discovered, developed, acquired or otherwise become known to the
Company (including, without limitation, information that is created, discovered,
developed, acquired or made known by Employee in the course of his employment)
and in which the Company has rights of indeterminable commercial value (all of
the aforementioned information is hereinafter collectively referred to as
"Proprietary Information"). By way of illustration, Proprietary Information
includes, but is not limited to, trade secrets, processes, formulas, data and
know-how, marketing plans, strategies, forecasts, market information, contacts,
customer lists, business plans, financial information, and all information
collected from the Company's clients and customers. Employee acknowledges that
such Proprietary Information is critical to the success of the Company and
constitutes the trade secrets of the Company. Employee further acknowledges that
Proprietary Information is in part set forth in the Company's manuals,
memoranda, drawings and designs, specifications, accounting and sales records,
and other documents and records of the Company whether or not otherwise
identified as "Proprietary," some of which documents may be actually prepared in
full or in part by Employee. Proprietary Information shall exclude information
that has become public, except (i) when and to the extent that such public
information, when applied to or combined with other information, is non-public
and proprietary or (ii) where such information became public through disclosure
by Employee.
3.2 Non-Disclosure. Employee acknowledges that all Proprietary Information
shall be the sole property of the Company and its successors and assigns. At all
times, both during the Term of employment by the Company and for the two year
period after Employee ceases to be employed by the Company, whether such
cessation of employment shall be for any reason or for no reason, with or
without cause, voluntary or involuntary, or by termination, resignation,
disability, retirement or otherwise, Employee agrees to keep in confidence and
trust all Proprietary Information, and not to use, disclose, disseminate,
publish, copy, or otherwise make available, directly or indirectly, any
Proprietary Information except as expressly authorized in writing by the
Company, provided Employee shall be relieved of his obligation of nondisclosure
hereunder if Proprietary Information is required to be disclosed by any
applicable judgment, order or decree of any court or governmental body or agency
having jurisdiction or by any law, rule or regulation, provided that, in
connection with any such disclosure, Employee shall give the Company reasonable
prior written notice of the disclosure of such information pursuant to this
exception and shall obtain, to the maximum extent possible, confidential
treatment for such information by any authority requiring delivery of such
information.
3.3 Return of Proprietary Information. Employee agrees that when he ceases
to be employed by the Company, whether such cessation of employment shall be for
any reason or for no reason, with or without cause, voluntary or involuntary, or
by termination, resignation, disability, retirement or otherwise, Employee shall
(i) deliver to the Company all documents and data of any nature owned by the
Company pertaining either to the Proprietary Information or to Employee's
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work with the Company and (ii) abstain from taking or removing any documents,
data or information, or any reproduction thereof, containing or pertaining to
the Proprietary Information or to Employee's work for the Company.
3.4 Disclosure and Assignment of Information. Employee agrees promptly to
disclose to the Company all information pertaining to the Company's business and
collected or learned by Employee, either alone or jointly with others, in the
course of his employment with the Company. In addition, Employee hereby assigns
to the Company any rights he may have or acquire in the Proprietary Information
referred to in Section 3.1, and promises that during the duration of his
employment with the Company and thereafter, he will assist the Company in the
enforcement and protection of the Proprietary Information. The Company shall
promptly reimburse Employee for any reasonable expenses incurred in complying
with the provisions of this Section 3.4.
3.5 Innovations and Improvements. Employee agrees that all inventions,
innovations or improvements in the Company's method of conducting its business
conceived by him during his employment with the Company belong to the Company.
Employee will promptly disclose such inventions, innovations or improvements to
the Company, and perform all actions reasonably requested by the Company to
establish and confirm such ownership. Any such actions required to be performed
by Employee shall be at the expense of the Company. Without limiting the
foregoing, Employee agrees that:
(a) It is the intention of the parties hereto that all rights, including
without limitation copyright, in any product, software (including source code,
object code, models and algorithms) reports, surveys, marketing, promotional and
collateral materials prepared by Employee pursuant to the terms of this
Agreement, or otherwise for Company (hereinafter the "Work") vest in Company.
The parties expressly acknowledge that the Work was specially ordered or
commissioned by Company, and further agree that it shall be considered a "Work
Made for Hire" within the meaning of the patent and copyright laws of the United
States and that Company is entitled, as author, to the copyright and all other
rights therein, throughout the world, including, but not limited to, the right
to make such changes therein and such uses thereof, as it may determine in its
sole and absolute discretion.
(b) If for any reason the Work is not considered a Work Made for Hire under
the copyright law, then Employee grants and assigns to Company, its successors
and assigns, all of his rights, title, and interest in and to the Work,
including, but not limited to, the patent or copyright therein throughout the
world (and any renewal, extension or reversion copyright now or hereafter
provided), and all other rights therein of any nature whatsoever, whether now
known or hereafter devised, including, but not limited to the right to make such
changes therein, and such uses thereof, as Company may determine in its sole and
absolute discretion.
ARTICLE IV
Competition
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4.1 Noncompetition Covenant. Employee covenants and agrees with the Company
that during the "Noncompete Term"( as hereinafter defined) he will not in any
geographic area in which the Company does business or makes sales during the
Term engage in any of the following activities: (i) either directly or
indirectly, solely or jointly with any person or persons, as an employee,
consultant, or advisor (whether or not engaged in business for profit) or as an
individual proprietor, owner, partner, shareholder, director, officer, joint
venturer, investor, lender or in any other capacity, compete with the Company
in, or engage in, the scenery or exhibit business including, without limitation,
the business of theatrical rental, lighting, scenery, rigging, supply of
physical product elements, or any other business which directly competes with
any other business conducted by the Company or any of its affiliates or any
other business if the Company or such affiliate took substantial steps in
anticipation of commencing such business prior to the termination of the
Employee and the Employee was aware of such steps; provided, Employee may own up
to one percent (1%) of the stock of any publicly traded company which may be
engaged in such business; (ii) request or advise any past or present customer or
customer prospect of the Company to withdraw, curtail or cancel its business
with the Company; (iii) sell any products or services which compete with any
Company products or services to any customer who has purchased products or
services from the Company in the two year period prior to the commencement of
the Noncompete Term; or (iv) directly or indirectly recruit or hire or attempt
to recruit or hire any employee of the Company or assist any person or persons
in recruiting or hiring or soliciting any employee of the Company or any person
who was an employee of the Company in the two year period prior to the
commencement of the Noncompete Term.
4.2 Noncompete Term. The "Noncompete Term" shall commence on the Effective
Date and end two years following expiration or termination of the Employee's
employment; provided, however, if termination of the Employee is by the Company,
subsection (i) of Section 4.1 shall apply only for such portion of the
Noncompete Term, if any, during which the Company pays Employee on a monthly
basis the Employee?s base salary as of the effective date of termination. The
Company shall notify the Employee in writing of its election to extend the
Noncompete Term as provided in Section 4.1(i) above, and monthly payments shall
be made on the first day of each month in arrears (partial months will be paid
on a per diem basis).
4.3 Blue Pencil Rule. The Employee and the Company desire that the
provisions of this Article IV be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. The parties agree that Employee is a key executive of the
Company. If a court of competent jurisdiction, however, determines that any
restrictions imposed on the Employee in this Article IV are unreasonable or
unenforceable because of duration, geographic area or otherwise, the Employee
and Company agree and intend that the court shall enforce this Article IV to the
maximum extent the court deems reasonable and that the court shall have the
right to strike or change any provisions of this Article IV and substitute
therefor different provisions to effect the intent of this Article IV to the
maximum extent possible.
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ARTICLE V
Indemnification
5.1 Indemnification of Employee. The Company agrees to indemnify Employee
in connection with the performance of his duties and obligations hereunder to
the maximum extent permitted by applicable law. In addition, expenses of defense
which may be indemnifiable under applicable law shall be paid by the Company in
advance of the final disposition of a proceeding, provided Employee agrees to
repay such amount if he is later found not entitled to be indemnified as
authorized by applicable law. A condition to the Company's obligation of
indemnification hereunder is that Employee provide the Company immediate written
notice of any claim for which indemnification will be sought, stating the
identity of the claimant, the nature and basis of the claim and the amount
thereof, and copies of all notices and documents received by Employee in
connection with the claim. Thereafter Employee, as a condition of the Company's
obligation of indemnification, shall cooperate in the defense of the claim by
the Company, and shall provide the Company with all additional information and
copies of documents received by him, or otherwise in his possession, related to
the claim. The Company will notify Employee of its election to assume the
defense of a claim against Employee, in which event the Company will defend
utilizing counsel of the Company's choice, reasonably acceptable to Employee,
and at the Company's sole expense, and in the event the Company makes such
election, Employee may also participate in the defense utilizing his own counsel
at Employee's sole expense. In the event the Company does not elect to defend,
the Company will advance Employee's reasonable expenses of counsel, subject to
Employee's contingent obligation to repay such expenses as provided above.
Employee will not independently consent to the settlement of any claim without
the prior written consent of the Company, which consent will not be unreasonably
withheld.
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ARTICLE VI
Termination of Employment and Severance Benefits
6.1 Events of Termination by the Company.
(a) Death or Disability. In the event Employee dies or becomes permanently
disabled during the term of this Agreement, his employment hereunder shall
automatically terminate. In such case, the Company shall pay to Employee or his
beneficiary, as the case may be, any earned but unpaid base salary as of the
date of his death or disability. For the purpose of this Agreement, "permanent
disability" or "permanently disabled" shall mean the inability of the Employee,
due to physical or mental illness or disease, to perform the functions then
performed by such Employee for one hundred eighty (180) substantially
consecutive days, accompanied by the likelihood, in the opinion of a physician
chosen by the Company, that the disabled Employee will be unable to perform such
functions within the reasonably foreseeable future; provided, however, that the
foregoing definition shall not include a disability for which the Company is
required to provide reasonable accommodation pursuant to the Americans with
Disabilities Act or other similar statute or regulation. If any question shall
arise as to whether during any period Employee has suffered disability, Employee
may, and at the request of the Company will, submit to the Company a
certification in reasonable detail by a physician selected by Employee or his
guardian to whom the Company has no reasonable objection as to whether Employee
was so disabled and such certification shall for the purposes of this Agreement
be conclusive of the issue. If such question shall arise and Employee shall fail
to submit such certification, the Company's determination of such issue shall be
binding on Employee.
(b) By the Company. The Company may terminate Employee's employment
hereunder for "Cause" at any time upon notice to Employee setting forth in
reasonable detail the nature of such cause. For purposes of this Agreement,
"Cause" shall have the meaning given in Section 2.6 hereof.
(c) By Employee for Good Reason. Employee may terminate his employment by
the Company for "Good Reason" at any time upon notice to the Company setting
forth in reasonable detail the nature of such good reason. "Good Reason" for
Employee to terminate his employment shall mean any act or omission by the
Company which constitutes a material breach of any term or provision of this
Agreement or which results in the assignment to Employee of any duties
inconsistent with, or in diminution of, the positions, duties, responsibilities
and status of Employee hereunder or any change in Employee's titles or duties
with the same intent or effect which breach continues for more than ten days
after written notice of such breach to Company.
(d) In the event of termination or cessation by the Company of Employee's
employment with the Company other than for "Cause" as defined above or the
termination of the Employee's employment with the Company by Employee for "Good
Reason" as defined above, Employee shall be entitled to receive from the Company
payment of all salary and bonus and
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<PAGE>
continuation of all benefits which Employee would have been entitled to receive
through the end of the Term had his employment not terminated, at the same times
as such payments would otherwise have been made. Upon the giving of notice of
termination of Employee's employment hereunder for Cause, and the passing of any
applicable notice period, except as specifically provided herein, the Company
shall have no further obligation or liability to Employee, other than the
payment of base salary earned but unpaid at the date of termination and the
contribution by the Company to the cost of Employee's participation (subject to
any required employee contribution by Employee under the terms of the applicable
plans) in the Company's group medical and dental insurance plans as the same are
in effect from time to time for so long as Employee is entitled to continue such
participation under applicable law and plan terms.
6.2 Survival. Notwithstanding termination of this Agreement as provided in
this Article VI, the obligations of Employee and the Company under Article III,
Article IV and Article V shall survive termination.
ARTICLE VII
Concluding Provisions
7.1 Entire Agreement. This Agreement contains the entire understanding of
the parties with respect to the matters contained herein. There are no oral
understandings, terms, or conditions, and no party has relied upon any
representation, express or implied, not contained in this Agreement.
7.2 Amendments. This Agreement may not be amended in any respect
whatsoever, nor may any provision hereof be waived by any party, except by a
further agreement, in writing, fully executed by each of the parties.
7.3 Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective heirs, personal representatives,
successors and assigns, executors and/or administrators, provided that Employee
may not assign his rights hereunder (except by will or the laws of descent)
without the prior written consent of the Company.
7.4 Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision contained in this
Agreement.
7.5 Notice. Any notice, demand, offer or other written instrument
("Notice") required or permitted to be given shall be in writing signed by the
party giving such Notice and shall be hand delivered or sent, postage prepaid,
by Certified or Registered Mail, Return Receipt Requested, to the parties at the
addresses as set forth in this Agreement. Any Notice to be given to the estate
of any deceased person shall be addressed to the personal representative of such
deceased person at his address as set forth in this Agreement. Any party shall
have the right to change the place to which such Notice shall be sent or
delivered by similar notice sent in like manner to all other parties hereto.
7.6 Effective Date of Notice. The effective date of any offer, demand,
notice or instrument shall be the date of delivery to the addressee.
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<PAGE>
7.7 Counterparts. This Agreement may be executed in one or more copies,
each of which shall be deemed an original. This Agreement may be executed by
facsimile signature and each party may fully rely upon facsimile execution; this
agreement shall be fully enforceable against a party which has executed the
agreement by facsimile.
7.8 Partial Invalidity. The invalidity of one or more of the phrases,
sentences, clauses, sections or Articles contained in this Agreement shall not
affect the validity of the remaining portions so long as the material purposes
of this Agreement can be determined and effectuated.
7.9 Applicable Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of New York.
7.10 Resolution of Disputes.
(a) Subject to the provisions of Section 7.11(b), any dispute, difference
or controversy arising under this Agreement regarding the payment of money shall
be settled by arbitration. Any arbitration pursuant to this Section 7.11 shall
be held before a panel of three arbitrators, one of which shall be selected by
each of the Employee and the Company and the third of which shall be selected by
the mutual election of such two arbitrators. Except as otherwise set forth
herein, each party shall bear its own expenses for counsel and other
out-of-pocket costs in connection with any resolution of a dispute, difference
or controversy. Any arbitration shall take place in New York, New York or at
such other location as the parties may agree upon, according to the American
Arbitration Association's Commercial Arbitration Rules now in force and
hereafter adopted. The parties agree that, in any arbitration the parties shall,
to the maximum extent possible, have such rights as to the scope and manner of
discovery as are permitted in the Federal Rules of Civil Procedure and consent
to the entry of any order of any court of competent jurisdiction necessary to
enforce such discovery. The arbitrators shall make their award in accordance
with and based upon all the provisions of this Agreement and judgment upon any
award rendered by the arbitrators shall be entered in any court having
jurisdiction thereof. The fees and disbursements of such arbitrators shall be
borne equally by the parties, with each party bearing its own expenses for
counsel and other out-of-pocket costs. The arbitrators are specifically
authorized to award costs and attorney's fees to the party substantially
prevailing in the arbitration and shall do so in any case in which they believe
the arbitration was not commenced in good faith.
(b) The parties acknowledge that in the case of disputes regarding matters
other than the payment of money, damages may be insufficient to remedy a breach
of this Agreement and that irreparable harm will result from a breach of this
Agreement. Accordingly, the parties consent to the award of preliminary and
permanent injunctive relief and specific performance to remedy any breach of
this Agreement, regarding disputes other than the payment of money, without
limiting any other rights or remedies to which the parties may be entitled under
law or equity. Either party may pursue injunctive relief or specific performance
in any court of competent jurisdiction.
7.11 Genders. Any reference to the masculine gender shall be deemed to
include feminine and neuter genders, and vice versa, and any reference to the
singular shall include the plural, and vice versa, unless the context otherwise
requires.
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<PAGE>
7.12 Initialing. Each page which contains handwritten or typewritten
changes and each exhibit which is not attached to this Agreement shall be
initialed or signed by each party.
7.13 No Conflicts. The parties represent and warrant that the terms of this
Agreement do not violate any existing agreements with other parties.
7.14 Withholding. All payments made by Company to Employee hereunder shall
be subject to applicable withholding.
7.15 Conversion of Form; Public Offering. In the event Company converts its
structure from a limited liability company to a stock corporation, and/or in the
event the Company subsequently registers its securities pursuant to the
Securities Act of 1933, as amended (the "Securities Act") (other than in
connection with a transaction contemplated by Rule 145(a) promulgated under the
Securities Act or pursuant to Form S-8 or successor forms), Employee shall (i)
be entitled to convert a proportionate number of Units as are converted by other
employee owners of the Company and (ii) be entitled to register a proportionate
number of shares of stock as the other employee owners of the Company with
respect to their interest, if any, in the Company, subject to the provisions of
the Company's Operating Agreement and the Owners' Agreement referred to in
Section 2.6 hereof. The Company will use reasonable best efforts to structure
the conversion of capital appreciation units in the event of a conversion of the
Company to a C corporation in a manner which will maximize Employee's ability to
obtain capital gains treatment.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first set forth above.
THE COMPANY:
PRODUCTION RESOURCE GROUP, L.L.C.
By: _____________________________________
Jeremiah J. Harris
Chairman
THE EMPLOYEE:
__________________________________________
Bradley G. Miller
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<PAGE>
EXHIBIT 10.6
AGREEMENT OF LEASE
BETWEEN
DANIS PROPERTIES LIMITED PARTNERSHIP
AND
PRODUCTION RESOURCE GROUP, L.L.C.
<PAGE>
THIS LEASE AGREEMENT is made by and between DANIS PROPERTIES LIMITED
PARTNERSHIP, an Ohio limited partnership ("LANDLORD") with its address at P.O.
Box 1253, Winter Park, FL 32790 and PRODUCTION RESOURCE GROUP, L.L.C., a limited
liability company organized under the laws of Delaware ("TENANT") with its
address at 539 Temple Hill Road, New Windsor, New York 12553. and is dated as of
the date on which this lease has been fully executed by Landlord and Tenant.
1. Summary of Terms and Certain Definitions
(a) "PREMISES": Approximate rentable square feet: 80,040
(Section 2) Suite: 100
(b) "BUILDING": Approximate rentable square feet: 120,360
(ss.2) Address: 1902 Cypress Lake Drive, Orlando, Florida
(c) "TERM": One hundred and twenty (120 ) months plus any partial
(ss.5) month from the Commencement Date until the first day of
the first full calendar month during the Term
(i) "COMMENCEMENT DATE": November 15,1997.
(ii) "EXPIRATION DATE": See Section 5
(d) Minimum Rent (ss.6) & Operating Expenses (ss.7)
(i) "MINIMUM ANNUAL RENT": $307,353.60 (Three hundred and seven
thousand three hundred and fifty three and 60 /100 Dollars), payable in
monthly installments of $25,612.80 (Twenty five thousand six hundred and
twelve and 80 /100 Dollars), increased as follows:
<TABLE>
<CAPTION>
Lease Year Annual Monthly Lease Year Annual Monthly
<S> <C> <C> <C> <C> <C>
2 $307,353.60 $25,612.80 6 $345,929.18 $28,827.43
3 $316,574.21 $26,381.18 7 $356,307.06 $29,692.25
4 $326,071.44 $27,172.62 9 $378,006.16 $31,500.51
5 $335,853.58 $27,987.80 10 $389,346.35 $32,445.53
</TABLE>
(ii) Estimated "ANNUAL OPERATING EXPENSES": $55,227.60 (Fifty five
thousand two hundred and twenty seven and 60 /100 Dollars), payable in
monthly installments of $ 4,602.30 (Four thousand six hundred and two and
30 /100 Dollars), subject to adjustment (ss.7(a))
(e) "PROPORTIONATE SHARE" (ss.7(a)): 66.5% (Ratio of approximate rentable
square feet in the Premises to approximate rentable square feet in the Building)
(f) "USE" (ss.4): Warehouse with appurtenant offices
(g) "SECURITY DEPOSIT" (ss.28): $ 25,612.80 (Twenty five thousand six
hundred and twelve and 80 /100 Dollars)
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<PAGE>
(h) CONTENTS: This lease consists of the Index, pages 1 through 11
containing Sections I through 28 and the following, all of
which are attached hereto and made a part of this lease:
Rider with Sections 29 through 34
Exhibits: "A" - Plan showing Premises "Co - Building Rules
"B" - Commencement Certificate "D" - Estoppel Certificate
Form Form
2. Premises. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the Premises as shown on attached, Exhibit "A" within the Building (the
Building and the lot on which it is located, the "PROPERTY"), together with the
non- exclusive right with Landlord and other occupants of the Building to use
all areas and facilities provided by Landlord for the use of all tenants in the
Property including any driveways, sidewalks and parking, loading and landscaped
areas (the "COMMON AREAS").
3. Acceptance of Premises. Tenant has examined and knows the condition of the
Property, the zoning, streets, sidewalks parking areas, curbs and access ways
adjoining it, visible easements, any surface conditions and the present uses,
and Tenant accept! them in the condition in which they now are, without relying
on any representation, covenant or warranty by Landlord. Tenant and its agents
shall have the right, at Tenant's own risk, expense and responsibility, at all
reasonable times prior to the Commencement Date, to enter the Premises for the
purpose of taking measurements and installing its furnishings and equipment;
provided that the Premises are vacant and Tenant obtains Landlords prior written
consent.
4. Use; Compliance.
(a) Permitted Use . Tenant shall occupy and use the Premises for and only
for the Use specified in Section I (f) above and in such a manner as is lawful,
reputable and will not create any nuisance or otherwise interfere with any other
tenant's normal operations or the management of the Building. Without limiting
the foregoing, such Use shall exclude any use that would cause the Premises or
the Property to be deemed a "place of public accommodation" under the Americans
with Disabilities Act (the "ADA") as further described in the Building Rules
(defined below). All Common Areas shall be subject to Landlords exclusive
control and management at all times. Tenant shall not use or permit the use of
any portion of the Property for outdoor storage or installations outside of the
Premises nor for any use that would interfere with any other person's use of any
portion of the Property outside of the Premises.
(b) Compliance. Landlord represents that, as of the date of this lease,
there is no action required with respect to the Premises or Common Areas under
any laws (including Title III of the ADA), ordinances, notices, orders, rules,
regulations and requirements applicable to the Premises or to the Common Areas.
From and after the Commencement Date, Tenant shall comply promptly, at its sole
expense, (including making any alterations or improvements) with all laws
(including the ADA), ordinances, notices, orders. rules, regulations and
requirements regulating the Property during the Term which impose any duty upon
Landlord or Tenant with respect to Tenant's use, occupancy or alteration of, or
Tenant's installations in or upon, the Property including the Premises, (as the
same may be amended, the "LAWS AND REQUIREMENTS") and the building rules
attached as Exhibit "C", as amended by Landlord from time to time (the "BUILDING
RULES"). Provided, however. that Tenant shall not be required to comply with the
Laws and Requirements with respect to the footings, foundations, structural
steel columns and girders forming a part of the Property unless the need for
such compliance arises out of
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<PAGE>
Tenant's use, occupancy or alteration of the Property, or by any act or omission
of Tenant or any employees, agents, contractors, licensees or invitees
("AGENTS") of Tenant. With respect to Tenant's obligations as to the Property,
other than the Premises, at Landlords option and at Tenant's expense, Landlord
may comply with any repair, replacement or other construction requirements of
the Laws and Requirements and Tenant shall pay to Landlord all costs thereof as
additional rent.
(c) Environmental. Tenant shall comply, at its sole expense, with all Laws
and Requirements as set forth above, all manufacturers' instructions and all
requirements of insurers relating to the treatment, production, storage,
handling, transfer, processing, transporting, use, disposal and release of
hazardous substances, hazardous mixtures, chemicals, pollutants, petroleum
products, toxic or radioactive matter (the "RESTRICTED ACTIVITIES"). Tenant
shall ` deliver to Landlord copies of all Material Safety Data Sheets or other
written information prepared by manufacturers, importers or suppliers of any
chemical and all notices. filings, permits and any other written communications
from or to Tenant and any entity regulating any Restricted Activities.
(d) Notice. If at any time during or after the Term, Tenant becomes aware
of any inquiry, investigation or proceeding regarding the Restricted Activities
or becomes aware of any claims, actions or investigations regarding the ADA,
Tenant shall give Landlord written notice, within 5 days after first learning
thereof, providing all available information and copies of any notices.
5. Term. The Term of this lease shall commence on the Commencement Date and
shall end at 11:59 p.m. on the last day of the Term (the "EXPIRATION DATE"),
without the necessity for notice from either party, unless sooner terminated in
accordance with the terms hereof. At Landlords request, Tenant shall confirm the
Commencement Date and Expiration Date by executing a lease commencement
certificate in the form attached as Exhibit "B".
6. Minimum Annual Rent. Tenant agrees to pay to Landlord the Minimum Annual Rent
in equal monthly installments in tile amount set forth in Section l(d) (as
increased at the beginning of each lease year as set forth in Section l(d)). in
advance, on the first day of each calendar month during the Term, without
notice, demand or setoff, at Landlord's address designated at the beginning of
this lease unless Landlord designates otherwise; provided that rent for the
first full month shall be paid at the signing of this lease. L the Commencement
Date falls on a day other than the first day of a calendar month, the rent shall
be apportioned pro rata on a per them basis for the period from the Commencement
Date until the first day of the following calendar month and shall be paid on or
before the Commencement Date. As used in this lease, the term "lease year" means
the period from the Commencement Date through the succeeding 12 full calendar
months (including for the first lease year any partial month from the
Commencement Date until the first day of the first full calendar month) and each
successive 12 month period thereafter during the Term.
7. Operation of Property; Payment of Expenses.
(a) Payment of Operating Expenses. Tenant shall pay to Landlord the
estimated Annual Operating Expenses in equal monthly installments in the amount
set forth in Section I(d) (prorated for any partial month), from the
Commencement Date and continuing throughout the Term on the first day of each
calendar month during the Term, as additional rent, without notice, demand or
setoff-, provided that the monthly installment for the first full month shall be
paid at the signing of this lease. Landlord shall apply such payments to the
operating expenses owed to Landlord by Tenant pursuant to the following Sections
7(b)-(f). The amount of the Annual Operating Expenses set forth in Section I(d)
represents Tenant's Proportionate Share of the estimated operating expenses
during the first calendar year of the Term on an annualized basis; from time to
time Landlord may adjust such estimated amount if the estimated operating
expenses increase. By April 30th of each year (and as soon as practical after
the
4
<PAGE>
expiration or termination of this lease or at any time in the event of a sale of
the Property), Landlord shall provide Tenant with a statement of the actual
amount of such expenses for the preceding calendar year or part thereof.
Landlord or Tenant shall pay to the other the amount of any deficiency or
overpayment then due from one to the other or, at Landlords option, Landlord may
credit Tenant's account for any overpayment. Ten ant's obligation to pay the
Annual Operating Expenses pursuant to this Section 7 shall survive the
expiration or termination of this lease.
(b) Taxes and Other Impositions. Tenant shall pay prior to delinquency all
levies, taxes (including sales taxes - and gross receipt taxes), assessments,
liens, license and permit fees, which are applicable to the Term, and which are
imposed by any authority or under any law, ordinance or regulation thereof, or
pursuant to any recorded covenants or agreements, and the reasonable cost of
contesting any of the foregoing (the "IMPOSITIONS") upon or with respect to the
Premises, or any improvements thereto, or directly upon this lease or the Rent
(defined in Section 7(f)) or a-mounts payable by any subtenants or other
occupants of the Premises, or against Landlord because of Landlords estate or
interest herein. Additionally, Tenant shall pay as aforesaid its Proportionate
Share of any Imposition which is not imposed upon the Premises as a separate
entity but which is imposed upon all or part of the Property or upon the leases
or rents relating to the Property.
(i) Nothing herein contained shall be interpreted as requiring Tenant
to pay any income, excess profits or corporate capital stock tax imposed or
assessed upon Landlord, unless such tax or any similar tax is levied or
assessed in lieu of all or any part of any Imposition or an increase in any
Imposition.
(ii) If it shall not be lawful for Tenant to reimburse Landlord for
any of the Impositions, the Minimum Annual Rent shall be increased by the
amount of the portion of such Imposition allocable to Tenant, unless
prohibited by law.
(c) Insurance.
(i) Property. Landlord shall keep in effect, and Tenant shall pay to
Landlord its Proportionate Share of the cost of, insurance against loss or
damage to the Building or the Property by fire and such other casualties as may
be included within fire, extended coverage and special form insurance covering
the full replacement cost of the Building (but excluding coverage of Tenant's
personal property in, and any alterations by Tenant to, the Premises), and such
other insurance as Landlord may reasonably deem appropriate or as may be
required from time-to-time by any mortgagee.
(ii) Liability. Tenant, at its own expense, shall keep in effect
comprehensive general public liability insurance with respect. to the Premises
and the Property, including contractual liability insurance, with such limits of
liability for bodily injury (including death) and property damage as reasonably
may be required by Landlord from time-to-time, but not less than a combined
single limit of $1.000,000 per occurrence and a general aggregate limit of not
less than $3,000,000 (which aggregate limit shall apply separately to each of
Tenants locations if more than the Premises), however, such limits shall not
limit the liability of Tenant hereunder. The policy of comprehensive general
public liability insurance also shall name Landlord and Landlord's agent as
insured parties with respect to the Premises, shall be written on an
"occurrence" basis and not on a "claims made" basis. shall provide that it is
primary with respect to any policies carried by Landlord and that any coverage
carried by Landlord shall be excess insurance, shall provide that it shall not
be cancelable or reduced without at least 30 days prior written notice to
Landlord and shall be issued in form satisfactory to Landlord. The insurer shall
be a responsible insurance carrier which is authorized to issue such insurance
and licensed to do
5
<PAGE>
business in the state in which the Property is located and which has at all
times during the Term a rating of no less than A VII in the most current edition
of Best's Insurance Reports. Tenant shall deliver to Landlord on or before the
Commencement Date, and subsequently renewals of, a certificate of insurance
evidencing such' coverage and the waiver of subrogation described below.
(iii) Waiver of Subrogation. Landlord and Tenant shall have included in
their respective property insurance policies waivers of their respective
insurers' right of subrogation against the other party. If such a waiver should
be Unobtainable or unenforceable, then such policies of insurance shall state
expressly that such policies shall not be invalidated if, before a casualty, the
insured waives the right of recovery against any party responsible for a
casualty covered by the policy.
(iv) Increase of Premiums. Tenant agrees not to do anything or fail to do
anything which will increase the cost of Landlord's insurance or which will
prevent Landlord from procuring policies (including public liability) from
companies and in a form satisfactory to Landlord. If any breach of the preceding
sentence by Tenant causes the rate of fire or other insurance to be increased,
Tenant shall pay the amount of such increase as additional rent promptly upon
being billed.
(d) Repairs and Maintenance; Common Areas; Building Management. Except as
specifically otherwise provided in this Section (d), Tenant at its sole expense
shall maintain the Premises in good order and condition, promptly make all
repairs necessary . necessary to maintain such condition, and repair any damage
to the Premises caused by Tenant or its Agents. All repairs made by Tenant shall
utilize materials and equipment which are comparable to those originally used in
constructing the Building and Premises. When used in this Section (d), the term
"repairs" shall include replacements and renewals when necessary.
(i) Landlord, at its sole expense, shall make all necessary repairs to
the footings, foundations, structural steel columns and girders forming a
part of the Premises, provided that Landlord shall have no responsibility
to make any repair until Landlord receives written notice or has actual
knowledge of the need for such repair.
(ii) Landlord, at Tenant's sole expense. shall maintain and repair the
HVAC systems appurtenant to the Premises.
(iii) Landlord shall make all necessary repairs to the roof, exterior
portions of the Premises and the Building, utility and communications
lines, equipment and facilities in the Building which serve more than one
tenant, and to the Common Areas, the cost of which shall be an operating
expense of which Tenant shall pay its Proportionate Share, provided that
Landlord shall have no responsibility to make any repair until Landlord
receives written notice of the need for such repair. Landlord shall operate
and manage the Property and shall maintain all Common Areas and any paved
areas appurtenant to the Property in a clean and orderly condition,
Landlord reserves the right to make alterations to the Common Areas from
time to time. Operating expenses also shall include (A) all sums expended
by Landlord for the supervision, maintenance, repair, replacement and
operation of the Common Areas (including the costs of utility services),
(B) any costs of building improvements made by Landlord to the Property
that are required by any governmental authority use of the Property or for
the purpose of reducing operating expenses and (C) a management and
administrative fee applicable to the overall operation of the Property not
to exceed five percent (5%) of gross rent.
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<PAGE>
(iv) Notwithstanding anything herein to the contrary, repairs and
replacements to the Property including the Premises made necessary by
Tenant's use, occupancy or alteration of, or Tenant's installation in or
upon the Property or by any act or omission of Tenant or its Agents shall
be made at the sole expense of Tenant to the extent not covered by any
applicable insurance proceeds paid to Landlord. Tenant shall not bear the
expense of any repairs or replacements to the Property arising out of or
caused by any other tenant's use, occupancy or alteration of, or any other
tenant's installation in or upon, the Property or by any act or omission of
any Other tenant or any other tenant's Agents.
(e) Utility Charges. Tenant shall pay for water, sewer, gas, electricity,
heat, power, telephone and other communication services and any other- utilities
supplied to or consumed in or on the Premises. Landlord shall not be responsible
or liable for any interruption in utility service, nor shall such interruption
affect the continuation or validity of this lease.
(f) Net lease. Except for the obligations of Landlord expressly set forth
herein, this lease is a "triple net lease" and Landlord shall receive the
Minimum Annual Rent as net income from the Premises, not diminished by any
expenses other than payments under any mortgages, and Landlord is not and shall
not be required to render any services of any kind to Tenant. The term "RENT" as
used in this lease means the Minimum Annual Rent, Annual Operating Expenses and
any other additional rent or sums payable by Tenant to Landlord pursuant to this
lease, all of which shall be deemed rent for purposes of Landlord's rights and
remedies with respect thereto. Tenant shall pay all Rent to Landlord within 30
days after Tenant is billed, unless otherwise provided in this lease, and
interest shall accrue on all sums due but unpaid.
8. Signs. Except for signs which are located wholly within the interior of the
Premises and not visible from the exterior of the Premises, no signs shall be
placed on the Property without the prior written consent of Landlord. All signs
installed by Tenant shall be maintained by tenant in good condition and Tenant
shall remove all such signs at the termination of this lease and shall repair.
any damage caused by such installation, existence or removal.
9. Alterations and Fixtures.
(a) Subject to Section 10, Tenant shall have the right to install its trade
fixtures in the Premises, provided that no such installation or removal thereof
shall affect any structural portion of the Property nor any utility lines,
communications lines, equipment or facilities in the Building serving any tenant
other than Tenant. At tile expiration or termination of this lease and at the
option of Landlord or Tenant, Tenant shall remove such installation(s) and, in
the event of such removal, Tenant shall repair any damage caused by such
installation or removal, if Tenant, with Landlord's written consent, elects no(
to remove such installation(s) at tile expiration or termination of this lease,
all such installations shall remain on the Property and become the property of
Landlord without payment by Landlord.
(b) Except for non-structural changes which do not exceed $5000 in the
aggregate, Tenant shall not make or permit to be made any alterations to the
Premises without Landlords prior written consent. Tenant shall pay the costs of
any required architectural/engineering reviews. In making any alterations, (i)
Tenant shall deliver to Landlord the plans, specifications and necessary
permits, together with certificates evidencing that Tenant's contractors and
subcontractors have adequate insurance coverage naming Landlord and Landlord's
agent as additional insureds, at least 10 days prior to commencement thereof,
(ii) such alterations shall not impair the structural strength of the Building
or any other improvements or reduce the value of the Property or affect any
utility lines, communication lines, equipment or facilities in tile Building
serving any tenant other than Tenant, (iii) Tenant shall comply with Section 10
and (iv) the occupants of the Building and of any adjoining property shall not
be
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disturbed thereby. All alterations to the Premises by Tenant shall be the
property of Tenant until the expiration or termination of this lease-, at that
time all such alterations shall remain on the Property and become the property
of Landlord without payment by Landlord unless Landlord gives written notice to
Tenant to remove the same, in which event Tenant will remove such alterations
and repair any resulting damage. At Tenant's request prior to Tenant making any
alterations, Landlord shall notify Tenant in writing, whether Tenant is required
to remove such alterations at the expiration or termination of this lease.
10. Mechanics' Liens. Tenant shall pay promptly any contractors and materialmen
who supply labor, work or materials to Tenant at the Property and shall take all
steps permitted by law in order to avoid the imposition of any mechanic's lien
upon all or any portion of the Property. Should any such lien or notice of lien
be filed for work performed for Tenant other than by Landlord, Tenant shall bond
against or discharge the same within 5 days after Tenant has notice that the
lien or claim is filed regardless of tile validity of such lien or claim.
Nothing in this lease is intended to authorize Tenant to do or cause any work to
be done or materials to be supplied for the account of Landlord, all of the same
to be solely for Tenant's account and at Tenant's risk and expense. Throughout
this lease the term "mechanic's lien" is used to include any lien, encumbrance
or charge levied or imposed upon all or any portion of, interest in or income
from the Property on account of any mechanic's, laborer's, materialman's or
construction lien or arising out of any debt or liability to or any claim of any
contractor, mechanic, supplier, materialman or laborer and shall include any
mechanic's notice of intention to file a lien given to Landlord or Tenant, any
stop order given to Landlord or Tenant, any notice of refusal to pay naming
Landlord or Tenant and any injunctive or equitable action brought by any person
claiming to be entitled to any mechanic's lien.
11. Landlord's Right of Entry. Tenant shall permit Landlord and its Agents to
enter the Premises at all reasonable times following reasonable notice (except
in the event of an emergency), for the purpose of inspection, maintenance or
making repairs, alterations or additions as well as to exhibit the Premises for
the purpose of sale or mortgage and, during tile last 12 months of the Term, to
exhibit the Premises to any prospective tenant. Landlord will make reasonable
efforts not to inconvenience Tenant in exercising the foregoing rights, but
shall not be liable for any loss of occupation or quiet enjoyment thereby
occasioned.
12. Damage by Fire or Other Casualty.
(a) If the Premises or Building shall be damaged or destroyed by fire or
other casualty, Tenant promptly shall notify Landlord and Landlord, subject to
the conditions set forth in this Section 12, shall repair such damage and
restore the Premises to substantially the same condition in which they were
immediately prior to such damage or destruction, but not including tile repair.
restoration or replacement of the fixtures or alterations installed by Tenant.
Landlord shall notify Tenant in writing, within 30 days after tile date of the
casualty, if Landlord anticipates that the restoration will take more than 180
days from the date of the casualty to complete-. in such event, either Landlord
or Tenant may terminate this lease effective as of tile date of casualty by
giving written notice to tile other within 10 days after Landlord's notice.
Further, if a casualty occurs during the last 12 months of tile Term or ally
extension thereof, Landlord may cancel this lease unless Tenant has tile right
to extend the Term for at least 3 more years and does so within 30 days after
the date of the casualty.
(b) Landlord shall maintain a 12 month rental coverage endorsement or other
comparable form of coverage as part of its fire, extended coverage and special
form insurance. Tenant will `receive an abatement of its Minimum Annual Rent and
Annual Operating Expenses to the extent the Premises are rendered untenantable
as determined by the carrier providing the rental coverage endorsement.
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13. Condemnation.
(a) Termination. If (i) all of the Premises are taken by a condemnation or
otherwise for any public or quasi-public use, (ii) any part of the Premises is
so taken and the remainder thereof is insufficient for the reasonable operation
of Tenant's business or (iii) any of the Property is so taken, and, in
Landlord's opinion, it would be impractical or the condemnation proceeds are
insufficient to restore the remainder of the Property, then this lease shall
terminate and all unaccrued obligations hereunder shall cease as of the day
before possession is taken by the condemnor.
(b) Partial Taking. If there is a condemnation and this lease has not been
terminated pursuant to this Section, (i) Landlord shall restore the Building and
the improvements which are a part of the Premises to a condition and size as
nearly comparable as reasonably possible to the condition and size thereof
immediately prior to the date upon which the condemnor took possession and (ii)
the obligations of Landlord and Tenant shall be unaffected by such condemnation
except that there shall be an equitable abatement of the Minimum Annual Rent
according to the rental value of the Premises before and after the date upon
which the condemnor took possession and/or the date Landlord completes such
restoration.
(c) Award. In the event of a condemnation affecting Tenant, Tenant shall
have the right to make a claim against the condemnor for moving expenses and
business dislocation damages to the extent that such claim does not reduce the
sums otherwise payable by the condemnor to Landlord. Except as aforesaid and
except as set forth in (d) below, Tenant hereby assigns all claims against the
condemnor to Landlord.
(d) Temporary Taking. No temporary taking of the Premises shall terminate
this lease or give Tenant any right to any rental abatement. Such a temporary
taking will be treated as if Tenant had sublet the Premises to the condemnor and
had assigned the proceeds of the subletting to Landlord to be applied on account
of Tenant's obligations hereunder. Any award for such a temporary taking during
the Term shall be applied first, to Landlord's costs of collection and, second,
on account of sums owing by Tenant hereunder, and if such amounts applied on
account of sums owing by Tenant hereunder should exceed the entire amount owing
by Tenant for the remainder of the Term, the excess will be paid to Tenant.
14. Non-Abatement of Rent. Except as otherwise expressly provided as to damage
by fire or other casualty in Section 12(b) and as to condemnation in Section
13(b), there shall be no abatement or reduction of the Rent for any cause
whatsoever, and this lease shall not terminate, and Tenant shall not be entitled
to surrender the Premises.
15. Indemnification of Landlord. Subject to Sections 7(c)(iii) and 16, Tenant
will protect, indemnify and hold harmless Landlord and its Agents from and
against any and all claims, actions, damages, liability and expense (including
fees of attorneys, investigators and experts) in connection with loss of life,
personal injury or damage to property in or about the Premises." arising out of
the occupancy or use of the Premises by Tenant or its Agents or occasioned
wholly or in part by any act or omission of Tenant or its Agents, whether prior
to, during or after the Term, except to the extent such loss, injury or damage
was caused by the negligence of Landlord or its Agents. In case any action or
proceeding is brought against Landlord and/or its Agents by reason of the
foregoing, Tenant, at its expense, shall resist and defend such action or
proceeding, or cause the same to be resisted and defended by counsel (reasonably
acceptable to Landlord and its Agents) designated by the insurer whose policy
covers such occurrence or by counsel designated by Tenant and approved by
Landlord and its Agents. Tenants obligations pursuant to this Section 15 shall
survive the expiration or termination of this lease.
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16. Waiver of Claims. Landlord and Tenant each hereby waives all claims for
recovery against the other for any loss or damage which may be inflicted upon
the property of such party even if such loss or damage shall be brought about by
the fault or negligence of the other party or its Agents-, provided, however,
that such waiver by Landlord shall not be effective with respect to any
liability of Tenant described in Sections 4(c) and 7(d)(iv).
17. Quiet Enjoyment. Landlord covenants that Tenant, upon performing all of its
covenants, agreements and conditions of this lease, shall have quiet and
peaceful possession of the Premises as against anyone claiming by or through
Landlord, subject, however, to the exceptions, reservations and conditions of
this lease.
18. Assignment and Subletting.
(a) Limitation. Tenant shall not transfer this lease, voluntarily or by
operation of law, without the prior written consent of Landlord which shall not
be withheld unseasonably. However, Landlords consent shall not be required in
the event of any transfer by Tenant to an affiliate of Tenant which is at least
as creditworthy as Tenant as of the date of this lease and provided Tenant
delivers to Landlord the instrument described in Section (c)(iii) below.
together with a certification of such creditworthiness by Tenant and such
affiliate. Any transfer not in conformity with this Section 18 shall be void at
the option of Landlord, and Landlord may exercise any or all of its rights under
Section 23. A consent to one transfer shall not be deemed to be a, consent to
any subsequent transfer. "Transfer" shall include any sublease, assignment,
license or concession agreement, change in ownership or control of Tenant,
(except that an initial public offering shall not be deemed a change of control)
mortgage or hypothecation of this lease or Tenant's interest therein or in a or
a portion of the Premises.
(b) Offer to Landlord. Tenant acknowledges that the terms of this lease,
including the Minimum Annual Rent, have been based on the understanding that
Tenant physically shall occupy the Premises for the entire Term. Therefore, upon
Tenant's request to transfer all or a portion of the Premises, at the option of
Landlord, Tenant and Landlord shall execute an amendment to this lease removing
such space from the Premises, tenant shall be relieved of any liability with
respect to such space and Landlord shall have the right to lease such space to
any party, including Tenant's proposed transferee.
(c) Conditions. Notwithstanding the above, the following shall apply to any
transfer, with or without Landlord's consent:
(i) As of the date of any transfer, Tenant shall not be in default
under this lease nor shall any act or omission have 4) occurred which would
constitute a default with the giving of notice and/or the passage of time.
(ii) No transfer shall relieve Tenant of its obligation to pay the
Rent and to perform all its other obligations hereunder. The acceptance of
Rent by Landlord from any person shall not be deemed to be a waiver by
Landlord of any provision of this lease or to be a consent to any transfer.
(iii) Each transfer shall be by a written instrument in form and
substance satisfactory to Landlord which shall (A) include an assumption of
liability by any transferee of all Tenant's obligations and the
transferee's ratification of and agreement to be bound by all the
provisions of this lease, (B) afford Landlord the right of direct action
against the transferee pursuant to the same remedies as are available to
Landlord against Tenant and (C) be executed by Tenant and the transferee.
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(iv) Tenant shall pay, within 10 days of receipt of an invoice which
shall be no less than $250, Landlords reasonable attorneys' fees and costs
in connection with the review, processing and documentation of any transfer
for which Landlord's consent is requested.
19. Subordination; Mortgagee's Rights.
(a) This lease shall be subordinate to any first mortgage or other primary
encumbrance now or hereafter affecting the Premises. Although the subordination
is self-operative, within 10 days after written request, Tenant shall execute
and deliver any further instruments confirming such subordination of this lease
and any further instruments of attornment that may be desired by any such
mortgagee or Landlord. However, any mortgagee may at any time subordinate its
mortgage to this lease, without Tenant's consent, by giving written notice to
Tenant, and thereupon this lease shall be deemed prior to such mortgage without
regard to their respective dates of execution and deliver)r, provided, however,
that such subordination shall not affect any mortgagee's right to condemnation
awards,- casualty. insurance proceeds, intervening liens or any right which
shall arise between the recording of such mortgage and the execution of this
lease. *See Rider
(b) It is understood and agreed that any mortgagee shall not be liable to
Tenant for any funds paid by Tenant to Landlord unless such funds actually have
been transferred to such mortgagee by Landlord,
(c) Notwithstanding the provisions of Sections 12 and 13 above, Landlord's
obligation to restore the Premises after a casualty or condemnation shall be
subject to the consent and prior rights of Landlords first mortgagee.
20. Recording; Tenant's Certificate. Tenant shall not record this lease or a
memorandum thereof without Landlord's prior written consent. Within 10 days
after Landlord's written request from time to time:
(a) Tenant shall execute, acknowledge and deliver to Landlord a written
statement certifying the Commencement Date and Expiration Date of this lease.
that this lease is in full force and effect and has not been modified and
otherwise as set forth in the form of estoppel certificate attached as Exhibit
"D" or with such modifications as may be necessary to reflect accurately the
stated facts and/or such other certifications as may be requested by a mortgagee
or purchaser. Tenant understands that its failure to execute such documents may
cause Landlord serious financial damage by causing the failure of a financing or
sale transaction.
(b) Tenant shall furnish to Landlord, Landlords mortgagee, prospective
mortgagee or purchaser. Tenant's most recent audited financial statement,
subject to an appropriate confidentiality understanding by the recipient
thereof.
21. Surrender; Abandoned Property.
(a) Subject to the terms of Sections 9(b), 12(a) and 13(b), at the
expiration or termination of this lease, Tenant promptly shall yield up in the
same condition, order and repair in which they are required to be kept
throughout the Term, the Premises and all improvements thereto, and all fixtures
and equipment servicing the Building, ordinary wear and tear excepted.
(b) Upon or prior to the expiration or termination of this lease, Tenant
shall remove any personal property from tile Property Any personal property
remaining thereafter shall be deemed conclusively to have been abandoned, and
Landlord, at Tenant's expense, may remove, store, sell or
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otherwise dispose of such property in such manner as Landlord may see fit and/or
Landlord may retain such property as its property. If any part thereof shall be
sold, then Landlord may receive and retain the proceeds of such sale and apply
the same, at its option, against the expenses of tile sale, the cost of moving
and storage and any Rent due under this lease.
(c) If Tenant, or any person claiming through Tenant, shall continue to
occupy the Premises after tile expiration or termination of this lease or any
renewal thereof, such occupancy shall be deemed to be under a month-to-month
tenancy under the same terms and conditions set forth in this lease, except that
the monthly installment of the Minimum Annual Rent during such continued
occupancy shall be double the amount applicable to the last month of the Term.
Anything to the contrary notwithstanding, any holding over by Tenant without
Landlords prior written consent shall constitute a default hereunder and shall
be subject to all the remedies available to Landlord.
22. Curing Tenant's Defaults. If Tenant shall be in default in tile performance
of any of its obligations hereunder, Landlord, without any obligation to do so,
in addition to any other rights it may have in law or equity, may elect to cure
such default on behalf of Tenant after written notice (except in tile case of
emergency to Tenant. Tenant shall reimburse Landlord upon demand for any slims
paid or costs incurred by Landlord in curing such default, including interest
thereon from the respective dates of Landlord's incurring such costs. which sums
and costs together with interest shall be deemed additional rent.
23. Defaults - Remedies
(a) Defaults. It shall be an event of default:
(i) If Tenant does not pay in full when due any and all Rent',
(ii) If Tenant fails to observe and perform or otherwise breaches any
other provision of this lease, and such failure or breach continues for ten
days after written notice from Landlord.
(iii) If Tenant abandons the Premises, which shall be conclusively
presumed if the Premises remain unoccupied for more than 30 consecutive
days, or removes or attempts to remove Tenant's goods or property other
than in the ordinary course of business; or
(iv) If Tenant becomes insolvent or bankrupt in any sense or makes a
general assignment for the benefit of creditors or offers a settlement to
creditors, or if a petition in bankruptcy or for reorganization or for an
arrangement with creditors under any federal or state law is filed by or
against Tenant, or a bill in equity or other proceeding for the appointment
of a receiver for any of Tenant's assets is commenced, or if any of the
real or personal property of Tenant shall be levied upon; provided,
however, that any proceeding brought by anyone other than Landlord or
Tenant under any bankruptcy, insolvency, receivership or similar law shall
not constitute a default until such proceeding has continued unstayed for
more than 60 consecutive days.
(b) Remedies. Then, and in any such event, Landlord shall have the
following rights:
(i) To charge a late payment fee equal to the greater of $100 or 5% of
any amount owed to Landlord pursuant to this lease which is not paid within
5 days after the due date.
(ii) To enter and repossess the Premises, by breaking open locked
doors if necessary. and remove all persons and all or any property
therefrom, by action at law or otherwise, without
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being liable for prosecution or damages therefor, and Landlord may, at
Landlords option, make alterations and repairs in order to relet the
Premises and relet all or any part(s) of the Premises for Tenant's account.
Tenant agrees to pay to Landlord on demand any deficiency that may arise by
reason of such reletting. In the event of reletting without termination of
this lease, Landlord may at any time thereafter elect to terminate this
lease for such previous breach.
(iii) To accelerate the whole or any part of the Rent for the balance
of the Term, and declare the same to be immediately due and payable,
(iv) To terminate this lease and the Term without any right on the
part of Tenant to save the forfeiture by payment of any' sum due or by
other performance of any condition, term or covenant broken.
(c) Grace Period. Notwithstanding anything hereinabove stated, neither
party will exercise any available right because of any default of the other,
except those remedies contained in subsection (b)(i) of this Section, unless
such parry shall have first given 10 days written notice thereof to the
defaulting party, and the defaulting party shall have failed to cure the default
within such period; provided, however, that:
(i) No such notice shall be required if Tenant fails to comply with
the provisions of Sections 10 or 20(a), in the case of emergency as set
forth in Section 22 or in the event of any default enumerated in
subsections (a)(iii) and (iv) of this Section.
(ii) Landlord shall not be required to give such 10 days notice more
than 2 times during any 12 month period.
(iii) If the default consists of something other than the failure to
pay money which cannot reasonably be cured within 10 days, neither party
will exercise any right if the defaulting party begins to cure the default
within tile 10 days and continues actively and diligently in good faith to
completely cure said default.
(iv) Tenant agrees that any notice given by Landlord pursuant to this
Section which is served in compliance with Section 27 shall be adequate
notice for the purpose of Landlord's exercise of any available remedies.
(d) Non-Waiver; Non-Exclusive. No waiver by Landlord of *any breach by
Tenant shall be a waiver of any subsequent breach, nor shall any forbearance by
Landlord to seek a remedy for any breach by Tenant be a waiver by Landlord of
any rights and remedies with respect to such or any subsequent breach. Efforts
by Landlord to mitigate the damages caused by Tenant's default shall not
constitute a waiver of Landlords right to recover damages hereunder. No right or
remedy herein conferred upon or reserved to Landlord is intended to be exclusive
of any other right or remedy provided herein or by law, but each shall be
cumulative and in addition to every other right or remedy given herein or now or
hereafter existing at law or in equity. No payment by Tenant or receipt or
acceptance by Landlord of a lesser amount than the total amount due Landlord
under this lease shall be deemed to be other than on account, nor shall any
endorsement or statement on any check or payment be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlords right to recover the balance of Rent due. or Landlords right to pursue
any other available remedy.
(e) Costs and Attorneys' Fees. If either party commences an action against
the other party arising out of or in connection with this lease, the prevailing
party shall be entitled to have and recover
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from the losing party attorneys' fees, costs of suit, investigation expenses and
discovery costs, including costs of appeal.
24. Representation of Tenant. Tenant represents to Landlord and agrees that:
(a) The word "Tenant" as used herein includes the Tenant named above as
well as its successors and assigns, each of which shall be tinder the same
obligations and liabilities and each of which shall have the same rights,
privileges and powers as it would have possessed had it originally signed this
lease as Tenant. Each and every of the persons named above as Tenant shall be
bound jointly and severally by the terms, covenants and agreements contained
herein. However, no such rights, privileges or powers shall inure to the benefit
of any assignee of Tenant immediate or remote, unless Tenant has complied with
the terms of Section 18 and (lie assignment to such assignee is permitted or has
been approved in writing by Landlord. Any notice required or Permitted by tile
terms of this lease may be given by or to any one of the persons named above as
Tenant, and shall have the same force and effect as if given by or to all
thereof.
(b) If Tenant is a corporation, partnership or any other form of business
association or entity, Tenant is duly formed and in good standing, and has full
corporate or partnership power and authority, as the case may be, to enter into
this lease and has taken all corporate or partnership action, as the case may
be, necessary to carry out the transaction contemplated herein, so that when
executed, this lease constitutes a valid and binding obligation enforceable in
accordance with its terms. Tenant shall provide Landlord with corporate
resolutions or other proof in a form acceptable to Landlord, authorizing the
execution of -this lease at the time of such execution.
25. Liability of Landlord. The word "Landlord" as used herein includes the
Landlord named above as well as its successors and assigns, each of which shall
have the same rights, remedies, powers, authorities and privileges as it would
have had it originally signed this lease as Landlord. Any such person or entity,
whether or not named herein, shall have no liability hereunder after it ceases
to hold title to the Premises except for obligations already accrued (and, as to
any unapplied portion of Tenant's Security Deposit, Landlord shall be relieved
of all liability therefor upon transfer of such portion to its successor in
interest) and Tenant shall I look solely to Landlords successor in interest for
the performance of the covenants and obligations of the Landlord hereunder which
thereafter shall accrue. Neither Landlord nor any principal of Landlord nor any
owner of the Property, whether disclosed or undisclosed, shall have any personal
liability with respect to any of the provisions of this lease or the Premises,
and if Landlord is in breach or default with respect to Landlord's obligations
under this lease or otherwise, Tenant shall look solely to the equity of
Landlord in the Property for the satisfaction of Tenant's claims.
Notwithstanding the foregoing, no mortgagee or ground lessor succeeding to the
interest of Landlord hereunder (either in terms of ownership or possessory
rights) shall be (a) liable for any previous act or omission of a prior
landlord, (b) subject to any rental offsets or defenses against a prior landlord
or (c) bound by any amendment of this lease made without its written consent, or
by payment by Tenant of Minimum Annual Rent in advance in excess of one monthly
installment.
26. Interpretation; Definitions
(a) Captions. The captions in this lease are for convenience only and are not a
part of this lease and do not in any way define, limit, describe or amplify the
terms and provisions of this lease or the scope or intent thereof.
(b) Entire Agreement This lease represents the entire agreement between the
parties hereto and there are no collateral or oral agreements or understandings
between Landlord and Tenant with respect to the Premises or the Property. No
rights, easements or licenses are acquired in the Property or
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any land adjacent to the Property by Tenant by implication or otherwise except
as expressly set forth in the provisions of this lease. This lease shall not be
modified in any manner except by an instrument in writing executed by the
parties. The masculine (or neuter) pronoun and the singular number shall include
the masculine, feminine and neuter genders and the singular and plural number.
The word "including" followed by any specific item(s) is deemed to refer to
examples rather than to be words of limitation Both parties having participated
fully and equally in the negotiation and preparation of this lease, this lease
shall not be more strictly construed, nor any ambiguities in this lease
resolved, against either Landlord or Tenant.
(c) Covenants. Each covenant, agreement, obligation, term, condition or
other provision herein ` contained shall be deemed and construed as a separate
and independent covenant of the party bound by, undertaking or making the same,
not dependent on any other provision of this lease unless otherwise expressly
provided. All of the terms and conditions set forth in this lease shall apply
throughout the Term unless otherwise expressly set forth herein.
(d) Interest. Wherever interest is required to be paid hereunder, such
interest shall be at the highest rate permitted under law but not in excess of
15% per annum.
(e) Severability; Governing Law. If any provisions of this lease shall be
declared unenforceable in any respect, such unenforceability shall not affect
any other provision of this lease, and each such provision shall be deemed to be
modified, if possible, in such a manner as to render it enforceable and to
preserve to the extent possible the intent of the parties as set forth herein.
This lease shall be construed and enforced in accordance with the laws of the
state in which the Property is located.
(f) "Mortgage" and "Mortgagee." The word "mortgage" as used herein includes
any lien or encumbrance on the Premises or (lie Property or on any part of or
interest in or appurtenance to any of the foregoing, including without
limitation any ground rent or ground lease if Landlord's interest is or becomes
a leasehold estate. The word "mortgagee" as used herein includes (lie holder of
any mortgage, including any ground lessor if Landlords interest is or becomes a
leasehold estate. Wherever any right is given to a mortgagee, that right may be
exercised on behalf of such mortgagee by any representative or servicing agent
of such mortgagee.
(g) "Person." The word "person" is used herein to include a natural person,
a partnership, a corporation, an association and any other form of business
association or entity.
(h) Proportionate Share. At any time or times, upon request of Landlord or
of any tenant of the Building. the method for allocating Tenant's Proportionate
Share of any Impositions, cost, charge, rent, expense or payment then or
thereafter payable shall be redetermined by an independent qualified expert. The
cost of such redetermination shall be borne by the tenants of the Building in
the same proportion as that determined by such expert for reallocation of said
relevant sum; except that if such redetermination is requested by a tenant, the
cost thereof shall be borne entirely by such tenant if the proportionate share
of said relevant Win allocable to such tenant as the result of such
redetermination shall not vary by at least 5% from the amount which would have
been allocable to such tenant in accordance with the percentage based on square
foot area.
27. Notices. Any notice or other communication tinder this lease shall be in
writing and addressed to Landlord or Tenant at their respective addresses
specified at the beginning of (his lease. except that after the Commencement
Date Tenant's address shall be at the Premises, (or to such other address as
either may designate by notice to the other) with a copy to any Mortgagee or
other party designated by Landlord. Each notice or other communication shall be
deemed given if sent by prepaid overnight delivery service or by certified mail,
return receipt requested, postage prepaid or in any other manner.
15
<PAGE>
with delivery in any case evidenced by a receipt, and shall be deemed received
on the day of actual receipt by the intended recipient or on tile business day
delivery is refused. Tile giving of notice by Landlords attorneys,
representatives and agents under this Section shall be deemed to be tile acts of
Landlord-, however, the foregoing provisions governing the date on which a
notice is deemed to have been received shall mean and refer to tile date on
which a party to this lease, and not its counsel or other recipient to which a
copy of the notice may be sent, is deemed to have received the notice.
28. Security Deposit. At the time of signing this lease, Tenant shall deposit
with Landlord the Security Deposit to be retained by Landlord as cash security
for the faithful performance and observance by Tenant of the provisions of this
lease. Tenant shall not be entitled to any interest whatever on the Security
Deposit. Landlord shall have the right to commingle the Security Deposit with
its other Rinds. Landlord may use the whole or any part of the Security Deposit
for the payment of any amount as to which Tenant is in default hereunder or to
compensate Landlord for any loss or damage it may suffer by reason of Tenant's
default under this lease. If Landlord uses all or any portion of the Security
Deposit as herein provided, within 10 days after written demand therefor, Tenant
shall pay Landlord cash in amount equal to that portion of the Security Deposit
used by Landlord. If within thirty days Tenant shall comply fully and faithfully
with all of tile provisions of this lease. tile Security Deposit shall be
returned to Tenant after the Expiration Date and surrender of the Premises to
Landlord.
16
<PAGE>
IN WITNESS WHEREOF, and in consideration of the mutual entry into this
lease and for other good and valuable consideration, and intending to be legally
bound, Landlord and Tenant have executed this lease.
Dated Signed: Landlord:
9/19/97 DANIS PROPERTIES LIMITED PARTNERSHIP
By: Danis Properties Co., Inc. - General
Partner
By:
------------------------------------------
Name:
Title:
Date signed: Tenant:
9/11/97 Production Resource Group, L.L.C.
Attest:
By:
- ----------------------------- ------------------------------------------
Name: Name:
Title: Title:
17
<PAGE>
RIDER
29. Randon Gas. Radon is a naturally occurring radioactive gas that, when it has
accumulated in a budding in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed federal and
state guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit.
30. Acknowledgement of Pending Sale. Landlord and Tenant acknowledge the
Property is under contract for sale to Liberty Property Limited Partnership.
Landlord intends to close the sale, including assignment of this Agreement of
Lease, on or about November 1, 1997.
31. Tenant Improvements. Landlord shall provide an allowance of two hundred
thousand dollars ( $200,000.00) for the construction of office space and other
basic improvements to the Property (the "Capital Improvement Allowance").
Landlord shall also provide an additional one hundred thousand dollars
($100,000.00) for further improvements to the Property (the " Tenant Improvement
Allowance"). Any portion of the Tenant Improvement Allowance which is used by
Tenant shall be amortized over the Term at an annual interest rate of ten
percent (10%) and paid to Landlord as additional rent. Any improvement cost
above the Capital Improvement Allowance and Tenant Improvement Allowance shall
be paid by Tenant. Landlord shall pay the cost of designing and permitting the
improvements, and all improvements require Landlord's prior written approval.
Tenant may use all of the electrical service currently serving the Premises.
Landlord shall bear the cost of constructing a demising wall separating the
Premises from the rest of the Budding, and shall have the Premises Broom swept
prior to Tenant's occupancy.
32. Expansion Option. Tenant shall have a right of first refusal to lease the
remaining 40,320 square feet of the Building (the `Expansion Premises). Landlord
shall notify Tenant when it is final negotiations with another party for the
Expansion Premises. Tenant shall have three (3) business days to respond to
Landlord with it's decision regarding the Expansion Premises. If Tenant elects
to lease the Expansion Premises all of the terms and conditions of this Lease
Agreement shall apply, including the payment of Minimum Annual Rent and Annual
Operating Expenses which shall be immediately payable at the same rate per
square foot as on the existing Premises, and Tenant shall occupy the Expansion
Premises on a "As Is" basis. If Tenant does not respond within the three (3) day
period, Tenant shall have no further rights to the Expansion Premises and
Landlord shall be able to lease the Expansion Premises to a third party.
33. Parking. Tenant shall have exclusive use of sixty (60) non-handicapped
parking spaces in the front of the building. Landlord shall have the right to
designate parking spaces.
34. Subordination. Tenant's subordination under Section 19.(a) of this lease is
conditioned in the requirement that any mortgagee, notwithstanding the
foreclosure of it's mortgage, shall not disturb Tenant's use and occupancy of
the Premises as long as Tenant is not in default of hereunder.
R-1
<PAGE>
EXHIBIT "B"
LEASE COMMENCEMENT CERTIFICATE
The undersigned, as duly authorized officers and/or representatives of
LIBERTY PROPERTY LIMITED PARTNERSHIP ("Landlord') and
___________________________ ("Tenant"), hereby agree as follows with respect to
the Lease Agreement (the "Lease") between them for premises located at (the
"Premises"):
1. Date of Lease: _______________________, 19__
2. Commencement Date:__________________, 19__
3. Expiration Date:_______________________, 19__
4. Rent and operating expenses due on or before the Commencement Date for
the period from the Commencement Date until the first day of the next calendar
month (Not applicable if the Commencement Date is the first day of the calendar
month):
Apportioned Minimum Rent: $__________
Apportioned Operating Expenses: $__________
Florida Sales Tax: $__________
TOTAL: $__________
Thereafter regular monthly payments due in the following amounts until
adjusted in accordance with the Lease:
Monthly Rent Installment: $
Monthly Operating Payment: $
Florida Sales Tax: $
TOTAL MONTHLY PAYMENT: $
5. Tenant certifies that, as of the date hereof, (a) the Lease is in full
force and effect and has not been amended, (b) Tenant has no offsets or defenses
against any provision of the Lease and (c) Landlord has substantially completed
any improvements to be performed by Landlord in accordance with the Lease,
excepting the Punch List items set forth on the Schedule attached hereto and
initialed by Landlord and Tenant, if any.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant, intending to be legally bound,
have executed this Certificate as of ______________, 19__.
LANDLORD:
LIBERTY PROPERTY LIMITED PARTNERSHIP
By: Liberty Property Trust, Sole General
Partner
By:
-----------------------------------------
Name:
Title:
TENANT:
--------------------------------------------
Witness/Attest:
By:
- ------------------------------ ------------------------------------------
Name:
Title:
3
<PAGE>
EXHIBIT "C"
BUILDING RULES
1. As stated in the lease, Tenant shall not use the Premises as a "place of
public accommodation" as defined in the Americans with Disabilities Act of 1990,
which identifies the following categories into one or more of which a business
must fall to be a "place of public accommodation":
a. Places of lodging (examples: hotel, motel)
b. Establishments serving food or drink (examples: bar, restaurant)
c. Places of exhibition or entertainment (examples: motion picture
house, theater, stadium, concert hall)
d. Places of public gathering (examples: auditorium, convention
center, lecture hall)
e. Sales or rental establishments (examples: bakery, grocery store,
hardware store, shopping center)
f. Service establishments (examples: bank, Laundromat barber shop,
funeral parlor. hospital, gas station, business offices such as
lawyer, accountant, healthcare provider or insurance office)
g. Stations used for specified public transportation (examples: bus
terminal, depot)
h. Places of public display or collection (examples: museum,
library, gallery)
i. Places of recreation (examples: park. zoo, amusement park)
j. Places of education (examples: nursery, elementary, secondary,
private or other undergraduate or postgraduate school)
k. Social service center establishments (examples: day-care center,
senior citizen center, homeless shelter, food bank, adoption
agency)
l. Places of exercise or recreation (examples: gym, health spa,
bowling alley, golf course)
2. Any sidewalks, lobbies, passages and stairways shall not be obstructed
or used by Tenant for any purpose other than ingress and egress from and to the
Premises. Landlord shall in all cases retain the right to control or prevent
access by all persons whose presence, in the judgment, of Landlord, shall be
prejudicial to the safety, peace or character of the Property.
3. The toilet rooms, toilets, urinals, sinks, faucets, plumbing or other
service apparatus of any kind shall not be used for any purposes other than
those for which they were
C-1
<PAGE>
installed, and no sweepings, rubbish, rags, ashes, chemicals or other refuse or
injurious substances shall be placed therein or used in connection therewith or
left in any lobbies, passages, elevators or stairways.
4. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.
No person shall go on the roof without Landlord's permission.
5. 5. Skylights, windows, doors and transoms shall not be covered or
obstructed by Tenant, and Tenant shall not install any window covering which
would affect the exterior appearance of the Building, except as approved in
writing by Landlord. Tenant shall not remove, without Landlord! s prior written
consent, any shades, blinds or curtains in the Premises.
6. Without Landlord's prior written consent. Tenant shall not hang,
install, mount, suspend or attach anything from or to any sprinkler, plumbing,
utility or other lines. If Tenant hangs, installs, mounts, suspends or attaches
anything from or to any doors, windows, walls, floors or ceilings, Tenant shall
sparkle and sand all holes and repair any damage caused thereby or by the
removal thereof at or prior to the expiration or termination of the lease. If
Tenant elects to sea] the floor, Tenant shall seal the entire unfinished floor
area within the Premises. If Tenant elects to paint all or any portion of the
Premises, Tenant, prior to the termination of the lease, shall restore all or
such portion(s) of the Premises to the painted or unpainted condition thereof as
of the Commencement Date.
7. Tenant shall not change any locks nor place additional locks upon any
doors and shall surrender all keys and passes at the end of the Term.
8. Tenant shall not use nor keep in the Building any matter having an
offensive odor, nor explosive or highly flammable material, nor shall any
animals other than seeing eye dogs in the company of their masters be brought
into or kept in or about the Premises.
9. If Tenant desires to introduce electrical, signaling, telegraphic,
telephonic, protective alarm or other wires, apparatus or devices, Landlord
shall direct where and how the same are to be placed, and except as so directed,
no installation boring or cutting shall be permitted. Landlord shall have the
right to prevent and to cut off the transmission of excessive or dangerous
current of electricity or annoyances into or through the Building or the
Premises and to require the changing of wiring connections or layout at Tenant's
expense, to the extent that Landlord may deem necessary, and further to require
compliance with such reasonable rules as Landlord may establish relating
thereto, and in the event of non-compliance with the requirements or rules,
Landlord shall have the right immediately to cut wiring or to do what it
considers necessary to remove the danger, annoyance or electrical interference
with apparatus in any part of the Building. All wires installed by Tenant must
be clearly tagged at the distributing boards and junction boxes and elsewhere
where required by Landlord, with the number of the office to which said wires
lead, and the purpose for which the wires respectively are used, together with
the name of the concern, if any, operating same.
10. Tenant shall not place weights anywhere beyond the safe carrying
capacity of the Building.
C-2
<PAGE>
11. The use of rooms as sleeping quarters is strictly prohibited at all
times.
12. Tenant shall have the right, at Tenant's sole risk and responsibility,
to use its proportional share of the parking spaces at the Property as
reasonably determined by Landlord. Tenant shall comply with all parking
regulations promulgated by Landlord from time to time for the orderly use of the
vehicle parking areas, including without limitation the following:. Parking
shall be limited to automobiles, passenger or equivalent vans, motorcycles,
light four wheel pickup trucks and (in designated area ) bicycles. No vehicles
shall be left in the parking lot overnight. Parked vehicles shall not be used
for vending or any other business or other activity while parked in the parking
areas. Vehicles shall be parked only in striped parking spaces, except for
loading and unloading, which shall occur solely in zones marked for such
purpose, and be so conducted as to not unreasonably interfere with traffic flow
within the Property or with loading and unloading areas of other tenants.
Employee and tenant vehicles shall not be parked in spaces marked for visitor
parking or other specific use. All vehicles entering or parking in the parking
areas shall do so at owner's sole risk, and Landlord assumes no responsibility
for any damage, destruction, vandalism or theft. Tenant shall cooperate with
Landlord in any measures implemented by Landlord to control abuse of the parking
areas, including without limitation access control programs, tenant and guest
vehicle identification programs, and validated parking programs, provided that
no such validated parking program shall result in Tenant being charged for
spaces to which it has a right to free use under its lease. Each vehicle owner
shall promptly respond to any sounding vehicle alarm or horn, and failure to do
so may result in temporary or permanent exclusion of such vehicle from the
parking areas. Any vehicle which violates the parking regulations may be cited,
towed at the expense of the owner, temporarily or permanently excluded from the
parking areas, or subject to other lawful consequence.
13. If Landlord designates the Building as a non-smoking building and
provides outdoor smoking area(s), Tenant and its Agents shall not smoke in the
Building.
14. If at Tenant's request, Landlord consents to Tenant having a dumpster
at the Property, Tenant shall locate the dumpster in the area designated by
Landlord and shall keep and maintain the dumpster clean and painted with lids
and doors in good working order and, at Landlords request, locked.
15. Tenant shall provide Landlord with a written identification of any
vendors engaged by Tenant to perform services for Tenant at the Premises
(examples: cleaners, security guards/monitors, trash haulers, telecommunications
installers/maintenance).
16. Tenant shall cause all of Tenant's Agents to comply with these Building
Rules.
17. Landlord reserves the right to rescind, suspend or modify any rules or
regulations and to make such other rules and regulations as, in Landlord's
reasonable judgment, may from time to time be needed for the safety, care,
maintenance, operation and cleanliness of the Property. Notice of any action by
Landlord referred to in this paragraph, given to Tenant, shall have the same
force and effect as if originally made a part of the foregoing lease. New rules
or regulations will not, however, be unreasonably i inconsistent with the proper
and rightful enjoyment of the Premises by Tenant under the lease.
C-3
<PAGE>
18. These Building Rules are not intended to give Tenant any rights or
claims in the event that Landlord does not enforce any of them against any other
tenants or if Landlord does not have the right to enforce them against any other
tenants and such nonenforcement will not constitute a waiver as to Tenant.
19. Tenant shall be deemed to have read these Building Rules and to have
agreed to abide by them as a condition to Tenant's occupancy of the Premises.
C-4
<PAGE>
EXHIBIT "D"
TENANT ESTOPPEL CERTIFICATE
Please refer to the documents described in Schedule I hereto, (the "`Lease
Documents") including the "Lease" therein described-, all defined terms in this
Certificate shall have the same meanings as set forth in the Lease unless
otherwise expressly set forth herein.. The undersigned Tenant hereby certifies
that it is the tenant under the Lease. Tenant hereby further acknowledges that
it has been advised that the Lease may be collaterally assigned in connection
with a proposed financing secured by the Property and/or may be assigned in
connection with a sale of the Property and certifies both to Landlord and to any
and all prospective mortgagees and purchasers of the Property, including any
trustee on behalf of any holders of notes or other similar instruments, any
holders from time to time of such notes or other instruments, and their
respective successors and assigns (the "Mortgagees") that as of the date hereof.
1. The information set forth in attached Schedule I is true and correct.
2. Tenant is in occupancy of the Premises and the Lease is in full force
and effect, and, except by such writings as are identified on Schedule 1, has
not been modified, assigned, supplemented or amended since its original
execution, nor are there any other agreements between Landlord and Tenant
concerning the Premises, whether oral or written.
3. All conditions and agreements under the Lease to be satisfied or
performed by Landlord have been satisfied and performed.
4. Tenant is not in default under the Lease Documents, Tenant has not
received any notice of default under the Lease Documents, and, to Tenant's
knowledge, there are no events which have occurred that, with the giving of
notice and/or the passage of time, would result in a default by Tenant under the
Lease Documents.
5. Tenant has not paid any Rent due under the Lease more than 30 days in
advance of the date due under the Lease -and Tenant has no rights of setoff,
counterclaim, concession or other rights of diminution of any Rent due and
payable under the Lease except as set forth in Schedule 1.
6. To Tenant's knowledge, there are no uncured defaults on the part of
Landlord under the Lease Documents, Tenant has not sent any notice of default
under the Lease Documents to Landlord, and there are no events which have
occurred that, with the giving of notice and/or the passage of time, would
result in a default by Landlord thereunder, and that at the present time Tenant
has no claim against Landlord under the Lease Documents.
7. Except as expressly set forth in Part G of Schedule 1, there are no
provisions for any, and Tenant has no, options with respect to the Premises or
all or any portion of the Property.
8. Except as set forth on Part M of Schedule 1, no action, voluntary or
involuntary, is pending against Tenant under federal or state bankruptcy or
insolvency law.
9. The undersigned has the authority to execute and deliver this
Certificate on behalf
D-1
<PAGE>
of Tenant and acknowledges that all Mortgagees will rely upon this Certificate
in purchasing the Property or extending credit to Landlord or its successors in
interest.
10. This Certificate shall be binding upon the successors, assigns and
representatives of Tenant and any party claiming through or under Tenant and
shall inure to the benefit of all Mortgagees.
IN WITNESS WHEREOF, Tenant has executed this Certificate this ___ day of
______, 19____.
-----------------------------------
Name of Tenant
By:
--------------------------------
Title:
-----------------------------
D-2
<PAGE>
SCHEDULE 1 TO TENANT ESTOPPEL CERTIFICATE
Lease Documents, Lease Terms and Current Status
A. Date of Lease:
B. Parties:
1. Landlord:
2. Tenant d/b/a:
C. Premises known as:
D. Modifications, Assignments, Supplements or Amendments to Lease:
E. Commencement Date:
F. Expiration of Current Term:
G. Options:
H. Security Deposit Paid to Landlord: $
I. Current Fixed Minimum Rent (Annualized): $
J. Current Additional Rent (and if applicable, Percentage Rent)
(Annualized): $
K. Current Total Rent: $
L. Square Feet Demised:
M. Tenant's Bankruptcy or other Insolvency Actions:
<PAGE>
Exhibit 12.1
Computation of Earnings to Fixed Charges Ratio
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
Year Endeds December 31, September 30,
---------------------------------------------------- -------------------------
1992 1993 1994 1995 1996 1996 1997
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense $ 103 $ 103 $ 279 $ 632 $ 1,292 $ 941 $ 2,322
Capitalized interest - - - 134 255 168 -
Amortization expense - - - - - - -
Interest portion of rent expense - - 103 104 224 141 280
-------- -------- -------- -------- ---------- ---------- ----------
Total fixed charges $ 103 $ 103 $ 382 $ 870 $ 1,771 $1,250 $ 2,602
========= ========= ========= ========= ============ ============= ============
Earnings:
Pre-tax income (loss) $ 42 $1,659 $2,541 $5,019 $ 6,801(2) $4,523 $(1,443)
Fixed Charges 103 103 382 870 1,771 1,250 2,602
Capitalized interest - - - (134) (255) (168) -
-------- -------- -------- -------- ---------- ---------- ----------
Total earnings $ 145 $1,762 $2,923 $5,755 $ 8,317 $5,605 $ 1,159
========= ========= ========= ========= ============ ============= ============
Ratio of earnings to fixed charges 1.4x 17.1x 7.7x 6.6x 4.7x 4.5x -(3)
========= ========= ========= ========= ============ ============= ============
<CAPTION>
Pro Forma (1)
-----------------------------------------
Year Ended Nine Months Twelve Months
December Ended Ended
31, September 30, September 30,
------------ --------------- ------------
1996 1997 1997
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
Fixed charges:
Interest expense $12,022 $ 8,987 $11,991
Capitalized interest 255 - 87
Amortization expense 370 278 370
Interest portion of rent expense 673 602 772
---------- ------------ ---------
Total fixed charges $13,320 $ 9,867 $13,220
=========== ============= =========
Earnings:
Pre-tax income (loss) $ 189 $(1,571) $ (561)
Fixed Charges 13,320 9,867 13,220
Capitalized interest (255) - (87)
---------- ------------ ---------
Total earnings $13,254 $ 8,296 $12,572
=========== ============ ==========
=========== ============= ===========
Ratio of earnings to fixed charges --(4) -(5) -(6)
=========== ============= ===========
</TABLE>
(1) Adjusted to give effect to the Transactions as if the Transactions had
occurred at the beginning of the period presented.
(2) Adjusted to exclude writedown of $495,000 to the carrying value of the
Company's former principal fabrication facility.
(3) Earnings were insufficient to cover fixed charges by approximately $1.4
million.
(4) Earnings were insufficient to cover fixed charges by approximately $66,000
(5) Earnings were insufficient to cover fixed charges by approximately $1.6
million.
(6) Earnings were insufficient to cover fixed charges by approximately
$648,000.
<PAGE>
SUBSIDIARIES OF PRODUCTION RESOURCE GROUP, L.L.C.
1. PRG Finance Corporation, a Delaware corporation
2. PRG Planning & Development, L.L.C., a Delaware limited liability company
3. ECTS, A Scenic Technology Company, Inc.
4. Showpay, L.L.C., a Delaware limited liability company
5. Attraction Management LLC, a Delaware limited liability company
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts," "Summary
Consolidated Financial Data" and "Selected Consolidated Financial Data" and to
the use of our reports dated April 4,1997, relating to the consolidated
financial statements and schedule of Production Resource Group, L.L.C., and
September 19, 1997, relating to the combined financial statements of Bash
Theatrical Lighting, Inc. and Affiliates, included in the Registration Statement
(Form S-4) and related Prospectus of Production Resource Group, L.L.C. for the
registration of $100,000,000 of its 11.5% Senior Subordinated Notes due 2008.
/s/ Ernst & Young LLP
-----------------------
Ernst & Young LLP
New York, New York
February 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS OF PRODUCTION RESOURCE GROUP, L.L.C. AS OF SEPTEMBER 30, 1997 AND
DECEMBER 31, 1996 AND THE RELATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001055417
<NAME> PRODUCTION RESOURCE GROUP, L.L.C.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
<CASH> 3,010 5,186
<SECURITIES> 0 0
<RECEIVABLES> 11,110 14,711
<ALLOWANCES> 323 647
<INVENTORY> 3,346 4,670
<CURRENT-ASSETS> 17,960 25,722
<PP&E> 39,715 57,794
<DEPRECIATION> 8,526 14,574
<TOTAL-ASSETS> 51,995 88,400
<CURRENT-LIABILITIES> 18,827 10,893
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 14,398 8,499
<TOTAL-LIABILITY-AND-EQUITY> 51,995 88,400
<SALES> 62,506 69,831
<TOTAL-REVENUES> 62,506 69,831
<CGS> 45,150 55,013
<TOTAL-COSTS> 54,541 69,028
<OTHER-EXPENSES> 495 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,292 2,322
<INCOME-PRETAX> 6,306 (1,443)
<INCOME-TAX> 206 298
<INCOME-CONTINUING> 6,100 (1,741)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 (614)
<CHANGES> 0 0
<NET-INCOME> 6,100 (2,355)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY FOR
PRODUCTION RESOURCE GROUP, L.L.C.
PRG FINANCE CORPORATION
WITH RESPECT TO
11.50% SENIOR SUBORDINATED NOTES DUE 2008
----------------------
PURSUANT TO THE PROSPECTUS DATED ____________, 1998
----------------------
This form or one substantially equivalent hereto must be used by a holder
of the 11.50% Senior Subordinated Notes Due 2008 (the "Old Notes") of Production
Resource Group, L.L.C., a Delaware limited liability company (the "Company") and
PRG Finance Corporation, a Delaware corporation ("Finance Corp.", together with
the Company, the "Issuers") to accept the Issuers' Exchange Offer made pursuant
to the Prospectus, dated February __, 1998 (the "Prospectus"), and the related
Letter of Transmittal (the "Letter of Transmittal") if certificates for the Old
Notes are not immediately available or if the procedure for book-entry transfer
cannot be completed on a timely basis or time will not permit all required
documents to reach First Union National Bank (the "Exchange Agent") prior to
5:00 P.M., New York City time, on the Expiration Date of the Exchange Offer.
This Notice of Guaranteed Delivery may be delivered or transmitted by facsimile
transmission, mail or hand delivery to the Exchange Agent as set forth below. In
addition, in order to utilize the guaranteed delivery procedure to tender Old
Notes pursuant to the Exchange Offer, a completed, signed and dated Letter of
Transmittal (or facsimile thereof) must also be received by the Exchange Agent
prior to 5:00 P.M., New York City time, on the Expiration Date. Capitalized
terms not defined herein have the respective meanings given to them in the
Prospectus or the Letter or Transmittal.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ________________, 1998,
UNLESS THE EXCHANGE OFFER IS EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
To: First Union National Bank
By Mail: By Hand or Overnight Courier:
First Union National Bank First Union National Bank
Corporate Trust Operations Corporate Trust Operations
1525 West W.T. Harris Blvd. 1525 West W.T Harris Blvd.
1
<PAGE>
Charlotte, N.C. 28288-1153 Charlotte, N.C. 28288-1153
By Facsimile (For Eligible Institutions Only):
(704) 590-7628
Confirm by Telephone
(704) 590-7408
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE,
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company upon the terms and
conditions set forth in the Prospectus and the related Letter of Transmittal,
receipt of which is hereby acknowledged, the aggregate principal amount of Old
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<CAPTION>
- -------------------------------------------- ---------------- ----------------------------------------------
Name(s) and Address(es) of Holder(s) Certificate Aggregate Principal Amount of Old Notes
(Please fill in, if blank) Number(s) Tendered (if less than all)**
- -------------------------------------------- ---------------- ----------------------------------------------
<S> <C> <C>
- -------------------------------------------- ---------------- ----------------------------------------------
- -------------------------------------------- ---------------- ----------------------------------------------
- -------------------------------------------- ---------------- ----------------------------------------------
- -------------------------------------------- ---------------- ----------------------------------------------
- -------------------------------------------- ---------------- ----------------------------------------------
- -------------------------------------------- ---------------- ----------------------------------------------
Total Principal Amount of Old Notes
Tendered
- ------------------------------------------------------------- ----------------------------------------------
</TABLE>
2
<PAGE>
If Old Notes will be delivered by book-entry transfer to The Depository
Trust Company, provide account number. Account Number:
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
X Date:
--------------------------------------- ------------------------------
X Date:
--------------------------------------- ------------------------------
SIGNATURE(S) OF OWNER OR AUTHORIZED SIGNATORY
This Notice of Guaranteed Delivery must be signed by the holder(s) of Old
Notes exactly as the name(s) of the holder(s) appear(s) on the certificate(s)
for the Old Notes or by any person(s) authorized to become (a) holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, such person must provide the following information.
Name(s): Address:
------------------------------- -----------------------------
(Please Print) (Include Zip Code)
Capacity: Telephone Number:
------------------------------ --------------------
(Include Area Code)
- --------------------------------------------------------------------------------
THE ACCOMPANYING GUARANTEE MUST BE COMPLETED.
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office correspondent in the United
States or any "eligible guarantor institution" within the meaning of Rule
17Ad-15 of the Securities Exchange Act of 1934, as amended, hereby (a)
represents that each holder of Old Notes on whose behalf this tender is being
made "own(s)" the Old Notes covered hereby within the meaning of Rule 14e-4
under the Securities Exchange Act of 1934, as amended, (b) represents that such
tender of Old Notes complies with Rule 14e-4, and (c) guarantees to deliver to
the Exchange Agent, at its address set forth above, the Old Notes described
above, in proper form for transfer (or confirmation of the book-entry transfer
of such Old Notes into the Exchange Agent's account at The Depositary Trust
Company, pursuant to the procedure for book-entry transfer set forth in the
Prospectus), together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, and
any other documents required by the Letter of Transmittal by 5:00 p.m., New York
City time, within five New York Stock Exchange trading days following the
Expiration Date.
The undersigned acknowledges that it must deliver the Letter of Transmittal
and Old Notes tendered hereby to the Exchange Agent within the time period set
forth above and that failure to do so could result in financial loss to the
undersigned.
Name of Firm:
-------------------------------------------------------------------
By:
-----------------------------------------------------------------------------
(Authorized Signature)
Name:
---------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Telephone Number:
---------------------------------------------------------------
(Include Area Code)
Date:
---------------------------------------------------------------------------
DO NOT SEND OLD NOTES WITH THIS FORM, ACTUAL SURRENDER OF OLD NOTES MUST BE
MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
INSTRUCTIONS
1. Delivery of this Notice of Guaranteed Delivery.
4
<PAGE>
A properly completed and duly executed copy of this Notice of Guaranteed
Delivery and any other documents required by this Notice of Guaranteed Delivery
must be received by the Exchange Agent at its address set forth herein prior to
the Expiration Date. The method of delivery of this Notice of Guaranteed
Delivery and any other required documents to the Exchange Agent is at the
election and sole risk of the holder, and the delivery will be deemed made only
when actually received by the Exchange Agent. If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. As an
alternative to delivery by mail, the holders may wish to consider using an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery.
2. Signatures on this Notice of Guaranteed Delivery.
If this Notice of Guaranteed Delivery is signed by the registered holder(s)
of the Notes referred to herein, the signature must correspond with the name(s)
written on the face of the Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Notes, the signature must correspond with the name
shown on the security position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Notes or signed as the name of the participant shown on the Book-Entry
Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies.
Questions and requests for assistance and requests for additional copies of
the Prospectus may be directed to the Exchange Agent at the address specified in
the Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
5
