<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1998.
REGISTRATION NO.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------------------
LIBERTY GROUP PUBLISHING, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2711 36-4197635
(State or other jurisdiction of (Primary Standard Industrial Classification (I.R.S. Employer Identification
incorporation or organization) Code Number) No.)
</TABLE>
3000 DUNDEE ROAD, SUITE 203
NORTHBROOK, ILLINOIS 60062
(847)272-2244
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------------
KENNETH L. SEROTA
LIBERTY GROUP PUBLISHING, INC.
3000 DUNDEE ROAD, SUITE 203
NORTHBROOK, ILLINOIS 60062
(847)272-2244
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
SCOTT J. DAVIS, ESQ.
MAYER, BROWN & PLATT
190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603
(312)782-0600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER UNIT OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
14 3/4% Senior Redeemable
Exchangeable Cumulative
Preferred Stock......... 1,800,000 shares 100% $45,000,000 $13,275
- ------------------------------------------------------------------------------------------------------------------
14 3/4% Subordinated
Exchange Debentures due
2010(2)................. $45,000,000 N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------
11 5/8% New Senior
Discount Debentures due
2009.................... $89,000,000 100% $89,000,000 $26,255
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated pursuant to Rule 457(f) under the Securities Act of 1933, as
amended, upon the basis of the book value of the securities to be canceled
in the exchange.
(2) Issuable at the option of the Registrant in exchange for all the outstanding
shares of 14 3/4% New Senior Redeemable Exchangeable Cumulative Preferred
Stock for which no separate consideration is required.
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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION FEBRUARY 26, 1998
PRELIMINARY PROSPECTUS
LIBERTY GROUP PUBLISHING, INC.
OFFER TO EXCHANGE NEW SHARES OF ITS 14 3/4% SENIOR REDEEMABLE EXCHANGEABLE
CUMULATIVE PREFERRED STOCK,
LIQUIDATION PREFERENCE OF $25 PER SHARE, AND ITS 11 5/8% NEW SENIOR DISCOUNT
DEBENTURES DUE 2009
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OF
ITS OUTSTANDING
14 3/4% SENIOR REDEEMABLE EXCHANGEABLE CUMULATIVE PREFERRED STOCK, LIQUIDATION
PREFERENCE OF $25 PER SHARE,
AND 11 5/8% SENIOR DISCOUNT DEBENTURES DUE 2009, RESPECTIVELY
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED.
Liberty Group Publishing, Inc., a Delaware corporation ("Holdings"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange one share of its 14 3/4% Senior Redeemable
Exchangeable Cumulative Preferred Stock, liquidation preference of $25 per share
(the "New Senior Preferred Stock"), which has been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this Prospectus is a part, for each outstanding
share of its 14 3/4% Senior Redeemable Exchangeable Cumulative Preferred Stock,
liquidation preference of $25 per share (the "Old Senior Preferred Stock" and,
together with the New Senior Preferred Stock, the "Holdings Senior Preferred
Stock"). The Old Senior Preferred Stock and the New Senior Preferred Stock
constitute the same class of preferred stock of Holdings. Accordingly, the
rights and preferences of the New Senior Preferred Stock are identical in all
material respects to the rights and preferences of the Old Senior Preferred
Stock except that the New Senior Preferred Stock has been registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof. See "The Exchange Offer" and "Description of New Senior Preferred
Stock."
In addition, Holdings hereby offers, 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 principal amount
at maturity of its 11 5/8% New Senior Discount Debentures due February 1, 2009
(the "New Debentures"), which have been registered under the Securities Act
pursuant to a Registration Statement of which this Prospectus is a part, for
each $1,000 principal amount at maturity of its 11 5/8% Senior Discount
Debentures due February 1, 2009 (the "Old Debentures" and, together with the New
Debentures, the "Debentures"). The form and terms of the New Debentures are
identical in all material respects to the form and terms of the Old Debentures
except that the New Debentures have been registered under the Securities Act
and, therefore, will not bear legends restricting the transfer thereof. The New
Debentures will evidence the same debt as the Old Debentures and will be
entitled to the benefits under the indenture governing the Old Debentures (the
"Indenture"). See "The Exchange Offer" and "Description of New Debentures." The
offering of the Old Senior Preferred Stock and Old Debentures is referred to
herein as the "Offering." The offering of New Senior Preferred Stock and New
Debentures are collectively referred to herein as the "Exchange Offer." The Old
Senior Preferred Stock and the Old Debentures are referred to herein
collectively as the "Old Securities." The New Senior Preferred Stock and the New
Debentures are referred to herein collectively as the "New Securities." The Old
Securities and the New Securities are collectively defined herein as the
"Securities." Contemporaneously with the Exchange Offer, Liberty Group
Operating, Inc. ("Liberty Group Operating") will commence an offer to exchange
pursuant to a separate prospectus $1,000 principal amount of its 9 3/8% New
Senior Subordinated Notes due 2008 (the "New Senior Subordinated Notes") for
each $1,000 principal amount of its 9 3/8% Senior Subordinated Notes due 2008
(the "Old Senior Subordinated Notes" and, together with the New Senior
Subordinated Notes, the "Senior Subordinated Notes").
Holdings will accept for exchange any and all Old Securities validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on ,
1998, unless extended (the "Expiration Date"). Tenders of Old Securities may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date. The Exchange Offer is subject to certain customary conditions. See "The
Exchange Offer."
The New Senior Preferred Stock will bear cumulative dividends at a rate of
14 3/4% per annum, payable quarterly on each February 1, May 1, August 1 and
November 1, commencing May 1, 1998. Dividends may be paid, at Holdings' option,
on any dividend payment date, either in cash or in additional shares of New
Senior Preferred Stock having a liquidation preference equal to the amount of
the dividend. The liquidation preference of the New Senior Preferred Stock will
be $25 per share. The New Senior Preferred Stock is redeemable at Holdings'
option, in whole or in part, at any time on or after February 1, 1999, at the
redemption prices set forth herein, plus accrued and unpaid dividends to the
date of redemption. Holdings is required, subject to certain conditions, to
redeem all of the New Senior Preferred Stock outstanding on February 1, 2010, at
a redemption price equal to 100% of the liquidation preference thereof, plus
accrued and unpaid dividends to the date of redemption. Upon the occurrence of a
Change of Control, Holdings will, subject to certain conditions, offer to
purchase all of the then outstanding shares of New Senior Preferred Stock at a
price equal to 100% of the liquidation preference thereof, plus accrued and
unpaid dividends to the purchase date. See "Description of New Senior Preferred
Stock."
Subject to certain conditions, the New Senior Preferred Stock is
exchangeable, on any dividend payment date, in whole but not in part, at the
option of Holdings for 14 3/4% Senior Subordinated Debentures due 2010
(including any securities paid in lieu of cash interest, as described herein,
the "Exchange Debentures"). Interest on the Exchange Debentures will be payable
at the rate of 14 3/4% per annum and will accrue from the date of issuance
thereof. Interest on the Exchange Debentures will be payable semi-annually in
cash, in arrears on each February 1 and August 1, commencing on the first such
date after the exchange of the Exchange Debentures for the New Senior Preferred
Stock. The Exchange Debentures mature on February 1, 2010 and are redeemable, at
the option of Holdings, in whole or in part, on and after February 1, 1999, at
the redemption prices set forth herein, plus accrued and unpaid interest to the
date of redemption. Upon the occurrence of a Change of Control, Holdings will,
subject to certain conditions, offer to purchase all of the then outstanding
shares of Exchange Debentures at a price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest to the repurchase date. See
"Description of Exchange Debentures."
(Cover continued on following page)
SEE "RISK FACTORS" COMMENCING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NEW
SECURITIES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
AND/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> 3
(Continuation of cover page)
The New Debentures will mature on February 1, 2009. The issue price of the Old
Debentures represented a yield to maturity of 11 5/8% (computed on a semi-annual
bond equivalent basis) calculated from January 27, 1998. The New Debentures will
accrete at a rate of 11 5/8%, compounded semi-annually, to an aggregate
principal amount at maturity of $89.0 million by February 1, 2003. Cash interest
will not accrue on the New Debentures prior to February 1, 2003. Commencing on
August 1, 2003, cash interest on the New Debentures will be payable at a rate of
11 5/8% per annum, semi-annually on February 1 and August 1 of each year. See
"Description of New Debentures."
The New Debentures will be redeemable at the option of Holdings, in whole or in
part, at any time on or after February 1, 2003, at the redemption prices set
forth herein, plus accrued and unpaid interest to the date of redemption. In
addition, at any time on or prior to February 1, 2001, Holdings may redeem up to
35% of the aggregate principal amount at maturity of the New Debentures
originally issued with the net cash proceeds of one or more Public Equity
Offerings (as defined herein) at a redemption price equal to 111.625% of the
Accreted Value (as defined herein) thereof plus accrued and unpaid interest to
the date of redemption; provided, that at least 65% of the original aggregate
principal amount at maturity of the New Debentures remains outstanding after
each such redemption. In the event of a Change of Control (as defined herein),
each Holder of New Debentures will have the right to require Holdings to
repurchase the New Debentures at a cash price equal to 101% of the Accreted
Value thereof plus accrued and unpaid interest to the date of repurchase in the
case of any such purchase prior to February 1, 2003, or 101% of the principal
amount at maturity thereof plus accrued and unpaid interest to the date of
repurchase in the case of any such purchase on or after February 1, 2003. See
"Description of New Debentures."
The Exchange Debentures and the New Debentures will be general unsecured
obligations of Holdings and will rank pari passu in right of payment with all
existing and future Senior Indebtedness of Holdings and will rank senior in
right of payment to all future subordinated Indebtedness of Holdings. The
Exchange Debentures and the New Debentures will be effectively subordinated to
all liabilities of Holdings' subsidiaries. As of February 24, 1998, on a pro
forma basis after giving effect to the Transactions (as defined herein),
Holdings would have had $89.0 million of Indebtedness outstanding and Holdings'
subsidiaries would have had $180.0 million of Indebtedness outstanding. See
"Capitalization."
The New Securities will initially be represented by a single permanent global
certificate in fully registered form and will be deposited with a custodian for,
and registered in the name of a nominee of, The Depositary Trust Company, New
York, New York ("DTC").
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in several no-action letters to third
parties, Holdings believes that each series of New Securities issued in exchange
for each series of Old Securities pursuant to the Exchange Offer may be offered
for resale, resold and otherwise transferred by any Holder (as defined herein)
thereof (other than (i) a broker-dealer who purchases such New Securities
directly from Holdings to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) any such Holder that is an
"affiliate" of Holdings, within the meaning of Rule 405 under the Securities
Act,) without compliance with the registration and prospectus delivery
provisions of the Securities Act; provided, that the Holder is acquiring such
New Securities in its ordinary course of business and is not participating, and
has no arrangement or understanding with any person to participate, in any
distribution of the New Securities. Persons wishing to exchange Old Securities
in the Exchange Offer must represent to Holdings that such conditions have been
met. However, any Holder who is an "affiliate" of Holdings or who tenders in the
Exchange Offer with the intention to participate or for the purpose of
participating, in a distribution of the New Securities cannot rely on the
interpretation by the staff of the Commission set forth in the above-referenced
no-action letters, and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or transfer of
the Old Securities. See "Risk Factors--Consequences to Non-Tendering Holders of
Old Securities." In addition, each broker-dealer that receives New Securities
for its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus, meeting the requirements under the Securities Act, in
connection with any resale of such New Securities. The Letter of Transmittal
states that by so acknowledging
i
<PAGE> 4
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 Securities received in
exchange for Old Securities where such Old Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities and not acquired directly from Holdings. Holdings has agreed that for
a period of 180 days 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." EXCEPT AS DESCRIBED IN THIS PARAGRAPH, THIS PROSPECTUS
MAY NOT BE USED FOR AN OFFER TO RESELL, RESALE OR OTHER TRANSFER OF NEW
SECURITIES.
The information contained in this Prospectus has been furnished by Holdings and
other sources believed by Holdings to be reliable. This Prospectus contains
summaries, believed to be accurate, of certain terms of certain documents but
reference is made to the actual documents, copies of which will be made
available upon request, for the complete information contained therein. All such
summaries are qualified in their entirety by this reference.
Prospective investors are not to construe the contents of this Prospectus as
investment, legal or tax advice. Each investor should consult its own counsel,
accountant and other advisors as to legal, tax, business, financial and related
aspects of a purchase of the New Securities. Holdings is not making any
representation to any offeree or purchaser of the New Securities regarding the
legality of an investment therein by such offeree or purchaser under appropriate
legal investment or similar laws.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS, INCLUDING THE "SUMMARY," "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS" SECTIONS,
CONTAINS "FORWARD-LOOKING STATEMENTS," WHICH CAN BE IDENTIFIED BY THE USE OF
FORWARD-LOOKING TERMINOLOGY, SUCH AS "MAY," "INTEND," "WILL," "EXPECT,"
"ANTICIPATE," "ESTIMATE," "SEEK," OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER
VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. IN PARTICULAR, ANY STATEMENTS,
EXPRESS OR IMPLIED, CONCERNING FUTURE OPERATING RESULTS OR THE ABILITY TO
GENERATE REVENUES, INCOME OR CASH FLOW TO SERVICE THE NEW SECURITIES ARE
FORWARD-LOOKING STATEMENTS. ALTHOUGH HOLDINGS BELIEVES THAT THE EXPECTATIONS
REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, THERE CAN BE NO
ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN ACCURATE. ALL FORWARD-
LOOKING STATEMENTS ARE EXPRESSLY QUALIFIED BY SUCH CAUTIONARY STATEMENTS AND
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, INCLUDING "RISK FACTORS."
ii
<PAGE> 5
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Unless the
context otherwise requires, the term "Company" or "Liberty Group Operating"
refers to the assets, liabilities and operations of the 166 local newspapers and
related publications (the "Local Publications") previously owned by subsidiaries
of American Publishing Company ("APC"), a wholly-owned subsidiary of Hollinger
International Inc. ("Hollinger"). Holdings' operations are limited to owning all
the outstanding stock of the Company. The historical financial data of the
Company described herein is identical to the historical financial data of
Holdings. The pro forma financial data described herein is that of Holdings.
Capitalized terms not defined in this "Summary" section have the meanings set
forth elsewhere in this Prospectus.
THE COMPANY
OVERVIEW
The Company is a leading U.S. publisher of local newspapers and related
publications that are the dominant source of local news and print advertising in
their markets. The Company owns and operates 166 publications in rural markets
in 11 states: Arizona, Arkansas, California, Illinois, Iowa, Kansas, Michigan,
Minnesota, Missouri, New York and Pennsylvania. The majority of the Company's
paid daily newspapers have been published for more than 100 years and are
typically the only paid daily newspapers of general circulation in their
respective rural markets. The Company's newspapers face limited competition as a
result of operating in markets that are distantly located from large
metropolitan areas and that can support only one primary newspaper. The Company
has increased revenues primarily by acquiring new publications and saturating
existing markets and has increased profitability by aggressively pursuing cost
reduction opportunities. Through a combination of these efforts, total revenues
have grown from $73.7 million in 1993 to $98.7 million in 1997, representing a
compounded annual growth rate of 7.6%. During the same period, EBITDA has
increased from $20.0 million in 1993 to $30.2 million in 1997, and EBITDA
margins have improved from 27.2% to 30.6%, respectively.
The Company's newspapers are comprised of 55 paid daily newspapers with
circulations ranging from approximately 1,100 to 12,500 and 34 paid non-daily
newspapers with circulations ranging from approximately 100 to 41,000. In
addition, the Company publishes 77 free circulation and "total market coverage"
("TMC") publications with limited or no news or editorial content. TMC
publications are distributed free of charge and generally provide 100%
penetration in their areas of distribution. The Company believes that its paid
newspapers, together with its free circulation and TMC publications, are an
effective medium for advertisers to reach substantially all of the households in
the markets served by the Company. All of the Local Publications are located in
small towns that are not suburbs of large cities and that typically have
populations of less than 20,000. The Company's publications focus on local
content, including coverage of local youth, high school and college sports, as
well as local business, politics, entertainment and cultural news. Each of the
Company's publications is specifically tailored to its market in order to
provide local content that radio, television and large metropolitan newspapers
are unable to provide on a cost-effective basis because of their broader
geographic coverage. The Local Publications also differentiate themselves from
other forms of media by providing a cost-effective medium for local advertisers
to target their customers.
The Company believes that its stable revenues and EBITDA are a result of
its geographic diversification, limited competition, low newsprint requirements
and cost of labor, strong base of local advertisers and lack of reliance on
volatile classified advertising. The regional clusters in which the Local
Publications are published are geographically diverse, with no single market
representing more than 3.5% of the Company's 1997 total revenues. The Local
Publications are well-positioned in their markets and face limited direct
competition for either local newspaper advertising or circulation revenue.
Start-ups of newspapers are rare and potential competitors face considerable
barriers to entry due to the Company's established franchises. The Company's
stable profitability is also a result of its favorable cost structure, which
includes low newsprint and labor cost as a percentage of total revenues. The
Company has relatively low exposure to fluctuations in newsprint prices due to
much lower page counts than large metropolitan newspapers, with newsprint
comprising 6.2% of the
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<PAGE> 6
Company's 1997 total revenues, compared to approximately 25% for large
metropolitan newspapers. The Company's cost of labor is also relatively low,
with employee salaries and benefits comprising 31.2% of the Company's 1997 total
revenues, compared to 40% to 45% for most large metropolitan newspapers. In
addition, advertising revenues at the Company's publications tend to be more
stable than the advertising revenues of large metropolitan newspapers because
the Company's publications rely primarily on local advertising rather than
national advertising, with national advertising comprising 0.9% and local
advertising comprising 41.3% of the Company's 1997 total revenues. Local
advertising is more stable than national advertising because local service
providers generally have fewer effective advertising vehicles from which to
choose. The Company also relies less than large metropolitan newspapers upon
classified advertising, particularly help wanted sections, which tend to be
cyclical.
The Company is led by the same experienced management team that had primary
responsibility for the acquisition activities and operations of the Local
Publications prior to the Acquisition (as defined herein). The five members of
the senior management team have, in the aggregate, over 125 years of experience
in the newspaper industry. The management team has a long history of integrating
acquisitions and improving the operations of both existing and acquired
publications. In addition, the Company retained all of the newspaper publishers
at the Local Publications. The local market knowledge of each newspaper's
publisher and his standing in the community are important in maintaining each
newspaper's local identity and in effectively serving its readership and
advertisers.
BUSINESS STRATEGY
The Company's business strategy is to continue to increase the
profitability of existing and acquired newspaper publications through market
leadership, aggressive cost controls, geographic clustering and revenue
enhancements. The Company attributes its strong historical results and its
positive outlook for growth and profitability to management's ability to
identify and complete acquisitions to which it has successfully applied the
following initiatives:
Market Leadership. The Company's newspapers generally have the largest
local news gathering resources in their markets and differentiate themselves
from large metropolitan newspapers by focusing on local information. The
Company's publications serve as the dominant medium for local print advertisers
to reach a specific audience and for readers interested in local events. The
Company believes that by supplementing its paid newspapers with TMC publications
it provides advertisers the ability to reach substantially all households in the
markets that they serve. The Company seeks to enhance reader loyalty through
excellent editorial content, including the proper mix of local and national news
to serve its markets effectively, and high-quality presentation. In addition,
because the Company's newspapers are generally produced on modern offset
presses, the Company has the ability to execute attractive layouts and color
enhancements that are designed to attract readers.
Aggressive Cost Controls. The Company implements uniform operating policies
and establishes strict cost controls at each of its publications. The Company
believes that operating margins are increased by implementing consistent
policies and standards, including specific guidelines for staffing levels,
employee productivity, automation of pre-press operations and regional
production operations. In addition, the Company utilizes specific guidelines
regarding product quality, distribution and customer service, marketing and
promotion, financial controls and purchasing. The Company establishes strict
cost controls to maintain low overhead expenses and continuously seeks to
identify lower cost alternatives for, and to improve utilization of, raw
materials, equipment and services, including newsprint, ink, office equipment
and supplies, production equipment and telecommunication services.
Geographic Clustering. The Company seeks to concentrate its ownership of
publications into regional clusters in order to realize operating efficiencies,
such as the consolidation and sharing of production and printing functions,
management personnel and other general and administrative costs. In addition,
clustering enables management to maximize revenues through cross-selling and
bundling advertising among contiguous newspaper markets. The Company believes
that its clustering strategy enables its publications to achieve higher
operating margins than they otherwise would achieve on a stand-alone basis. In
addition, clustering
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<PAGE> 7
spreads fixed costs, such as salaries, across publications, which allows the
Company to employ high-quality management that is shared among contiguous
markets.
Revenue Enhancements. The Company seeks to saturate its markets through
market layering, which focuses on introducing new products to increase
readership and advertising revenues. New products have historically included
both paid newspapers and free circulation publications, including TMC
publications. Other new products have included more frequent publication of
non-daily newspapers; shopping guides; and niche publications covering subjects,
such as children and parenting, employment, health, seniors and real estate,
that are of interest to residents of particular geographic areas and members of
particular demographic groups. The Company believes that its market layering
strategy has successfully increased its penetration, strengthened its market
presence and protected its publications from encroachment by competitors.
Attractive Acquisition Opportunities. The Company's low-cost operating
model, broad geographic coverage and successful acquisition history provide a
platform for the acquisition of local newspapers. The Company has a proven track
record of significantly improving the profitability of acquired operations by
implementing the same cost control systems and revenue enhancements that are in
place at existing properties. Favorable acquisition candidates would have some
or all of the following characteristics: a long publishing history, strong
readership and advertiser loyalty, editorial independence and potential
opportunities for revenue enhancements and increases in profitability through
cost reductions and synergies with the Company's existing operations. The
Company believes that the newspaper publishing industry is highly fragmented,
with over 7,500 paid daily and non-daily publications with circulation less than
25,000 operating in the United States today. The Company further believes that
competition is abating for these smaller publications as the historical
acquirors of such publications have grown too large for publications of this
size to have a meaningful impact on operations and have diverted resources
toward the acquisition of metropolitan newspapers.
THE ACQUISITION
On January 27, 1998 (the "Closing Date"), the Company acquired from
wholly-owned subsidiaries of Hollinger virtually all of the assets that were
used primarily in the business of publishing, marketing and distributing the
Local Publications (the "Acquisition") pursuant to the Asset Purchase Agreements
(as defined herein).
In consideration of the transfer of such assets, the Company paid Hollinger
the contractual purchase price of $309.1 million, plus interest of $1.1 million
calculated pursuant to the Asset Purchase Agreements, and received from
Hollinger a cash adjustment of $3.0 million, which resulted in a net cash
payment of $307.2 million (the "Purchase Price"), and assumed certain
liabilities related to the Local Publications. Of the total Purchase Price,
approximately $31.0 million represented consideration in connection with a Non-
Competition Agreement (the "Non-Competition Agreement") whereby Hollinger and
its affiliates have agreed not to compete with the Company's acquired newspaper
business. Also in connection with the Acquisition, the Company and American
Publishing Management Services, Inc., a wholly-owned subsidiary of Hollinger
("APMS"), entered into a Transitional Services Agreement (the "Transitional
Services Agreement") pursuant to which APMS has agreed to provide to the the
Company, at the Company's option, certain management and administrative services
to the Company at cost for a period of three years. See "The Acquisition--Other
Agreements Related to the Acquisition."
The Acquisition, including the payment of related fees and expenses, was
financed from (i) proceeds of $180.0 million from the issuance and sale of the
Old Senior Subordinated Notes; (ii) proceeds of $50.5 million from the issuance
and sale of the Old Debentures; (iii) proceeds of $45.0 million from the
issuance and sale of the Old Senior Preferred Stock; (iv) proceeds of $49.0
million from the issuance and sale of Holdings' Series B 10% Junior Redeemable
Cumulative Preferred Stock ("Holdings Junior Preferred Stock"); and (v) proceeds
of $8.0 million from the issuance and sale of shares of Holdings common stock
(together with the Acquisition and the establishment of the Revolving Credit
Facility (as defined herein), referred to herein as the "Transactions").
3
<PAGE> 8
Holdings was incorporated under the laws of the State of Delaware in 1997
as part of the Acquisition and owns all of the capital stock of Liberty Group
Operating. Holdings maintains its principal executive offices at 3000 Dundee
Road, Suite 203, Northbrook, Illinois 60062, and its telephone number is (847)
272-2244.
RELATED TRANSACTIONS
On January 27, 1998, Liberty Group Operating sold $180.0 million aggregate
principal amount of its Old Senior Subordinated Notes (the "Note Offering")
which were issued pursuant to an indenture, dated as of January 27, 1998, among
Liberty Group Operating, as issuer, each of Liberty Group Operating's direct and
indirect subsidiaries, as guarantors, and State Street Bank and Trust Company,
as Trustee (the "Senior Subordinated Note Indenture"). Contemporaneously with
the Exchange Offer, Liberty Group Operating will commence an offer to exchange
$1,000 principal amount of its New Senior Subordinated Notes for each $1,000
principal amount of its Old Senior Subordinated Notes.
The net proceeds of the Note Offering were used, together with the proceeds
from the issuance and sale of the Old Debentures, the Old Senior Preferred
Stock, Holdings Junior Preferred Stock and shares of common stock of Holdings,
to finance the Acquisition and to pay related fees and expenses.
4
<PAGE> 9
THE EXCHANGE OFFER
Registration Rights
Agreements............... The Old Debentures were sold by Holdings on January
27, 1998 to Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), Citibank Securities, Inc., BT
Alex. Brown and Chase Securities Inc., as initial
purchasers (the "Initial Purchasers"), which placed
the Old Debentures with institutional investors.
The Old Senior Preferred Stock was sold by Holdings
on January 27, 1998 to DLJ, as the initial
purchaser ("DLJ"), which placed the Old Senior
Preferred Stock with institutional investors. In
connection therewith, the Company executed and
delivered for the benefit of the Holders of the Old
Debentures and the Old Senior Preferred Stock,
respectively, certain registration rights
agreements (each a "Registration Rights Agreement"
and, collectively, the "Registration Rights
Agreements") providing for the Exchange Offer.
The Exchange Offer......... One share of New Senior Preferred Stock in exchange
for each outstanding share of Old Senior Preferred
Stock. As of the date hereof, 1,800,000 shares of
Old Senior Preferred Stock are outstanding.
$1,000 principal amount at maturity of New
Debentures in exchange for each $1,000 principal
amount at maturity of Old Debentures. As of the
date hereof, $89.0 million aggregate principal
amount at maturity of Old Debentures are
outstanding.
Holdings will issue the New Debentures and New
Senior Preferred Stock to Holders as promptly as
practicable after the Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes that the New
Securities issued in exchange for Old Securities
pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by any
Holder thereof (other than (i) a broker-dealer who
purchases such New Securities directly from the
Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act
or (ii) any such Holder that is an "affiliate" of
the Company within the meaning of Rule 405 under
the Securities Act) without compliance with the
registration and prospectus delivery provisions of
the Securities Act; provided, that the Holder is
acquiring such New Securities in its ordinary
course of business and is not participating, and
has no arrangement or understanding with any person
to participate, in any distribution of the New
Securities. Persons wishing to exchange Old
Securities in the Exchange Offer must represent to
the Company that such conditions have been met.
However, any Holder who is an "affiliate" of the
Company or who tenders in the Exchange Offer for
the purpose of distributing the New Securities
cannot rely on the interpretation of the staff of
the Commission set forth in the above-referenced
no-action letters and must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any sale
or transfer of the Old Securities. See "Risk
Factors--Consequences to Non-Tendering Holders of
Old Securities."
Each broker-dealer that receives New Securities 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 Securities.
The Letter of Transmittal states that by so
acknowledging and by delivering a
5
<PAGE> 10
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 Securities received in exchange
for Old Securities where such Old Securities were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities and not acquired directly from the
Company. The Company has agreed that for a period
of 180 days 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."
Expiration Date............ 5:00 p.m., New York City time, on , 1998,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended.
Conditions to the
Exchange Offer........... The Exchange Offer is subject to certain customary
conditions which may be waived by the Company. See
"The Exchange Offer--Conditions."
Procedures for Tendering
Old
Securities............... Each Holder of Old Securities wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, or (in
the case of a book-entry transfer) an Agent's
Message (as defined herein) in lieu of the Letter
of Transmittal, together with the Old Securities
and any other required documentation to the
Exchange Agent (as defined herein) at the address
set forth herein. By executing the Letter of
Transmittal, each Holder will represent to the
Company that, among other things, the New
Securities acquired pursuant to the Exchange Offer
are being obtained in the ordinary course of
business of the person receiving such New
Securities, whether or not such person is the
Holder, that neither the Holder nor any such other
person has an arrangement or understanding with any
person to participate in the distribution of such
New Securities and that neither the Holder nor any
such other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the
Company. See "The Exchange Offer--Procedures for
Tendering." Each broker-dealer that receives New
Securities for its own account in exchange for Old
Securities, where such Old Securities 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 Securities.
See "The Exchange Offer--Procedures for Tendering"
and "Plan of Distribution."
Special Procedures for
Beneficial Owners........ Any beneficial owner whose Old Securities are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender should contact such registered
Holder promptly and instruct such registered Holder
to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of Transmittal
and delivering his Old Securities, either make
appropriate arrangements to register ownership of
the Old Securities in such owner's name or obtain a
properly completed bond power from the registered
6
<PAGE> 11
Holder. The transfer of registered ownership may
take considerable time. See "The Exchange
Offer--Procedures for Tendering."
Guaranteed Delivery
Procedures............... Holders of Old Securities who wish to tender their
Old Securities and whose Old Securities are not
immediately available or who cannot deliver their
Old Securities, the Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis
and deliver an Agent's Message, must tender their
Old Securities according to the guaranteed delivery
procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
See "The Exchange Offer--Withdrawal of Tenders."
Acceptance of Old
Securities
and Delivery of
New Securities........... The Company will accept for exchange any and all
Old Securities which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Securities
issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date.
See "The Exchange Offer--Terms of the Exchange
Offer."
Certain Federal Income
Tax Consequences......... Subject to certain conditions set forth under "The
Exchange Offer--Conditions," the exchange of Old
Securities for New Securities pursuant to the
Exchange Offer should not be treated as a taxable
exchange for federal income tax purposes. See
"Certain Federal Income Tax
Considerations--Consequences of the Exchange Offer
to Exchanging and Nonexchanging Holders."
Exchange Agents............ is serving as Exchange Agent in
connection with the exchange of New Senior
Preferred Stock for Old Senior Preferred Stock.
State Street Bank and Trust Company is serving as
Exchange Agent in connection with the exchange of
New Debentures for Old Debentures.
BankBoston, N.A. and State Street Bank and Trust
Company are collectively referred to herein as the
"Exchange Agent." See "The Exchange Offer--Exchange
Agent."
Net Proceeds............... Holdings will not receive any proceeds from the
issuance of New Securities offered in the Exchange
Offer.
7
<PAGE> 12
SUMMARY OF TERMS OF NEW SENIOR PREFERRED STOCK
The Exchange Offer applies to 1,800,000 shares of Old Senior Preferred
Stock. The Old Senior Preferred Stock and the New Senior Preferred Stock
constitute the same class of preferred stock of Holdings. Accordingly, the
rights and preferences of the New Senior Preferred Stock are identical in all
material respects to the rights and preferences of the Old Senior Preferred
Stock except that the New Senior Preferred Stock has been registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof. See "Description of New Senior Preferred Stock."
Issuer..................... Liberty Group Publishing, Inc.
Securities Offered......... 1,800,000 shares of 14 3/4% Senior Redeemable
Exchangeable Cumulative Preferred Stock, par value
$0.01 per share.
Liquidation Preference..... $25 per share plus accumulated and unpaid dividends
thereon.
Ranking.................... The New Senior Preferred Stock will rank senior to
the Holdings Junior Preferred Stock ($49.0 million
aggregate liquidation preference as of the date
hereof) and Holdings' common stock ("Holdings
Common Stock"). See "Description of Holdings'
Capital Stock."
Dividends.................. The New Senior Preferred Stock will bear cumulative
dividends at the rate of 14 3/4% per annum, payable
quarterly beginning on May 1, 1998 and accumulating
from January 27, 1998. Dividends may, at the option
of Holdings, be paid in cash or a number of shares
of New Senior Preferred Stock having an aggregate
liquidation preference equal to the amount of such
dividends.
Dividend Payment Dates..... February 1, May 1, August 1 and November 1 of each
year, commencing May 1, 1998.
Mandatory Redemption....... February 1, 2010 at a price equal to 100% of the
liquidation preference plus accrued and unpaid
dividends.
Optional Redemption........ The New Senior Preferred Stock will be redeemable
at the option of Holdings, in whole or in part, at
any time on or after February 1, 1999, at the
redemption prices set forth herein, plus all
accrued and unpaid dividends per share. See
"Description of New Senior Preferred
Stock--Optional Redemption."
Change of Control.......... Upon a change of control, subject to contractual
and other restrictions, Holdings must offer to
repurchase the New Senior Preferred Stock at 100%
of the liquidation preference plus accrued and
unpaid dividends.
Exchange Provisions........ The New Senior Preferred Stock is exchangeable into
the Exchange Debentures (in whole but not in part),
at Holdings' option, subject to certain conditions,
on any scheduled dividend payment date.
Voting Rights.............. The New Senior Preferred Stock will have no voting
rights with respect to general corporate matters
except as provided by law or to authorize the
issuance of senior or parity equity securities of
Holdings or to modify adversely the rights of the
New Senior Preferred Stock.
8
<PAGE> 13
SUMMARY OF TERMS OF EXCHANGE DEBENTURES
Issuer..................... Liberty Group Publishing, Inc.
Securities Offered......... 14 3/4% Senior Subordinated Debentures due 2010
issuable, at Holdings' option, in exchange for the
New Senior Preferred Stock in an aggregate
principal amount equal to the aggregate liquidation
preference of the New Senior Preferred Stock, plus,
without duplication, accrued and unpaid dividends
to the date fixed for the exchange thereof (the
"Exchange Date"), plus any additional Exchange
Debentures issued from time to time in lieu of cash
interest.
Maturity Date.............. February 1, 2010.
Interest Rate
and Payment Dates........ The Exchange Debentures will bear interest at a
rate of 14 3/4% per annum. Interest will accrue
from the date of issuance or from the most recent
interest payment date to which interest has been
paid or provided for or, if no interest has been
paid or provided for, from the Exchange Date.
Interest will be payable semi-annually in cash (or,
at the option of Holdings, in additional Exchange
Debentures) in arrears on each February 1 and
August 1, commencing with the first such date after
the Exchange Date.
Ranking.................... The Exchange Debentures will be subordinated to all
existing and future Senior Indebtedness of
Holdings. In addition, the Exchange Debentures will
be effectively subordinated to all existing and
futures liabilities of Liberty Group Operating and
subsidiaries of Liberty Group Operating. The
Exchange Debentures will rank pari passu or senior
to any class or series of indebtedness that
expressly provides that it ranks pari passu or
subordinate to the Exchange Debentures, as the case
may be. As of February 24, 1998, there was $51.0
million of Senior Indebtedness of Holdings and
$180.0 million of total liabilities of Liberty
Group Operating and subsidiaries of Liberty Group
Operating (excluding available borrowings and
letters of credit under the Revolving Credit
Facility) that would be senior to the Exchange
Debentures and $49.0 million of other liabilities
that would be pari passu with or subordinated to
the Exchange Debentures. See "Capitalization."
Optional Redemption........ The Exchange Debentures will be redeemable, at
Holdings' option, in whole or in part, at any time
on or after February 1, 1999, at the redemption
prices set forth herein, plus accrued and unpaid
interest to the date of redemption.
Change of Control.......... In the event of a Change of Control, each Holder of
Exchange Debentures will have a right to require
Holdings to repurchase Exchange Debentures at a
cash price equal to 101% of the principal amount
thereof plus accrued and unpaid interest to the
date of repurchase. See "Description of Exchange
Debentures--Repurchase of Exchange Debentures at
the Option of the Holder Upon a Change of Control."
Certain Covenants.......... The Exchange Indenture contains certain covenants
that, among other things, limit the ability of
Holdings and its subsidiaries to incur additional
debt, pay dividends or make certain other
restricted payments, enter into certain
transactions with affiliates, or merge or
consolidate with or sell all or substantially all
of their assets to any other person.
9
<PAGE> 14
SUMMARY OF TERMS OF NEW DEBENTURES
The Exchange Offer applies to $89.0 million aggregate principal amount at
maturity of Old Debentures. The form and terms of the New Debentures are
identical in all material respects to the form and terms of the Old Debentures
except that the New Debentures have been registered under the Securities Act
and, therefore, will not bear legends restricting the transfer thereof. The New
Debentures will evidence the same debt as the Old Debentures and will be
entitled to the benefits of the Indenture. See "Description of New Debentures."
Issuer..................... Liberty Group Publishing, Inc.
Securities Offered......... $89.0 million aggregate principal amount at
maturity of 11 5/8% New Senior Discount Debentures
due 2009.
Maturity Date.............. February 1, 2009.
Yield and Interest......... 11 5/8% (computed on a semi-annual bond equivalent
basis) calculated from January 27, 1998. The New
Debentures will accrete at a rate of 11 5/8%,
compounded semi-annually, to an aggregate principal
amount at maturity of $89.0 million by February 1,
2003. Cash interest will not accrue on the New
Debentures prior to February 1, 2003. Commencing on
February 1, 2003, cash interest on the New
Debentures will be payable at a rate of 11 5/8% per
annum, semi-annually on February 1 and August 1 of
each year.
Ranking.................... The New Debentures will be general unsecured
obligations of Holdings and will rank pari passu in
right of payment with all existing and future
Senior Indebtedness of Holdings and will rank
senior in right of payment to all future
subordinated Indebtedness of Holdings. The New
Debentures will be effectively subordinated to all
liabilities of Holdings' subsidiaries. As of
February 24, 1998, Holdings had $51.0 million of
Indebtedness and Holdings' subsidiaries would have
had $180.0 million of Indebtedness outstanding,
consisting of Indebtedness under the New Senior
Subordinated Notes.
Optional Redemption........ The New Debentures will be redeemable at the option
of Holdings, in whole or in part, at any time on or
after February 1, 2003, at the redemption prices
set forth herein, plus accrued and unpaid interest
to the date of redemption. In addition, at any time
on or before February 1, 2001, Holdings may redeem,
on one or more occasions, up to an aggregate of 35%
of the aggregate principal amount at maturity of
the New Debentures originally issued with the net
cash proceeds of one or more Public Equity
Offerings (as defined herein) are at a redemption
price equal to 111.625% of the Accreted Value
thereof plus accrued and unpaid interest to the
date of redemption; provided, that at least 65% of
the original aggregate principal amount at maturity
of the New Debentures remain outstanding after each
such redemption. See "Description of New
Debentures--Optional Redemption."
Change of Control.......... In the event of a Change of Control, each Holder of
New Debentures will have the right to require
Holdings to repurchase New Debentures at a cash
price equal to 101% of the Accreted Value thereof
plus accrued and unpaid interest to the date of
repurchase in the case of any such purchase prior
to February 1, 2003, or 101% of the principal
amount at maturity thereof plus accrued and unpaid
interest to the date of repurchase in the case of
any such purchase on or after February 1, 2003.
Holdings does not have, and may not in the future
have, any assets other than common stock of Liberty
Group Operating (which is pledged to
10
<PAGE> 15
secure Liberty Group Operating's obligations under
the Revolving Credit Facility). As a result,
Holdings' ability to repurchase all or any part of
the New Debentures upon the occurrence of a Change
of Control will be dependent upon the receipt of
dividends or other distributions from its direct
and indirect subsidiaries. The Revolving Credit
Facility and the Senior Subordinated Note Indenture
restrict the ability of Liberty Group Operating to
pay dividends and make other distributions to
Holdings. See "Risk Factors--Holding Company
Structure; Limitation on Access to Cash Flow of
Subsidiaries." If Holdings is unable to obtain
sufficient dividends from Liberty Group Operating
to permit the repurchase of the New Debentures or
does not refinance such Indebtedness, Holdings will
likely not have the financial resources to purchase
New Debentures upon the occurrence of a Change of
Control. In any event, there can be no assurance
that Holdings' subsidiaries will have the resources
available to pay any such dividend or make any such
distribution. Furthermore, the Revolving Credit
Facility provides that certain change of control
events will constitute a default thereunder and the
Senior Subordinated Note Indenture provides that,
in the event of a Change of Control, Liberty Group
Operating will be required to offer to repurchase
the New Senior Subordinated Notes at the price
specified therefor. Holdings' failure to make a
Change of Control Offer when required or to
purchase tendered New Debentures when tendered
would constitute an Event of Default under the
Indenture. See "Description of New
Debentures--Certain Covenants--Repurchase of New
Debentures at the Option of the Holder Upon a
Change of Control."
Original Issue Discount.... For federal income tax purposes the New Debentures
will be treated as having been issued with
"original issue discount" ("OID"). Each Holder of
New Debentures will be required to include amounts
in gross income for federal income tax purposes in
advance of the receipt of cash payments to which
the income is attributable. See "Certain United
States Federal Tax
Considerations--Debentures--Original Issue
Discount."
Certain Covenants.......... The Indenture contains certain covenants that limit
the ability of Holdings and its subsidiaries to,
among other things, (i) incur additional
Indebtedness and issue Disqualified Capital Stock,
(ii) pay dividends or make other distributions,
(iii) create certain liens, (iv) sell certain
assets and stock of subsidiaries, (v) enter into
certain transactions with affiliates, and (vi)
effect certain mergers and consolidations. See
"Description of New Debentures--Certain Covenants."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in connection with an investment in the New Securities.
11
<PAGE> 16
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth summary unaudited pro forma combined
statement of operations data of Holdings and its subsidiaries for the year ended
December 31, 1997 and summary unaudited historical and pro forma combined
balance sheet data as of December 31, 1997. The pro forma combined statement of
operations data for the year ended December 31, 1997 gives effect to the
Transactions as if they had occurred on January 1, 1997. The pro forma combined
balance sheet data as of December 31, 1997 gives effect to the Transactions as
if they had occurred on December 31, 1997. The data presented below should be
read in conjunction with the "Unaudited Pro Forma Combined Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Advertising............................................... $68,712
Circulation............................................... 22,341
Job printing and other.................................... 7,666
-------
Total revenues.............................................. 98,719
Operating costs............................................. 29,318
Selling, general and administrative......................... 40,527
Depreciation and amortization............................... 15,027
-------
Income from operations...................................... 13,847
OTHER DATA:
EBITDA(1)................................................... $30,122
Cash interest expense....................................... 17,500
Total interest expense...................................... 25,416
Capital expenditures........................................ 1,713
Ratio of total debt to EBITDA............................... 7.7x
Ratio of EBITDA to cash interest expense.................... 1.7x
Ratio of EBITDA-capital expenditures to cash interest
expense................................................... 1.6x
Ratio of EBITDA to total interest expense................... 1.2x
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-------------------------
HISTORICAL PRO FORMA
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 1,452 $ 686
Total assets................................................ 109,700 343,083
Total debt.................................................. -- 230,522
Holdings Senior Preferred Stock............................. -- 45,000
Holdings Junior Preferred Stock............................. -- 49,000
Stockholders' equity........................................ 99,139 8,000
</TABLE>
- ---------------
(1) EBITDA represents net income before income taxes, interest expense,
depreciation and amortization, subordinated management fee and losses
incurred by the Mid-South Trader which was closed in January 1998. See
"Certain Relationships and Related Transactions." While EBITDA is not
intended to represent cash flow from operations as defined by generally
accepted accounting principles ("GAAP") and should not be considered as an
indicator of operating performance or an alternative to cash flow (as
measured by GAAP) as a measure of liquidity, the Company has included it
herein to provide additional information with respect to the ability of the
Company to meet its future debt service, capital expenditure and working
capital requirements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
12
<PAGE> 17
SUMMARY COMBINED HISTORICAL FINANCIAL DATA
The following table sets forth summary combined historical financial data
of the Company. The historical financial data of the Company described herein is
identical to the historical financial data of Holdings. The summary financial
data for the years ended December 31, 1995, 1996 and 1997 are derived from the
combined financial statements of the Company, which have been audited by
independent auditors. The summary financial data for the years ended December
31, 1993 and 1994 have been derived from the unaudited combined financial
statements of the Company and include, in the opinion of the Company, all
adjustments necessary to present fairly the data for such periods. The results
for the year ended December 31, 1997 are not necessarily indicative of the
results to be expected for any future period. The data presented below should be
read in conjunction with the combined financial statements, including the notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Advertising................................... $50,252 $56,770 $60,255 $66,816 $68,712
Circulation................................... 16,287 17,766 19,058 22,004 22,341
Job printing and other........................ 7,128 7,328 8,054 8,722 7,666
------- ------- ------- ------- -------
Total revenues.................................. 73,667 81,864 87,367 97,542 98,719
Operating costs................................. 23,743 25,880 29,405 31,320 29,318
Selling, general and administrative............. 29,910 33,255 34,506 38,259 39,162
Depreciation and amortization................... 7,450 7,722 7,290 7,854 7,470
------- ------- ------- ------- -------
Income from operations.......................... 12,564 15,007 16,166 20,109 22,769
OTHER DATA:
EBITDA(1)....................................... $20,014 $22,729 $23,456 $27,963 $30,239
EBITDA margin(2)................................ 27.2% 27.8% 26.8% 28.7% 30.6%
Capital expenditures............................ $ 1,813 $ 2,232 $ 2,255 $ 3,081 $ 1,713
</TABLE>
- ---------------
(1) EBITDA represents net income before income taxes, interest expense,
depreciation and amortization. While EBITDA is not intended to represent
cash flow from operations as defined by GAAP and should not be considered as
an indicator of operating performance or an alternative to cash flow (as
measured by GAAP) as a measure of liquidity, the Company has included it
herein to provide additional information with respect to the ability of the
Company to meet its future debt service, capital expenditure and working
capital requirements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(2) EBITDA margin represents EBITDA divided by total revenues.
13
<PAGE> 18
RISK FACTORS
In addition to the other matters described in this Prospectus, prospective
investors should carefully consider the following risk factors before deciding
to make an investment in the New Securities. Prospective investors should also
refer to the "Disclosure Regarding Forward-Looking Statements" found on page ii
of this Prospectus when evaluating this "Risk Factors" section and Holdings'
business, financial condition and operations.
CONSEQUENCES TO NON-TENDERING HOLDERS OF OLD SECURITIES
Upon consummation of the Exchange Offer, Holdings will have no further
obligation to register the Old Securities. Thereafter, any Holder of Old
Securities who does not tender its Old Securities in the Exchange Offer,
including any Holder which is an "affiliate" (as that term is defined in Rule
405 of the Securities Act) of the Company which cannot tender its Old Securities
in the Exchange Offer, will continue to hold restricted securities which may not
be offered, sold or otherwise transferred, pledged or hypothecated except
pursuant to Rule 144 and Rule 144A under the Securities Act or pursuant to any
other exemption from registration under the Securities Act relating to the
disposition of securities. In addition, in connection with any sale of Old
Securities, an opinion of counsel must be furnished to Holdings that such an
exemption is available for such sale.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS
Holdings is highly leveraged and has Indebtedness that is substantial in
relation to its stockholders' equity, tangible equity and cash flow. As of
December 31, 1997, on a pro forma basis after giving effect to the Transactions,
Holdings would have $50.5 million of outstanding Indebtedness, $8.0 million of
stockholders' equity and $(301.4) million of tangible equity and Holdings'
subsidiaries would have had an aggregate of $180.0 million of outstanding
Indebtedness. For the years ended December 31, 1997, on a pro forma basis after
giving effect to the Transactions, earnings were insufficient to cover fixed
charges by $11.6 million. The degree to which the Company is leveraged could
have important consequences to holders of the New Securities, including the
following: (i) a substantial portion of the Company's cash flow from operations
must be dedicated to the payment of interest on the New Senior Subordinated
Notes and interest and principal on its other Indebtedness, thereby reducing the
funds available to the Company for other purposes; (ii) Indebtedness under the
Revolving Credit Facility is at variable rates of interest, which causes Liberty
Group Operating to be vulnerable to increases in interest rates; (iii) the
Company is substantially more leveraged than certain of its competitors, which
might place the Company at a competitive disadvantage; (iv) the Company may be
hindered in its ability to adjust rapidly to changing market conditions; (v) the
Company's substantial degree of leverage could make it more vulnerable in the
event of a downturn in general economic conditions or other adverse events in
its business; and (vi) the Company's ability to obtain additional financing for
working capital, capital expenditures, acquisitions or general corporate
purposes may be impaired.
HOLDING COMPANY STRUCTURE; LIMITATION ON ACCESS TO CASH FLOW OF SUBSIDIARIES
Holdings is a holding company, and its ability to pay dividends on the New
Senior Preferred Stock and interest on the New Debentures, is dependent upon the
receipt of dividends from its direct and indirect subsidiaries. Holdings does
not have and may not in the future have, any assets other than the common stock
of Liberty Group Operating. Liberty Group Operating is a party to the Senior
Subordinated Note Indenture and the Revolving Credit Facility, each of which
imposes substantial restrictions on Liberty Group Operating's ability to pay
dividends to Holdings. Any payment of dividends will be subject to the
satisfaction of certain financial conditions set forth in the Senior
Subordinated Note Indenture and the Revolving Credit Facility. The ability of
Liberty Group Operating and its subsidiaries to comply with such conditions in
the Senior Subordinated Note Indenture and the Revolving Credit Facility may be
affected by events that are beyond the control of Holdings. The breach of any
such condition could result in a default under the Senior Subordinated Note
Indenture and the Revolving Credit Facility, and in the event of any such
default, the holders of the Senior Subordinated Notes or the lenders under the
Revolving Credit Facility could elect to accelerate the maturity of all the
Senior Subordinated Notes or the loans under the Revolving Credit Facility.
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If the maturity of the Senior Subordinated Notes or the loans under the
Revolving Credit Facility were to be accelerated, all such outstanding debt
would be required to be paid in full before Liberty Group Operating or its
subsidiaries would be permitted to distribute any assets or cash to Holdings.
There can be no assurance that the distributions to Holdings would be sufficient
to repay all of such outstanding debt and to meet its obligations to holders of
New Senior Preferred Stock or under the Indenture. Future borrowings by Liberty
Group Operating can be expected to contain restrictions or prohibitions on the
payment of dividends by Liberty Group Operating and its subsidiaries to
Holdings. In addition, under Delaware law, a subsidiary of a company is
permitted to pay dividends on its capital stock only out of its surplus or, in
the event that it has no surplus, out of its net profits for the year in which a
dividend is declared or for the immediately preceding fiscal year. Under
Delaware Law, surplus is defined as the excess of a company's total assets over
the sum of its total liabilities plus the par value of its outstanding capital
stock. In order to pay dividends in cash, Liberty Group Operating must have
surplus or net profits equal to the full amount of the cash dividend at the time
such dividend is declared. In determining Liberty Group Operating's ability to
pay dividends, Delaware law permits the Board of Directors of Liberty Group
Operating to revalue its assets and liabilities from time to time to their fair
market values in order to create surplus. Holdings cannot predict what the value
of its subsidiaries' assets or the amounts of their liabilities will be in the
future and, accordingly, there can be no assurance that Holdings will be able to
pay its obligations to holders of New Senior Preferred Stock or its debt service
obligations on the New Debentures.
RESTRICTIONS IMPOSED BY TERMS OF HOLDINGS' AND THE COMPANY'S INDEBTEDNESS
The Indenture, the Senior Subordinated Note Indenture and the Revolving
Credit Facility impose upon Holdings and the Company certain restrictive
financial and operating covenants, including, among others, requirements that
Holdings and the Company maintain certain financial ratios and satisfy certain
financial tests, limitations on capital expenditures, and restrictions on the
ability of Holdings and the Company to incur debt, pay dividends or take certain
other corporate actions, all of which may restrict Holdings' and the Company's
ability to expand or to pursue its business strategies. Certain of the covenants
in the Revolving Credit Facility are more restrictive than those in the
Indenture and the Senior Subordinated Note Indenture. Changes in economic or
business conditions, results of operations or other factors could in the future
cause a violation of one or more covenants in Holdings' and the Company's debt
instruments, which could lead to such Indebtedness becoming immediately due and
payable. See "Description of New Debentures--Certain Covenants."
POSSIBLE INABILITY TO FUND CHANGE OF CONTROL OFFER
In the event of a Change of Control, each Holder of New Senior Preferred
Stock will have the right to require Holdings to repurchase all or any part of
the outstanding New Senior Preferred Stock at 100% of the liquidation preference
plus accrued and unpaid dividends.
In the event of a Change of Control, each Holder of New Debentures will
have the right to require Holdings to repurchase all or any part of the
outstanding New Debentures at a cash price specified therefor in the Indenture.
Holdings does not have, and may not in the future have, any assets other
than common stock of the Company. As a result, Holdings' ability to repurchase
all or any part of the New Securities upon the occurrence of a Change of Control
will be dependent upon the receipt of dividends or other distributions from its
direct and indirect subsidiaries. The Senior Subordinated Note Indenture and the
Revolving Credit Facility restrict the ability of the Company to pay dividends
and make other distributions to Holdings. If Holdings does not obtain sufficient
dividends from the Company to repurchase the New Securities or does not
refinance such Indebtedness, Holdings will likely not have the financial
resources to purchase the New Securities upon the occurrence of a Change of
Control. In any event, there can be no assurance that Holdings' subsidiaries
will have the resources available to pay such dividend or make any such
distribution. Furthermore, the Revolving Credit Facility provides that certain
change of control events will constitute a default thereunder, and the Senior
Subordinated Note Indenture provides that, in the event of a Change of Control,
the Company will be required to offer to repurchase the Senior Subordinated
Notes at the price specified therefor. Holdings' failure
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to make a Change of Control offer when required or to purchase tendered New
Debentures when tendered would constitute an Event of Default under the
Indenture. In addition, notwithstanding any covenant in the Indenture, Holdings
could enter into certain transactions, including certain recapitalizations, that
would not constitute a Change of Control but would increase the amount of debt
outstanding at such time. See "Description of New Debentures--Certain
Covenants--Repurchase of New Debentures at the Option of the Holder Upon a
Change of Control," "Description of New Senior Preferred Stock" and "Description
of Other Indebtedness."
CONTROL BY PRINCIPAL STOCKHOLDER
GEI, an investment partnership managed by Leonard Green & Partners, L.P.
("LGP"), owns approximately 96% of Holdings Common Stock and all of the Holdings
Junior Preferred Stock. Accordingly, GEI is able to elect all of the members of
the Board of Directors of Holdings and to exercise control over Holdings' and
Liberty Group Operating's business and affairs. See "Principal Stockholders."
ABSENCE OF A PUBLIC MARKET
The New Securities are being offered to the holders of the Old Securities.
The Old Securities were issued on January 27, 1998, to a small number of
institutional investors and are eligible for trading in the Private Offering,
Resale and Trading through Automated Linkages (PORTAL) Market, the National
Association of Securities Dealers' screen-based, automated market for trading of
securities eligible for resale under Rule 144A. To the extent that Old
Securities are tendered and accepted in the Exchange Offer, the trading market
for the remaining untendered Old Securities could be adversely affected. There
is no existing trading market for the New Securities and there can be no
assurance regarding the future development of a market for the New Securities,
or the ability of holders of the New Securities to sell their New Securities or
the price at which such holders may be able to sell their New Securities.
Although the Initial Purchases of the Old Securities have informed Holdings that
they currently intend to make a market in the New Securities, they are not
obligated to do so and any such market making may be discontinued at any time
without notice. As a result, the market price of the New Securities could be
adversely affected. Holdings does not intend to apply for listing or quotation
of the New Securities on any securities exchange or stock market.
ORIGINAL ISSUE DISCOUNT CONSEQUENCES OF THE DEBENTURES
The Debentures were issued at a substantial discount from their principal
amount. Consequently, the Holders of the Debentures generally will be required
to include amounts in gross income for federal income tax purposes in advance of
receipt of the cash payments to which the income is attributable. See "Certain
United States Federal Tax Considerations--Debentures" for a more detailed
discussion of the federal income tax consequences to the holders of the
Debentures of the purchase, ownership and disposition of the Debentures. If a
bankruptcy case is commenced by or against the Company under the United States
Bankruptcy Code after the issuance of the Debentures, the claim of a holder of
Debentures may be limited to an amount equal to the sum of (i) the price paid by
the holder for the Debentures (which price may be deemed to be the closing price
of the Debentures on their first day of trading); and (ii) that portion of the
OID that is not deemed to constitute "unmatured interest" for purposes of the
United States Bankruptcy Code. Any OID that was not amortized as of any such
bankruptcy filing would constitute "unmatured interest." The amortization for
purposes of a claim in bankruptcy may be calculated differently than the
amortization of OID for tax purposes.
TAX CONSEQUENCES OF DEEMED STOCK DISTRIBUTION WITH RESPECT TO THE NEW SENIOR
PREFERRED STOCK AND ORIGINAL ISSUE DISCOUNT ON EXCHANGE DEBENTURES; POTENTIAL
FOR TAXATION BEFORE RECEIPT OF CASH
If the redemption price of the New Senior Preferred Stock exceeds its issue
price by more than a de minimis amount, such excess may be treated as a
constructive distribution with respect to the New Senior Preferred Stock of
additional stock over the term of the New Senior Preferred Stock using a
constant interest rate method similar to that used for accruing OID. Because the
issue price as determined for federal income tax purposes of the New Senior
Preferred Stock distributed in lieu of payments of cash dividends will be equal
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to the fair market value of the New Senior Preferred Stock at the time of
distribution, it is possible, depending on its fair market value at that time,
that such New Senior Preferred Stock will be issued with a redemption premium
large enough to be considered a dividend as described above. In such event,
holders may be required to include such premium in income as a distribution over
some period in advance of receiving the cash attributable to such income, and
such New Senior Preferred Stock might not trade separately, which circumstances
together might adversely affect the liquidity of the New Senior Preferred Stock.
See "Certain Federal Income Tax Consequences--Holdings Senior Preferred Stock."
Further, to the extent holders of New Senior Preferred Stock receive
additional shares of New Senior Preferred Stock as a distribution in respect of
such New Senior Preferred Stock, such holders may be required to include in
gross income for federal income tax purposes the fair market value of such
stock, even though such holders have not received such fair market value in
cash. See "Certain Federal Income Tax Consequences--Holdings Senior Preferred
Stock."
Finally, Holdings may, at its option and under certain circumstances,
exchange the New Senior Preferred Stock for the Exchange Debentures. Any such
exchange will be a taxable event to holders of the New Senior Preferred Stock.
Furthermore, the Exchange Debentures may in certain circumstances be treated as
having been issued with OID for federal income tax purposes. In such event,
holders of the Exchange Debentures will be required to include such OID (as
ordinary income) in income over the life of the Exchange Debentures, in advance
of the receipt of the cash attributable to such income. See "Certain Federal
Income Tax Consequences--Exchange Debentures."
FRAUDULENT CONVEYANCE STATUTES
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, Holdings,
at the time it incurred the Indebtedness evidenced by the Debentures or the
Exchange Debentures, (i) (a) was or is insolvent or rendered insolvent by reason
of such occurrence or (b) was or is engaged in a business or transaction for
which the assets remaining with Holdings constituted unreasonably small capital
or (c) intended or intends to incur, or believed or believes that it would
incur, debts beyond its ability to pay such debts as they mature, and (ii)
received or receives less than reasonably equivalent value or fair consideration
for the incurrence of such Indebtedness, then the New Debentures and/or the
Exchange Debentures could be voided, or claims in respect of the New Debentures
and/or the Exchange Debentures could be subordinated to all other debts of
Holdings. In addition, the payment of interest and principal by Holdings
pursuant to the New Debentures and/or the Exchange Debentures could be voided
and required to be returned to the person making such payment, or to a fund for
the benefit of the creditors of Holdings.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, Holdings would be considered insolvent if (i) the
sum of its debts, including contingent liabilities, were greater than the
saleable value of all of its assets at a fair valuation or if the present fair
saleable value of its assets were less than the amount that would be required to
pay its probable liability on its existing debts, including contingent
liabilities, as they become absolute and mature or (ii) it could not pay its
debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, Holdings believes that, after giving effect to the
Indebtedness incurred in connection with the Exchange Offer and the offering of
the Old Debentures it is not insolvent, does not have unreasonably small capital
for the business in which it is engaged and has not incurred debts beyond its
ability to pay such debts as they mature. There can be no assurance, however, as
to what standard a court would apply in making such determinations or that a
court would agree with Holdings' conclusions in this regard.
NEWSPAPER INDUSTRY COMPETITION
The Company's business is concentrated in newspapers and other publications
located primarily in rural markets in the United States. Revenues in the
newspaper industry primarily consist of advertising and paid circulation.
Competition for advertising expenditures and paid circulation comes from local,
regional and
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national newspapers, shoppers, television, radio, direct mail, electronic media
and other forms of communication and advertising media. Competition for
newspaper advertising expenditures is based largely upon advertiser results,
readership, advertising rates, demographics and circulation levels, while
competition for circulation and readership is based largely upon the content of
the newspaper, its price and the effectiveness of its distribution. The
Company's local and regional newspaper competitors are typically unique to each
market and many of the Company's competitors, particularly publishers of large
metropolitan newspapers, are larger and have greater financial and distribution
resources than the Company. See "Business--Competition."
DEPENDENCE ON LOCAL ECONOMIES
The Company's advertising revenues and, to a lesser extent, circulation
revenues are dependent on a variety of factors specific to the communities that
the Company's publications serve. These factors include, among others, the size
and demographic characteristics of the local population, local economic
conditions in general, and the related retail segments in particular. If the
local economy, population or prevailing retail environment of a community served
by the Company were to experience a downturn, the Company's publications in that
market would be adversely affected, which in turn could have an adverse impact
on the Company's business, financial condition or results of operations.
ACQUISITION STRATEGY
The Company anticipates that it will grow through acquisitions of paid
daily and non-daily newspapers and free circulation publications. Acquisitions
may expose the Company to particular risks, including, without limitation,
diversion of management's attention and assumption of liabilities, either of
which could have a material adverse effect on the business, financial condition
or results of operations of the Company. Moreover, there can be no assurance
that the Company will be successful in integrating its acquisitions into the
Company. The Company anticipates that it will finance acquisitions through cash
provided by operating activities and borrowings under its Revolving Credit
Facility, which would reduce the Company's cash available for other purposes,
including the repayment of Indebtedness, or increase the Company's leverage
ratio and the amount of Indebtedness ranking effectively senior to the New
Debentures. See "Business--Business Strategy."
PRICE AND AVAILABILITY OF NEWSPRINT
The basic raw material for newspapers is newsprint. The Company's newsprint
consumption totaled approximately $6.1 million in 1997, which was 6.2% of the
Company's total revenues. In 1997, the Company consumed approximately
metric tons of newsprint. The Company has no long-term contracts to purchase
newsprint. Although the Company is not dependent on its current sources for
newsprint, the inability of the Company to obtain an adequate supply of
newsprint in the future could have a material adverse effect on the business,
financial condition or results of operations of the Company. Historically, the
price of newsprint has been cyclical and volatile. Significant increases in
newsprint costs could have a material adverse effect on the business, financial
condition or results of operations of the Company. Although the Company will
seek to manage the effects of increases in prices of newsprint through a
combination of, among other things, technology improvements, including web width
reductions, inventory management and advertising and circulation price
increases, there can be no assurance that such actions will mitigate any
newsprint price increases. See "Business--Newsprint."
LACK OF STAND-ALONE OPERATING HISTORY
Holdings' and the Company's success depends to a great extent on the
management and other skills of their officers and on their ability to recruit
and retain other key personnel. Pursuant to the Acquisition, the Company
allocated management and administrative responsibilities to certain retained
employees which exceed the responsibilities these employees had with Hollinger.
The Company has the option pursuant to the Transitional Services Agreement to
obtain certain services in order to facilitate the transition of the Company to
a stand-alone operation. See "The Acquisition--Other Agreements Related to the
Acquisition." Any failure of the Company to implement management and operating
systems that will allow it to operate
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effectively as a stand-alone operation upon termination of the Transitional
Services Agreement could have a material adverse effect on the Company's
business, financial condition or results of operations.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state and local
environmental laws and regulations pertaining to air and water quality, storage
tanks and the management and disposal of wastes at its facilities. Neither
Holdings nor the Company can predict with any certainty whether future events,
such as changes in existing laws and regulations or the discovery of conditions
not currently known to Holdings or the Company, may give rise to additional
costs that could be material. Furthermore, actions of federal, state and local
governments concerning environmental matters could result in laws or regulations
that could have a material adverse effect on the business, financial condition
or results of operations of the Company. Neither Holdings nor the Company is
aware of any pending legislation by federal, state or local governments relating
to environmental matters that, if enacted, would reasonably be expected to have
a material adverse effect on the business, financial condition or results of
operations of Holdings or the Company.
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USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain obligations of Holdings
under the Registration Rights Agreements. Holdings will not receive any proceeds
from the issuance of the New Securities offered in the Exchange Offer.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Senior Preferred Stock was sold by Holdings on January 27, 1998 to
the Initial Purchasers, which placed the Old Senior Preferred Stock with
institutional investors. The Old Debentures were sold by Holdings on January 27,
1998 to DLJ, as initial purchaser, which placed the Old Debentures with
institutional investors. In connection therewith, Holdings entered into the
Registration Rights Agreements, which required that, within 90 days following
the issuance of the Old Securities, Holdings file with the Commission a
registration statement under the Securities Act with respect to the issuance of
new preferred stock and new debentures of Holdings identical in all material
respects to the Old Senior Preferred Stock and Old Debentures, respectively, use
its best efforts to cause such registration statement to become effective under
the Securities Act and, upon the effectiveness of that registration statement,
offer to the Holders of Old Securities the opportunity to exchange their Old
Securities for a like principal amount of New Securities, which will be issued
without a restrictive legend and may be reoffered and resold by such Holders
without restrictions or limitations under the Securities Act. Copies of the
Registration Rights Agreements have been filed as exhibits to the Registration
Statement of which this Prospectus is a part. The term "Holder" means any person
(i) in whose name Old Securities are registered on the books of Holdings or any
other person who has obtained a properly completed bond power from the
registered Holder or (ii) whose Old Securities are held of record by DTC who
desires to deliver such Old Securities by book-entry transfer at DTC.
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, Holdings believes that New Securities
issued pursuant to the Exchange Offer in exchange for Old Securities may be
offered for resale, resold and otherwise transferred by any Holder thereof
(other than (i) a broker-dealer who purchases such New Securities directly from
Holdings to resell pursuant to Rule 144A or any other available exemption under
the Securities Act or (ii) any such Holder which is an "affiliate" of Holdings
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery provisions of the Securities Act;
provided, that the Holder is acquiring such New Securities in the ordinary
course of its business and is not participating, and has no arrangement or
understanding with any person to participate, in any distribution of the New
Securities. Persons wishing to exchange Old Securities in the Exchange Offer
must represent to Holdings that such conditions have been met. Any Holder who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the New Securities could not rely on such interpretation by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. In addition, any such resale transaction should be covered by an
effective registration statement containing the selling security holders
information required by Item 507 of Regulation S-K of the Securities Act.
Further, any Holder who may be deemed an "affiliate" of Holdings cannot rely on
the interpretation by the staff of the Commission set forth in the
above-referenced no-action letters with respect to resales of the New Securities
without compliance with the registration and prospectus delivery requirements of
the Securities Act.
In addition, each broker-dealer that receives New Securities for its own
account in exchange for Old Securities, where such Old Securities 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 Securities. See "Plan of Distribution."
As a result of the filing and the effectiveness of the Registration
Statement and the consummation of the Exchange Offer, Holdings' obligation to
make certain payments with respect to the Old Securities will be terminated. The
Old Securities were issued to a small number of sophisticated investors on
January 27, 1998.
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To the extent Old Securities are tendered and accepted in the exchange, the
principal amount of outstanding Old Securities will decrease with a resulting
decrease in the liquidity in the market therefor. Following the Exchange Offer,
Holders of Old Securities will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for the Old Securities could
be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, Holdings will accept any and all Old
Securities validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date.
Holdings will issue one share of New Senior Preferred Stock in exchange for
each share of outstanding Old Senior Preferred Stock accepted in the Exchange
Offer. Holders may tender some or all of their Old Senior Preferred Stock
pursuant to the Exchange Offer. See "Risk Factors--Consequences to Non-Tendering
Holders of Old Securities."
The rights and preferences of the New Senior Preferred Stock will be
identical in all material respects to the rights and preferences of the Old
Senior Preferred Stock except that the New Senior Preferred Stock has been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof.
Holdings will issue $1,000 principal amount at maturity of New Debentures
in exchange for each $1,000 principal amount at maturity of outstanding Old
Debentures accepted in the Exchange Offer. Holders may tender some or all of
their Old Debentures pursuant to the Exchange Offer. However, Old Debentures may
be tendered only in integral multiples of $1,000. See "Risk
Factors--Consequences to Non-Tendering Holders of Old Securities."
The form and terms of the New Debentures will be identical in all material
respects to the form and terms of the Old Debentures except that the New
Debentures have been registered under the Securities Act and, therefore, will
not bear legends restricting the transfer thereof. The New Debentures will
evidence the same debt as the Old Debentures and will be entitled to the
benefits of the Indenture.
As of , 1998, 1,800,000 shares of the Old Senior Preferred Stock
are outstanding and there were registered Holders of the Old Senior
Preferred Stock. As of , 1998, $89.0 million aggregate principal
amount at maturity of the Old Debentures were outstanding and there were
registered holders of the Old Debentures. This Prospectus, together with the
Letter of Transmittal, is being sent to all such registered Holders as of the
date hereof.
Holders of Old Securities do not have any appraisal or dissenters' rights
under the General Corporation Law of Delaware (or, in the case of Old
Debentures, under the Indenture), in connection with the Exchange Offer.
Holdings intends to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder.
Holdings shall be deemed to have accepted validly tendered Old Securities
when, as and if Holdings has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
for the purpose of receiving the Old Securities.
If any tendered Old Securities 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 Securities will be returned,
without expense, to the tendering Holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Securities in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Old
Securities pursuant to the Exchange Offer. Holdings will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "--Fees and Expenses."
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EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless Holdings, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, Holdings 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.
Holdings reserves the right, in its sole discretion, (i) to delay accepting
any Old Securities, to extend the Exchange Offer or, if any of the conditions
set forth below under "--Conditions" shall not have been satisfied, to terminate
the Exchange Offer, by giving oral or written notice of such delay, extension or
termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by a public announcement
thereof. If the Exchange Offer is amended in a manner determined by Holdings to
constitute a material change, Holdings will promptly disclose such amendment by
means of a prospectus supplement that will be distributed to the registered
Holders and Holdings will extend the Exchange Offer for a period of five (5) to
ten (10) business days, depending upon the significance of the amendment and the
manner of disclosure to the registered Holders, if the Exchange Offer would
otherwise expire during such five (5) to ten (10) business day period.
Without limiting the manner in which Holdings may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, Holdings shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
PROCEDURES FOR TENDERING
Only a Holder of Old Securities may tender such Old Securities in the
Exchange Offer. To tender in the Exchange Offer, a Holder must complete, sign
and date the Letter of Transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile, or (in the case
of a book-entry transfer) an Agent's Message in lieu of the Letter of
Transmittal, together with the Old Securities, as applicable, and any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. To be tendered effectively, the Old Securities,
Letter of Transmittal and other required documents must be received by the
Exchange Agent at the address set forth below under "--Exchange Agent" prior to
5:00 p.m., New York City time, on the Expiration Date. The term "Agent's
Message" means a message, transmitted by DTC to and received by the Exchange
Agent and forming a part of a book-entry confirmation, which states that DTC has
received an express acknowledgment from the tendering participant, which
acknowledgment states that such participant has received and agrees to be bound
by the Letter of Transmittal and that Holdings may enforce such Letter of
Transmittal against such participant.
HOLDERS OF BOTH OLD SENIOR PREFERRED STOCK AND OLD DEBENTURES WILL RECEIVE
TWO (2) LETTERS OF TRANSMITTAL AND MUST DELIVER ONE COMPLETED LETTER OF
TRANSMITTAL DESCRIBING THE OLD SENIOR PREFERRED STOCK TO BE TENDERED TO THE
EXCHANGE AGENT FOR THE OLD SENIOR PREFERRED STOCK AND ONE COMPLETED LETTER OF
TRANSMITTAL DESCRIBING THE OLD DEBENTURES TO THE EXCHANGE AGENT FOR THE OLD
DEBENTURES.
Book-Entry Delivery of the Old Securities. Within two business days after
the date of this Exchange Offer, the Exchange Agent will establish an account
with respect to the Old Securities at DTC for purposes of the Exchange Offer.
Any financial institution that is a participant in the DTC system may make
book-entry delivery of Old Securities by causing DTC to transfer such Old
Securities into the Exchange Agent's account in accordance with DTC's procedure
for such transfer. Although delivery of Old Securities may be effected through
book-entry at DTC, the Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or (in the case of a book-entry transfer through
the DTC Automatic Tender Offer Program ("ATOP")) an Agent's Message in lieu of
the Letter of Transmittal, and any other required documents, must
22
<PAGE> 27
be transmitted to and received by the Exchange Agent at or prior to 5:00 p.m.,
New York City time, on the Expiration Date at one of its addresses set forth in
"--Exchange Agent." DELIVERY OF SUCH DOCUMENTS TO DTC IN ACCORDANCE WITH ITS
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a Holder will constitute an agreement between such Holder and
Holdings in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal.
The method of delivery of Old Securities and the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the Holder. Instead of delivery by mail, it is recommended that Holders use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure delivery to the Exchange Agent before the Expiration Date. No
Letter of Transmittal or Old Securities should be sent to Holdings. Holders may
request their respective brokers, dealers, commercial banks, trust companies or
nominees to effect the above transactions for such Holders.
Any beneficial owner whose Old Securities are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's Old Securities, either make appropriate arrangements to register
ownership of the Old Securities in such owner's name or obtain a properly
completed bond power from the registered Holder. The transfer of registered
ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Securities tendered pursuant thereto are tendered (i) by a
registered Holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Old Securities listed therein, such Old Securities must
be endorsed or accompanied by a properly completed bond power, signed by such
registered Holder as such registered Holder's name appears on such Old
Securities.
If the Letter of Transmittal, any Old Securities or bond power is signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by Holdings, evidence
satisfactory to Holdings of their authority to so act must be submitted with the
Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Securities will be
determined by Holdings in its sole discretion, which determination will be final
and binding. Holdings reserves the absolute right to reject any and all Old
Securities not properly tendered or any Old Securities the acceptance of which
would, in the opinion of counsel for Holdings, be unlawful. Holdings also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Securities. Holdings' interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Securities must be
cured within such time as Holdings shall determine. Although Holdings intends to
notify Holders of defects or irregularities with respect to tenders of Old
Securities, none of Holdings, the Exchange Agent nor any other person shall
incur any liability for failure to give such notification. Tenders of Old
Securities will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Securities received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned
23
<PAGE> 28
by the Exchange Agent to the tendering Holders unless otherwise provided in the
Letter of Transmittal, as soon as practicable following the Expiration Date.
In addition, Holdings reserves the right in its sole discretion to purchase
or make offers for any Old Securities that remain outstanding subsequent to the
Expiration Date or, as set forth below under "--Conditions," to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Old
Securities in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers could differ from the terms
of the Exchange Offer.
By tendering, each Holder will represent to Holdings that, among other
things, the New Securities acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Securities, whether or not such person is the Holder, that neither the Holder
nor any such other person has an arrangement or understanding with any person to
participate in the distribution of such New Securities and that neither the
Holder nor any such other person is an "affiliate," as defined under Rule 405 of
the Securities Act, of Holdings. If the Holder is a broker-dealer that will
receive New Securities for its own account in exchange for Old Securities that
were acquired as a result of market-making activities or other trading
activities, such Holder by tendering will acknowledge that it will deliver a
Prospectus in connection with any resale of such New Securities. See "Plan of
Distribution."
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Securities and (i) whose Old
Securities are not immediately available or (ii) who cannot deliver their Old
Securities, the Letter of Transmittal or any other required documents to the
Exchange Agent prior to the Expiration Date or who cannot complete the procedure
for book-entry transfer on a timely basis and deliver an Agent's Message, may
affect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate number(s)
of such Old Securities and the principal amount of Old Securities tendered,
stating that the tender is being made thereby and guaranteeing that, within
five (5) New York Stock Exchange trading days after the Expiration Date,
the Letter of Transmittal (or facsimile thereof) together with the
certificate(s) representing the Old Securities to be tendered in proper
form for transfer (or a confirmation of a book-transfer into the Exchange
Agent's account at DTC with an Agent's Message) and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Old Securities in proper form for transfer (or a confirmation of a
book-transfer into the Exchange Agent's account at DTC of Old Securities
delivered electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five (5) New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Securities according to the
guaranteed delivery procedures set forth above.
HOLDERS OF BOTH OLD SENIOR PREFERRED STOCK AND OLD DEBENTURES WHO WISH TO
TENDER THEIR OLD SENIOR PREFERRED STOCK AND OLD DEBENTURES ACCORDING TO THE
GUARANTEED DELIVERY PROCEDURES SET FORTH ABOVE MUST OBTAIN A NOTICE OF
GUARANTEED DELIVERY FROM EACH RESPECTIVE EXCHANGE AGENT AND MUST DELIVER ONE
COMPLETED NOTICE OF GUARANTEED DELIVERY IN CONNECTION WITH THE OLD SENIOR
PREFERRED STOCK TO BE TENDERED TO THE EXCHANGE AGENT FOR THE OLD SENIOR
PREFERRED STOCK AND ONE COMPLETED NOTICE OF GUARANTEED DELIVERY IN CONNECTION
WITH THE OLD DEBENTURES TO THE EXCHANGE AGENT FOR THE OLD DEBENTURES.
24
<PAGE> 29
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Securities may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Old Securities in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Securities to be withdrawn (the
"Depositor"), (ii) identify the Old Securities to be withdrawn (including the
certificate number or numbers and principal amount of such Old Securities),
(iii) be signed by the Holder in the same manner as the original signature on
the Letter of Transmittal by which such Old Securities were tendered (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee or Transfer Agent, as the case may be, with
respect to the Old Securities register the transfer of such Old Securities into
the name of the person withdrawing the tender, and (iv) specify the name in
which any such Old Securities are to be registered, if different from that of
the Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by Holdings in its sole
discretion, which determination shall be final and binding on all parties. Any
Old Securities so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no New Securities will be issued with respect
thereto unless the Old Securities so withdrawn are validly retendered. Properly
withdrawn Old Securities may be retendered by following one of the procedures
described above under "--Procedures for Tendering" at any time prior to the
Expiration Date.
Any Old Securities which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable to the Holder thereof without cost
to such Holder.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, Holdings shall not be
required to accept for exchange, or exchange Old Securities for, any New
Securities, and may terminate the Exchange Offer as provided herein before the
acceptance of such Old Securities, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of Holdings, might materially impair the
ability of Holdings to proceed with the Exchange Offer or materially impair
the contemplated benefits of the Exchange Offer to Holdings, or any
material adverse development has occurred in any existing action or
proceeding with respect to Holdings or any of its subsidiaries; or
(b) any change, or any development involving a prospective change, in
the business or financial affairs of Holdings or any of its subsidiaries
has occurred which, in the sole judgment of Holdings, might materially
impair the ability of Holdings to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to
Holdings; or
(c) any law, statute, rule or regulation is proposed, adopted or
enacted, which, in the sole judgment of Holdings, might materially impair
the ability of Holdings to proceed with the Exchange Offer or materially
impair the contemplated benefits of the Exchange Offer to Holdings; or
(d) any governmental approval has not been obtained, which approval
Holdings shall, in its sole discretion, deem necessary for the consummation
of the Exchange Offer as contemplated hereby.
If Holdings determines in its reasonable discretion that any of the
conditions are not satisfied, Holdings may (i) refuse to accept any Old
Securities and return all tendered Old Securities to the tendering Holders, (ii)
extend the Exchange Offer and retain all Old Securities tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of Holders to
withdraw such Old Securities (see "--Withdrawal of Tenders"), or (iii) waive
such unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Old Securities which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, Holdings will promptly
disclose such waiver by means of a prospectus supplement that
25
<PAGE> 30
will be distributed to the registered Holders and Holdings will extend the
Exchange Offer for a period of five (5) to ten (10) business days, depending
upon the significance of the waiver and the manner of disclosure to the
registered Holders, if the Exchange Offer would otherwise expire during such
five (5) to ten (10) business day period.
EXCHANGE AGENTS
has been appointed as Exchange Agent for the exchange of
New Senior Preferred Stock for Old Senior Preferred Stock pursuant to the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notices of Guaranteed Delivery with respect to Holdings Senior Preferred Stock
should be directed to the Exchange Agent addressed as follows:
[address]
State Street Bank and Trust Company has been appointed as Exchange Agent
for the exchange of New Debentures for Old Debentures pursuant to the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery with respect to the Debentures should be directed to the
Exchange Agent addressed as follows:
By Mail
(registered or certified mail recommended):
State Street Bank and Trust Company
Corporate Trust Department
P.O. Box 778
Boston, Massachusetts 02102-0078
By Hand or Overnight Courier:
State Street Bank and Trust Company
Corporate Trust Department, 4th Floor
Two International Plaza
Boston, Massachusetts 02110
By Facsimile:
(617) 664-5395
Confirmation by Phone
Sandra Szczsponik
(617) 664-5587
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by Holdings. The principal
solicitation is being made by mail; however, additional solicitation may be made
by telegraph, telephone or in person by officers and regular employees of
Holdings and its affiliates.
Holdings has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. Holdings, 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 and will
pay the reasonable fees and expenses of one firm acting as counsel for the
Holders of Old Securities should such Holders deem it advisable to appoint such
counsel.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by Holdings and are estimated in the aggregate to be approximately
$ . Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, among others.
Holdings will pay all transfer taxes, if any, applicable to the exchange of
Old Securities pursuant to the Exchange Offer. If, however, certificates
representing New Securities, for principal amounts not tendered or
26
<PAGE> 31
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Old Securities tendered,
or if tendered Old Securities are registered in the name of any person other
than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Securities pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered Holder or any other persons) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering Holder.
ACCOUNTING TREATMENT
The New Securities will be recorded at the same carrying value as the Old
Securities, as reflected in Holdings' accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized upon consummation of the Exchange Offer. The expenses of the Exchange
Offer will be amortized over the term of the New Securities.
CAPITALIZATION
The following table sets forth the historical capitalization of Holdings as
of December 31, 1997 and its capitalization on a pro forma basis after giving
effect to the Transactions. This table should be read in conjunction with
"Unaudited Pro Forma Combined Financial Data" and the financial statements of
Holdings and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-----------------------
HISTORICAL PRO FORMA
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt:
Revolving Credit Facility................................. $ -- $ --
Senior Subordinated Notes................................. -- 180,000
Debentures................................................ -- 50,522
------- --------
Total long-term debt................................... -- 230,522
Holdings Senior Preferred Stock............................. -- 45,000
Holdings Junior Preferred Stock............................. -- 49,000
Stockholders' equity........................................ 99,139 8,000
------- --------
Total capitalization................................... $99,139 $332,522
======= ========
</TABLE>
27
<PAGE> 32
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial data has been prepared
by Holdings' management from the financial statements of Holdings and the notes
thereto included elsewhere in this Prospectus. For purposes of the following
unaudited pro forma combined financial data, the column entitled "Holdings"
refers to the historical financial position and results of operations of the
Local Newspaper Group of American Publishing Company. Holdings and Liberty Group
Operating were formed for the purpose of acquiring the Local Publications and,
accordingly, as of December 31, 1997, had no assets, liabilities, revenues or
expenses. The unaudited pro forma combined statements of operations for the year
ended December 31, 1997 reflect adjustments as if the Transactions had occurred
on January 1, 1997. The unaudited pro forma combined balance sheet as of
December 31, 1997 gives effect to the Transactions as if they had occurred on
December 31, 1997. See "The Acquisition."
The financial effects of the Transactions as presented in the pro forma
financial data are not necessarily indicative of either Holdings' financial
position or the results of its operations that would have been obtained had the
Transactions actually occurred on the dates set forth above, nor are they
necessarily indicative of the results of future operations. The pro forma
financial data should be read in conjunction with the notes thereto, which are
an integral part thereof, and with the financial statements of Holdings and the
notes thereto included elsewhere in this Prospectus.
28
<PAGE> 33
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
HOLDINGS ADJUSTMENTS PRO FORMA
-------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Advertising........................................... $68,712 $ -- $ 68,712
Circulation........................................... 22,341 -- 22,341
Job printing and other................................ 7,666 -- 7,666
------- -------- --------
Total revenues.......................................... 98,719 -- 98,719
Operating costs......................................... 89,310 -- 29,318
Selling, general and administrative..................... 39,162 (1,697)(a) 40,527
3,062 (b)
Depreciation and amortization........................... 7,470 7,557 (c) 15,027
------- -------- --------
Income from operations.................................. 22,769 (8,922) 13,847
Interest expense........................................ 10,551 14,865 (d) 25,416
------- -------- --------
Income (loss) before income taxes....................... 12,218 (23,787) (11,569)
Income taxes............................................ 5,271 (5,271)(e) --
------- -------- --------
Net income (loss)....................................... $ 6,947 $(18,516) $(11,569)
======= ======== ========
EBITDA(f)............................................... $30,239 $ 30,122
</TABLE>
29
<PAGE> 34
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(a) Represents elimination of a portion of the intercompany management fees
charged by APC.
(b) Represents establishment of estimated costs of the Company and Holdings
operating on a stand-alone basis, consisting principally of corporate
office facilities, salaries and wages of corporate staff personnel and a
subordinated management fee to LGP.
(c) Represents adjustment necessary to amortize intangible assets over a
weighted-average life of 25 years. Holdings plans to amortize identifiable
intangible assets over their estimated useful lives (presently estimated
between 5 and 20 years) and goodwill over 40 years. Finalization of the
value of specific intangible assets and their useful lives is subject to
completion of independent valuations which are being undertaken.
(d) The interest expense adjustment is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Interest and fees on Revolving Credit Facility, Senior
Subordinated Notes and Debentures.................... $ 23,544
Other................................................. 1,872
------------
25,416
Less: amounts in historical statements of
operations........................................... (10,551)
------------
Adjustment to interest expense........................ $ 14,865
============
</TABLE>
(e) Represents adjustment to eliminate historical income tax expense.
Subsequent to the Acquisition, Holdings anticipates that it will, for the
foreseeable future, be in a tax loss position. Given uncertainty as to the
timing of Holdings' ability to utilize such losses to offset future taxable
income, Holdings does not presently anticipate recording any tax benefit
associated with its pre-tax losses.
(f) EBITDA represents net income before income taxes, interest expense,
depreciation and amortization, subordinated management fee and losses
incurred by the Mid-South Trader which was closed in January 1998. See
"Certain Relationships and Related Transactions." While EBITDA is not
intended to represent cash flow from operations as defined by GAAP and
should not be considered as an indicator of operating performance or an
alternative to cash flow (as measured by GAAP) as a measure of liquidity,
the Company has included it herein to provide additional information with
respect to the ability of the Company to meet its future debt service,
capital expenditure and working capital requirements. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
30
<PAGE> 35
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
--------------------------------------------
HOLDINGS ADJUSTMENTS PRO FORMA
-------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................ $ 1,452 $ (766)(a) $ 686
Accounts receivable, net......................... 10,308 -- 10,308
Inventory........................................ 1,947 -- 1,947
Prepaid expenses and other current assets........ 278 -- 278
-------- --------- --------
Total current assets.......................... 13,985 (766) 13,219
Property, plant and equipment, net................. 20,503 -- 20,503
Intangible assets, net............................. 75,212 219,964(b) 295,176
Other assets....................................... -- 14,185(c) 14,185
-------- --------- --------
Total assets.................................. $109,700 $ 233,383 $343,083
======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term liabilities......... $ 338 $ -- $ 338
Accounts payable................................. 1,119 -- 1,119
Accrued expenses................................. 2,223 -- 2,223
Deferred revenue................................. 4,411 -- 4,411
-------- --------- --------
Total current liabilities..................... 8,091 -- 8,091
Revolving Credit Facility.......................... -- -- --
Senior Subordinated Notes.......................... -- 180,000(d) 180,000
Debentures......................................... -- 50,522(d) 50,522
Long-term liabilities, less current portion........ 706 -- 706
Deferred income taxes.............................. 1,764 -- 1,764
-------- --------- --------
Total liabilities............................. 10,561 230,522 241,083
Holdings Senior Preferred Stock.................... -- 45,000(d) 45,000
Holdings Junior Preferred Stock.................... -- 49,000(d) 49,000
STOCKHOLDERS' EQUITY:
Net assets....................................... 99,139 (1,452)(a) --
(97,687)(b)
Common stock..................................... -- -- --
Additional paid-in-capital....................... -- 317,651(b) 8,000
(309,651)(c)(d)
-------- --------- --------
Total stockholders' equity.................... 99,139 (91,139) 8,000
-------- --------- --------
Total liabilities and stockholders' equity.... $109,700 $ 233,383 $343,083
======== ========= ========
</TABLE>
31
<PAGE> 36
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(a) Represents elimination of cash not acquired in the Acquisition and cash and
cash equivalents remaining after consummation of the Acquisition and the
payment of fees and expenses.
(b) Represents recording of excess of purchase price of acquisition over fair
value of net assets acquired, as follows:
<TABLE>
<S> <C>
Purchase price.............................................. $309,100
Purchase price adjustment................................... 2,736
Acquisition fees and expenses............................... 5,815
--------
Total purchase price...................................... 317,651
Historical tangible net assets acquired..................... (22,475)
--------
Excess purchase price..................................... $295,176
========
</TABLE>
In the opinion of management of Holdings, the book value of the tangible
assets and liabilities of the Local Publications approximates their fair
value. Accordingly, the entire excess purchase price of the Acquisition has
been allocated to intangible assets. Holdings is having independent
valuations of the intangible assets of the Company performed to allocate
the value of intangible assets between specific intangibles and goodwill.
(c) Represents capitalized fees and expenses in connection with the Holdings
Senior Preferred Stock, Holdings Junior Preferred Stock, Senior Subordinated
Notes and the Revolving Credit Facility.
(d) Represents the recording of the Senior Discount Debentures, Holdings Senior
Preferred Stock, Holdings Junior Preferred Stock and Senior Subordinated
Notes.
32
<PAGE> 37
SELECTED COMBINED HISTORICAL FINANCIAL DATA
The following table sets forth selected combined historical financial data
of the Company. The historical financial data of the Company described herein is
identical to the historical financial data of Holdings. The selected statement
of operations and balance sheet data as of and for each of the years ended
December 31, 1995, 1996 and 1997 are derived from the combined financial
statements of the Company, which have been audited by independent auditors. The
selected financial and balance sheet data as of and for the years ended December
31, 1993 and 1994 have been derived from the unaudited combined financial
statements of the Company, and include, in the opinion of management, all
adjustments necessary to present fairly the data for such periods. The results
for the year ended December 31, 1997 are not necessarily indicative of the
results to be expected for any future period. The data presented below should be
read in conjunction with the combined financial statements, including the notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Advertising............................. $ 50,252 $ 56,770 $ 60,255 $ 66,816 $ 68,712
Circulation............................. 16,287 17,766 19,058 22,004 22,341
Job printing and other.................. 7,128 7,328 8,054 8,722 7,666
-------- -------- -------- -------- --------
Total revenues............................ 73,667 81,864 87,367 97,542 98,719
Operating costs........................... 23,743 25,880 29,405 31,320 29,318
Selling, general and administrative....... 29,910 33,255 34,506 38,259 39,162
Depreciation and amortization............. 7,450 7,722 7,290 7,854 7,470
-------- -------- -------- -------- --------
Income from operations.................... 12,564 15,007 16,166 20,109 22,769
Interest expense.......................... 10,711 10,991 11,195 10,968 10,551
-------- -------- -------- -------- --------
Income before income taxes................ 1,853 4,016 4,971 9,141 12,218
Income taxes.............................. 778 1,687 2,338 4,006 5,271
-------- -------- -------- -------- --------
Net income................................ $ 1,075 $ 2,329 $ 2,633 $ 5,135 $ 6,947
======== ======== ======== ======== ========
OTHER DATA:
EBITDA(1)................................. $ 20,014 $ 22,729 $ 23,456 $ 27,963 $ 30,239
EBITDA margin(2).......................... 27.2% 27.8% 26.8% 28.7% 30.6%
Capital expenditures...................... $ 1,813 $ 2,232 $ 2,255 $ 3,081 $ 1,713
Ratio of earnings to fixed charges(3)..... 1.2x 1.4x 1.4x 1.8x 2.2x
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents................. $ 1,723 $ 1,746 $ 1,929 $ 1,768 $ 1,452
Total assets.............................. 119,081 111,256 120,170 112,974 109,700
Total debt................................ -- -- -- -- --
Stockholders' equity...................... 105,965 98,626 106,945 102,980 99,139
</TABLE>
- ---------------
(1) EBITDA represents net income before income taxes, interest expense,
depreciation and amortization. While EBITDA is not intended to represent
cash flow from operations as defined by GAAP and should not be considered as
an indicator of operating performance or an alternative to cash flow (as
measured by GAAP) as a measure of liquidity, the Company has included it
herein to provide additional information with respect to the ability of the
Company to meet its future debt service, capital expenditure and working
capital requirements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(2) EBITDA margin represents EBITDA divided by total revenues.
(3) 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 on all indebtedness, amortization of deferred debt
financing costs and one-third of rental expense (the portion deemed
representative of the interest factor).
33
<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the historical
financial statements of the Company, including the notes thereto, appearing
elsewhere in this Prospectus. As used herein, with respect to the historical
financial data, references to the Company means the Local Publications. The
historical financial data of the Company described herein is identical to the
historical financial data of Holdings. Certain information in this section
includes forward-looking statements. Such forward-looking statements relate to
the Company's financial condition, results of operations, expansion plans and
business. Actual results could differ materially from the forward-looking
statements due to, among other things, the risks and uncertainties noted under
the heading "Disclosure Regarding Forward-Looking Statements" on page ii and
"Risk Factors" in this Prospectus. For information regarding the pro forma
financial condition and results of operations of the Company, see "Unaudited Pro
Forma Combined Financial Data."
OVERVIEW
The Company is a leading U.S. publisher of local newspapers and related
publications that are the dominant source of local news and print advertising in
their markets. The Company's total revenues are derived from advertising (69.6%
of 1997 total revenues), circulation (22.6%) and job printing and other (7.8%).
The Company's primary operating costs and expenses are comprised of
operating costs and selling, general and administrative expenses, which include,
prior to the Acquisition, a management fee paid to APC that was based upon a
percentage of total revenues. Salaries and employee benefits are the Company's
largest operating cost. The Company has been able to control salaries and
employee benefit expenses by realizing efficiencies from the implementation of
new technologies and the achievement of synergies from its strategy of
clustering its newspaper operations.
Certain administrative services, including accounting, payroll,
administration, tax services and financial reporting, have historically been
performed for the Company by APC. The Company was charged directly by APC for
certain of such services and also paid to APC a management fee that was based
upon a percentage of total revenues. The management fee to APC was discontinued
after the Acquisition. In addition, the Company has in place a Transitional
Services Agreement that allows for certain administrative services to be
provided by APMS until the Company can establish capabilities to provide its
administrative services in-house. The Company believes that the cost of any
services utilized under the Transitional Services Agreement will approximate the
management fees it was being charged by APC.
Prior to the Acquisition, the Company operated as a business unit of APC
and as such did not file separate tax returns. The income tax provision included
in the Company's combined financial statements was computed as if the Company
were a separate company. Subsequent to the Acquisition, the Company has been and
anticipates that it will be, for the foreseeable future, in a tax loss position.
Given the uncertainty as to the timing of the Company's ability to utilize such
losses to offset future taxable income, the Company does not presently
anticipate recording any tax benefit associated with its pre-tax losses. In
addition, the operations of the Company were historically financed through APC.
Holdings and the Company have a capital structure different than that set forth
in the Company's combined financial statements for periods preceding the
Transactions and, accordingly, historical interest expense is not indicative of
the interest expense that either Holdings or the Company incurs as a separate
company.
34
<PAGE> 39
RESULTS OF OPERATIONS
The following table summarizes the Company's historical results of
operations as a percentage of total revenues for the years ended December 31,
1995, 1996 and 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Revenues:
Advertising............................................... 69.0% 68.5% 69.6%
Circulation............................................... 21.8 22.6 22.6
Job printing and other.................................... 9.2 8.9 7.8
----- ----- -----
Total revenues.............................................. 100.0 100.0 100.0
Operating costs............................................. 33.7 32.1 29.7
Selling, general and administrative......................... 39.5 39.2 39.7
Depreciation and amortization............................... 8.3 8.1 7.6
----- ----- -----
Income from operations...................................... 18.5 20.6 23.1
EBITDA...................................................... 26.8% 28.7% 30.6%
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Total Revenues. Total revenues for the year ended December 31, 1997
increased by $1.2 million, or 1.2%, to $98.7 million from $97.5 million for the
year ended December 31, 1996. The increase in total revenues was comprised of a
$1.9 million increase in advertising revenue and a $0.3 million increase in
circulation revenue offset by a $1.1 million decrease in job printing and other
revenue. During the year ended December 31, 1997, the Company acquired
publications in two markets. The publications acquired during the year ended
December 31, 1997 contributed $0.8 million to total revenues for such period.
The increase in advertising revenue during the year ended December 31, 1997 was
primarily due to general continued strength in demand for advertising in the
Company's markets. The increase in circulation revenue during the year ended
December 31, 1997 was primarily due to increases in the cover price of selected
newspaper publications. The decrease in job printing and other revenue during
the year ended December 31, 1997 was primarily due to the Company pursuing fewer
opportunities for commercial printing than in the prior year.
Operating Costs. Operating costs for the year ended December 31, 1997
decreased by $2.0 million, or 6.4%, to $29.3 million from $31.3 million for the
year ended December 31, 1996. Operating costs decreased as a percentage of total
revenues to 29.7% for the year ended December 31, 1997 from 32.1% for the year
ended December 31, 1996. The decrease in operating costs as a percentage of
total revenues during the year ended December 31, 1997 was primarily due to
declines in newsprint prices and the continued successful implementation of cost
controls at the Company's publications.
Selling, General and Administrative. Selling, general and administrative
expenses for the year ended December 31, 1997 increased by $0.9 million, or
2.4%, to $39.2 million from $38.3 million for the year ended December 31, 1996.
Selling, general and administrative expenses increased as a percentage of total
revenues to 39.7% for the year ended December 31, 1997 from 39.2% for the year
ended December 31, 1996. The increase in selling, general and administrative
expenses during the year ended December 31, 1997 was primarily due to the effect
of increases in the federal minimum wage requirements.
Income from Operations. Income from operations for the year ended December
31, 1997 increased by $2.7 million, or 13.2%, to $22.8 million from $20.1
million for the year ended December 31, 1996. Income from operations as a
percentage of total revenues increased to 23.1% for the year ended December 31,
1997 from 20.6% for the year ended December 31, 1996. The increase in income
from operations was primarily due to higher total revenues and lower operating
costs described above.
EBITDA. EBITDA for the year ended December 31, 1997 increased by $2.3
million, or 8.1%, to $30.2 million from $28.0 million for the year ended
December 31, 1996. EBITDA margin increased to 30.6% for the year ended December
31, 1997 from 28.7% for the year ended December 31, 1996. The increase in
35
<PAGE> 40
EBITDA and EBITDA margin during the year ended December 31, 1997 was primarily
due to higher total revenues and lower operating costs described above.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Total Revenues. Total revenues for the year ended December 31, 1996
increased by $10.2 million, or 11.6%, to $97.5 million from $87.4 million for
the year ended December 31, 1995. The increase in total revenues was comprised
of a $6.6 million increase in advertising revenue, a $2.9 million increase in
circulation revenue and a $0.7 million increase in job printing and other
revenue. During the year ended December 31, 1996, the Company acquired
publications in three markets. The publications acquired during the year ended
December 31, 1996 contributed $2.5 million to total revenues for such period.
The increase in advertising revenue during the year ended December 31, 1996 was
primarily due to a favorable economic environment, which promoted increased
spending by advertisers in the Company's markets. The increase in circulation
revenue during the year ended December 31, 1996 was primarily due to increases
in the cover price of selected newspaper publications. The increase in job
printing and other revenue during the year ended December 31, 1996 was primarily
due to strong demand for commercial printing services in the Company's markets
and the Company's success in identifying and capturing such business.
Operating Costs. Operating costs for the year ended December 31, 1996
increased by $1.9 million, or 6.5%, to $31.3 million from $29.4 million for the
year ended December 31, 1995. Operating costs decreased as a percentage of total
revenues to 32.1% for the year ended December 31, 1996 from 33.7% for the year
ended December 31, 1995. The increase in operating costs during the year ended
December 31, 1996 was primarily due to increases in the price of newsprint and
increased costs associated with the higher total revenues described above.
Selling, General and Administrative. Selling, general and administrative
expenses for the year ended December 31, 1996 increased by $3.8 million, or
10.9%, to $38.3 million from $34.5 million for the year ended December 31, 1995.
Selling, general and administrative expenses decreased as a percentage of total
revenues to 39.2% for the year ended December 31, 1996 from 39.5% for the year
ended December 31, 1995. The increase in selling, general and administrative
expenses during the year ended December 31, 1996 was primarily due to expenses
associated with the growth of the Company's operations, including an increase in
the number of publications operated by the Company.
Income from Operations. Income from operations for the year ended December
31, 1996 increased by $3.9 million, or 24.4%, to $20.1 million from $16.2
million for the year ended December 31, 1995. Income from operations as a
percentage of total revenues increased to 20.6% for the year ended December 31,
1996 from 18.5% for the year ended December 31, 1995. The increase in income
from operations was primarily due to higher total revenues, partially offset by
higher operating costs, selling, general and administrative expenses and
depreciation and amortization.
EBITDA. EBITDA for the year ended December 31, 1996 increased by $4.5
million, or 19.2%, to $28.0 million from $23.5 million for the year ended
December 31, 1995. EBITDA margin increased to 28.7% for the year ended December
31, 1996 from 26.8% for the year ended December 31, 1995. The increase in EBITDA
and EBITDA margin during the year ended December 31, 1996 was primarily due to
higher total revenues, partially offset by higher operating costs and selling,
general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
Cash Provided by Operating Activities. Cash provided by operating
activities for the year ended December 31, 1997 increased $0.3 million to $14.6
million from $14.3 million for the year ended December 31, 1996. The increase in
cash provided by operating activities was primarily due to an increase in the
Company's net earnings and a decrease in working capital requirements. Cash
provided by operating activities for the year ended December 31, 1996 increased
$6.4 million to $14.3 million from $7.9 million for the year ended December 31,
1995. The increase in cash provided by operating activities for the year ended
December 31, 1996 was primarily due to an increase in the Company's net earnings
and a decline in working capital requirements.
36
<PAGE> 41
Cash Used in Investing Activities. Cash used in investing activities for
the year ended December 31, 1997 decreased $1.2 million to $3.4 million from
$4.5 million for the year ended December 31, 1996. The decrease in cash used in
investing activities for the year ended December 31, 1997 was primarily due to a
decrease in capital expenditures. Cash used in investing activities for the year
ended December 31, 1996 decreased $10.4 million to $4.5 million from $14.9
million for the year ended December 31, 1995. The decrease in cash used in
investing activities for the year ended December 31, 1996 was primarily due to a
decline in the number of newspaper acquisitions completed, partially offset by
an increase in capital expenditures. The Company's capital expenditures consist
of the purchase of machinery, equipment, furniture and fixtures relating to its
publishing operations. The Company has no material commitments for capital
expenditures. The most significant investing activities contemplated over the
next five years will be to pursue the Company's acquisition program of
opportunistically purchasing local newspapers in contiguous markets and clusters
of local newspapers in new markets. The Company will only pursue acquisitions
that it believes would contribute to the Company's overall cash flow growth. The
Company has a proven track record of significantly improving the revenues and
profitability of local newspaper acquisitions and the Company believes that it
will continue to be successful at integrating and improving future newspaper
acquisitions.
Cash Used in Financing Activities. Cash used in financing activities for
the year ended December 31, 1997 increased $1.6 million to $11.5 million from
$9.9 million for the year ended December 31, 1996. Cash used in financing
activities for the year ended December 31, 1996 increased $17.1 million to $9.9
million from $7.2 million of cash provided by financing activities for the year
ended December 31, 1995. The Company has historically relied upon Hollinger for
financing of its operations and has maintained its own cash balances only for
certain daily expenses. Subsequent to the Acquisition, the Company will be
financed independently of Hollinger.
Liquidity. The Company's principal sources of funds are cash provided by
operating activities and borrowings under the Revolving Credit Facility. For a
description of the terms and covenants contained in the Revolving Credit
Facility, see "Description of Revolving Credit Facility." The Company believes
that such funds will provide the Company with sufficient liquidity and capital
resources to meet its current and future financial obligations.
INFLATION
The Company believes that inflation has not had a material impact on its
results of operations for the years ended December 31, 1997, 1996 and 1995.
37
<PAGE> 42
BUSINESS
GENERAL
The Company is a leading U.S. publisher of local newspapers and related
publications that are the dominant source of local news and print advertising in
their markets. The Company owns and operates 166 publications in rural markets
in 11 states: Arizona, Arkansas, California, Illinois, Iowa, Kansas, Michigan,
Minnesota, Missouri, New York and Pennsylvania. The majority of the Company's
paid daily newspapers have been published for more than 100 years and are
typically the only paid daily newspapers of general circulation in their
respective rural markets. The Company's newspapers face limited competition as a
result of operating in markets that are distantly located from large
metropolitan areas and that can support only one primary newspaper. The Company
has increased revenues primarily by acquiring new publications and saturating
existing markets, and has increased profitability by aggressively pursuing cost
reduction opportunities. Through a combination of these efforts, total revenues
have grown from $73.7 million in 1993 to $98.7 million for the year ended
December 31, 1997, representing a compounded annual growth rate of 7.6%. During
the same period, EBITDA has increased from $20.0 million in 1993 to $30.2
million for the year ended December 31, 1997, and EBITDA margins have improved
from 27.2% to 30.6%, respectively.
The Company's newspapers are comprised of 55 paid daily newspapers with
circulations ranging from approximately 1,100 to 12,500 and 34 paid non-daily
newspapers with circulations ranging from approximately 100 to 41,000. In
addition, the Company publishes 77 free circulation and "total market coverage"
("TMC") publications with limited or no news or editorial content. TMC
publications are distributed free of charge and generally provide 100%
penetration in their areas of distribution. The Company believes that its paid
newspapers, together with its free circulation and TMC publications, are an
effective medium for advertisers to reach substantially all of the households in
the markets served by the Company. All of the Local Publications are located in
small towns that are not suburbs of large cities and that typically have
populations of less than 20,000. The Company's publications focus on local
content, including coverage of local youth, high school and college sports, as
well as local business, politics, entertainment and cultural news. Each of the
Company's publications is specifically tailored to its market in order to
provide local content that radio, television and large metropolitan newspapers
are unable to provide on a cost-effective basis because of their broader
geographic coverage. The Local Publications also differentiate themselves from
other forms of media by providing a cost-effective medium for local advertisers
to target their customers.
The Company believes that its stable revenues and EBITDA are a result of
its geographic diversification, limited competition, low newsprint requirements
and cost of labor, strong base of local advertisers and lack of reliance on
volatile classified advertising. The regional clusters in which the Local
Publications are published are geographically diverse, with no single market
representing more than 3.5% of the Company's 1997 total revenues. The Local
Publications are well-positioned in their markets and face limited direct
competition for either local newspaper advertising or circulation revenue.
Startups of newspapers are rare and potential competitors face considerable
barriers to entry due to the Company's established franchises. The Company's
stable profitability is also a result of its favorable cost structure, which
includes low newsprint and labor cost as a percent of total revenues. The
Company has relatively low exposure to fluctuations in newsprint prices due to
much lower page counts than large metropolitan newspapers, with newsprint
comprising 6.2% of the Company's 1997 total revenues, compared to approximately
25% for large metropolitan newspapers. The Company's cost of labor is also
relatively low, with employee salaries and benefits comprising 31.2% of the
Company's 1997 total revenues, compared to 40% to 45% for most large
metropolitan newspapers. In addition, advertising revenues at the Company's
publications tend to be more stable than the advertising revenues of large
metropolitan newspapers because the Company's publications rely primarily on
local advertising rather than national advertising, with national advertising
comprising 0.9% and local advertising comprising 41.3% of the Company's 1997
total revenues. Local advertising is more stable than national advertising
because local service providers generally have fewer effective advertising
vehicles from which to choose. The Company also relies less than large
metropolitan newspapers upon classified advertising, particularly help wanted
sections, which tend to be cyclical.
38
<PAGE> 43
The Company is led by the same experienced management team that had primary
responsibility for the acquisition activities and operations of the Local
Publications prior to the Acquisition. The five members of the senior management
team have, in the aggregate, over 125 years of experience in the newspaper
industry. The management team has a long history of integrating acquisitions and
improving the operations of both existing and acquired publications. In
addition, the Company retained all of the newspaper publishers at the Local
Publications. The local market knowledge of each newspaper's publisher and his
standing in the community are important in maintaining each newspaper's local
identity and in effectively serving its readership and advertisers.
BUSINESS STRATEGY
The Company's business strategy is to continue to increase the
profitability of existing and acquired newspaper publications through market
leadership, aggressive cost controls, geographic clustering and revenue
enhancements. The Company attributes its strong historical results and its
positive outlook for growth and profitability to management's ability to
identify and complete acquisitions to which it has successfully applied the
following initiatives:
Market Leadership. The Company's newspapers generally have the largest
local news gathering resources in their markets and differentiate themselves
from large metropolitan newspapers by focusing on local information. The
Company's publications serve as the dominant medium for local print advertisers
to reach a specific audience and for readers interested in local events. The
Company believes that by supplementing its paid newspapers with TMC publications
it provides advertisers the ability to reach substantially all households in the
markets that they serve. The Company seeks to enhance reader loyalty through
excellent editorial content, including the proper mix of local and national news
to serve its markets effectively, and high-quality presentation. In addition,
because the Company's newspapers are generally produced on modern offset
presses, the Company has the ability to execute attractive layouts and color
enhancements that are designed to attract readers.
Aggressive Cost Controls. The Company implements uniform operating policies
and establishes strict cost controls at each of its publications. The Company
believes that operating margins are increased by implementing consistent
policies and standards, including specific guidelines for staffing levels,
employee productivity, automation of pre-press operations and regional
production operations. In addition, the Company utilizes specific guidelines
regarding product quality, distribution and customer service, marketing and
promotion, financial controls and purchasing. The Company establishes strict
cost controls to maintain low overhead expenses and continuously seeks to
identify lower cost alternatives for, and to improve utilization of, raw
materials, equipment and services, including newsprint, ink, office equipment
and supplies, production equipment and telecommunication services.
Geographic Clustering. The Company seeks to concentrate its ownership of
publications into regional clusters in order to realize operating efficiencies,
such as the consolidation and sharing of production and printing functions,
management personnel and other general and administrative costs. In addition,
clustering enables management to maximize revenues through cross-selling and
bundling advertising among contiguous newspaper markets. The Company believes
that its clustering strategy enables its publications to achieve higher
operating margins than they otherwise would achieve on a stand-alone basis. In
addition, clustering spreads fixed costs, such as salaries, across publications,
which allows the Company to employ high-quality management that is shared among
contiguous markets.
Revenue Enhancements. The Company seeks to saturate its markets through
market layering, which focuses on introducing new products to increase
readership and advertising revenues. New products have historically included
both paid newspapers and free circulation publications, including TMC
publications. Other new products have included more frequent publication of
non-daily newspapers; shopping guides; and niche publications covering subjects,
such as children and parenting, employment, health, seniors and real estate,
that are of interest to residents of particular geographic areas and members of
particular demographic groups. The Company believes that its market layering
strategy has successfully increased its penetration, strengthened its market
presence and protected its publications from encroachment by competitors.
39
<PAGE> 44
Attractive Acquisition Opportunities. The Company's low-cost operating
model, broad geographic coverage and successful acquisition history provide a
platform for the acquisition of local newspapers. The Company has a proven track
record of significantly improving the profitability of acquired operations by
implementing the same cost control systems and revenue enhancements that are in
place at existing properties. Favorable acquisition candidates would have some
or all of the following characteristics: a long publishing history, strong
readership and advertiser loyalty, editorial independence and potential
opportunities for revenue enhancements and increases in profitability through
cost reductions and synergies with the Company's existing operations. The
Company believes that the newspaper publishing industry is highly fragmented,
with over 7,500 paid daily and non-daily publications with circulation less than
25,000 operating in the United States today. The Company further believes that
competition is abating for these smaller publications as the historical
acquirors of such publications have grown too large for publications of this
size to have a meaningful impact on operations and have diverted resources
toward the acquisition of metropolitan newspapers.
INDUSTRY OVERVIEW
Newspaper publishing is the oldest and largest segment of the media
industry. Due to a focus on local news, newspapers remain the dominant medium
for local advertising and, in calendar year 1996, accounted for more than 47.6%
of all local media advertising expenditures in the United States. In addition,
in calendar year 1996, U.S. newspaper advertising expenditures reached an all
time high of approximately $38.2 billion, representing a compounded annual
growth rate of 6.1% since 1980. Newspapers continue to be the best medium for
retail advertising, which emphasizes the price of goods, in contrast to
television, which is generally used for image advertising.
The number of adult readers of daily and Sunday newspapers is reported to
have increased from 106.0 million and 106.7 million in 1980 to 112.1 million and
128.6 million in 1996, respectively, representing compounded annual growth rates
of 0.4% and 1.2%, respectively. Readers of daily and Sunday newspapers tend to
be more highly educated and have higher incomes than non-newspaper readers. For
instance, 71% of college graduates and 66% of households with income greater
than $40,000 are reported to read a daily newspaper, compared to 61% of high
school graduates and 52% of households with income less than $40,000. The
Company believes that newspapers continue to be the most cost-effective means
for advertisers to reach this highly targeted demographic group. Reliable
circulation statistics for non-daily newspapers are not available.
Newspaper advertising revenues are cyclical and are generally affected by
changes in national and regional economic conditions. Classified advertising,
which typically makes up approximately one-third of newspaper advertising
revenues, is the most sensitive to economic improvements or slowdowns as it is
primarily affected by the demand for employment, real estate transactions and
automotive sales. However, management believes that the profitability of the
Company's publications is significantly more stable than the overall newspaper
industry due to a reduced dependence on classified advertising. In 1997,
classified advertising represented only 15.1% of the Company's total revenues.
Growth in newspaper advertising has exceeded growth in Gross Domestic
Product ("GDP") in every calendar year since 1993 and, in calendar year 1996,
newspaper advertising spending grew 5.8% while GDP grew by only 4.5%.
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<PAGE> 45
OVERVIEW OF OPERATIONS
The Company's operations consist of 166 local newspapers and publications
strategically positioned in rural markets in 11 states. The Company's
publications are comprised of 55 paid daily and 34 paid non-daily newspapers
with average circulations of 4,372 and 3,194, respectively. In addition, the
Company publishes 77 free circulation publications with limited or no news or
editorial content.
The following chart sets forth information for the Company's publications
by state as of December 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF NEWSPAPERS AND PUBLICATIONS AVERAGE CIRCULATION
--------------------------------------- -------------------
PAID PAID FREE PAID PAID
STATE DAILY NON-DAILY CIRCULATION TOTAL DAILY NON-DAILY
----- ----- --------- ----------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Arizona.................................. 0 2 1 3 0 3,562
Arkansas................................. 3 1 3 7 3,053 3,896
California............................... 2 3 3 8 4,985 2,231
Illinois................................. 12 16 15 43 3,810 3,784
Iowa..................................... 1 0 2 3 2,843 0
Kansas................................... 6 2 7 15 4,103 220
Michigan................................. 3 0 3 6 4,196 0
Minnesota................................ 1 0 1 2 2,234 0
Missouri................................. 11 6 16 33 4,577 1,487(1)
New York................................. 5 4 15 24 6,833 4,816
Pennsylvania............................. 11 0 11 22 4,438 0
-- -- -- --- ----- -----
Total.......................... 55 34 77 166 4,372 3,194
</TABLE>
- -------------------------
(1) Excludes circulation of Mid-South Trader, as such paper was closed as of
December 31, 1997.
In 1997, no single market within such states contributed more than 3.5% of
the Company's total revenues.
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<PAGE> 46
The following is a list of the states and communities served by the
Company's paid daily newspapers, paid non-daily newspapers, and free circulation
publications and the mastheads of all 166 publications as of December 31, 1997:
ARIZONA
Globe
Arizona Silver Belt
Gila County Advantage
Moccasin
ARKANSAS
Heber Springs
The Sun Times
Helena
The Daily World
Daily World "TMC"
Newport
Newport Daily Independent
Newport Daily Independent "TMC"
Stuttgart
Stuttgart Daily Leader
The Stuttgart Daily "TMC"
CALIFORNIA
Mount Shasta
Dunsmuir News
Mount Shasta Herald
Supersaver Advertiser
Voice of the Mountain
Weed Press
Taft
Daily Midway Driller
Yreka
Siskiyou Daily News
Siskiyou Daily News "Extra"
ILLINOIS
Albion
Albion Journal Register
Prairie Post
Benton
Benton Evening News
The Benton Standard
Franklin Press
Canton
Daily Ledger
Little Giant Advertiser
Carmi
The Carmi Times
The Weekly Times
White County Shopper News
Chester
Chester Herald Tribune
Monday Herald
Christopher
Christopher Progress
DuQuoin
The Ashley News
DuQuoin Evening Call
Perry County Extra
Fairbury
The Blade
Flora
Ccap Special
Daily Advocate Press
Galatia
Money Stretcher
Galesburg
Pennysaver Press
Harrisburg
Eldorado Daily Journal
Harrisburg Daily Register
Herrin
The Spokesman
The Spokesman Sunday
Marion
Marion Daily Republican
Marion Daily Extra
Monmouth
Daily Review Atlas
Oquawka Current
Pennysaver
Murphysboro
American Monday
Murphysboro American
Norris City
Norris City Banner
Olney
Jasper County News Eagle, Advantage
The Olney Daily Mail
The Weekly Mail
Pontiac
Daily Leader
Home Times
Livingston Shopping News
Shawneetown
Gallatin Democrat
Ridgway News
West Frankfort
Daily American
Trader
IOWA
Charles City
Charles City Press
The Extra
Six County Shopper
KANSAS
Atchison
The Atchison Daily Globe
Globe Extra
Augusta
Augusta Advertiser
Augusta Daily Gazette
Derby
Daily Reporter
The Record
The Weekly Shopper
The Wichita Journal
El Dorado
The El Dorado Times
El Dorado Times Weekly
Shoppers Guide
Leavenworth
The Leavenworth Times
River Bend Journal
McPherson
McPherson Sentinel
The Sentinel Ad-Viser
MICHIGAN
Cheboygan
Cheboygan Daily Tribune
Shoppers Fair
Ionia
Sentinel-Standard
Sentinel-Standard "TMC"
Sault Ste. Marie
The Evening News
Tri County Buyers Guide
MINNESOTA
Crookston
Crookston Daily Times
Crookston Valley Shopper
MISSOURI
Boonville
Boonville Daily News
The Record
Brookfield
Daily News Bulletin
Camdenton
Lake Sun Leader
Carthage
The Carthage Press
The Carthage Press "TMC"
Chillicothe
C.T. Extra
Constitution Tribune
Greenfield
Lake Stockton Shopper
Miller Press
The Vedette
Kirksville
Kirksville Crier
Kirksville Daily Express & News
The Market Place
Macon
Chronicle Herald
Macon Journal
Malden
Mid-South Trader
Marceline
Marceline Press/Chariton Courier
Sho-Me Shopper
Mexico
The Mexico Ledger
The Mexico Ledger "TMC"
Monroe City
Mark Twain Regional News
Monroe City News
Neosho
Neosho Daily News
Neosho Daily News "Etc."
Osage Beach
Vacation News
Rolla
Rolla Daily News
Rolla Daily News "Plus"
Saint James
Advertiser
St. James Leader Journal
Waynesville
The Daily Guide
Daily Guide Extra
Fort Wood Constitution
NEW YORK
Bath
Steuben Courier Advocate
Canajoharie
Mohawk Valley Pennysaver
Canisteo
Hornell Canisteo Penn-E-Saver
Dansville
Genesee County Express
Geneseeway Shopper
Herkimer
The Evening Telegram
Images
Hornell
Evening Tribune
The Spectator (Sunday)
The Tribune Extra
Little Falls
The Evening Times
Times-Saver
North Tonawanda
Grand Island Record
Record Advertiser
Tonawanda News
Tonawanda News Extra
Penn Yan
Chronicle Ad-Viser
The Chronicle-Express
Saugerties
Mountain Pennysaver
Saugerties Pennysaver
Saugerties Post Star
Wellsville
Allegany Co. Pennysaver
Wellsville Daily Reporter
Wellsville Daily "TMC"
PENNSYLVANIA
Corry
Corry Journal
Corry Journal "TMC"
Honesdale
The Independent Extra
The Wayne Independent
Kane
Kane Republican
Milton
Lewisburg Daily Journal
Milton Daily Standard
The Standard-Journal
Punxsutawney
Country Neighbors
The Punxsutawney Spirit
The Punxsutawney Spirit "TMC"
Ridgway
The Ridgway Record
Shop-Right
Saint Mary's
The Daily Press
The Daily Press "TMC"
Sayre
The Evening Times
The Times Extra
Titusville
Titusville Herald
Titusville Herald "TMC"
Warren
Warren County Guide
Waynesboro
The Record Herald
Record Herald Shoppers Express
42
<PAGE> 47
ADVERTISING
Advertising revenues are the largest component of a newspaper's revenues
followed by circulation revenues. The Company's advertising rate structures vary
among its publications and are a function of various factors, including results
achieved for advertisers, local market conditions and competition, as well as
circulation, readership, demographics and the type of advertising (whether
classified or display).
Substantially all of the Company's advertising revenues are derived from a
diverse group of local retailers and classified advertisers. The Company's
advertising revenues tend to be more stable than the advertising revenues of
large metropolitan newspapers because its publications rely on local advertising
rather than national advertising, with national advertising comprising 0.9% and
local advertising comprising 41.3% of the Company's 1997 total revenues. Local
advertising is more stable than national advertising because residents' ongoing
needs for local services provide a stable base of local businesses and local
advertisers generally have fewer effective advertising vehicles from which to
choose. Moreover, the Company relies less than large metropolitan newspapers
upon classified advertising revenues, particularly help wanted sections, which
tend to be cyclical. Classified advertising accounted for 15.1% of the Company's
1997 total revenues. The following table represents the breakdown of advertising
revenue components for the Company as a percentage of total revenues:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Local advertising........................................... 41.8% 41.5% 41.3%
National advertising........................................ 0.8 0.9 0.9
Preprints................................................... 12.4 11.3 11.7
Classified.................................................. 13.8 14.4 15.1
Non-traditional............................................. 0.2 0.4 0.7
---- ---- ----
Total advertising revenue.............................. 69.0% 68.5% 69.6%
</TABLE>
The Company's advertising revenues are not reliant upon any one company or
industry but rather are supported by a variety of companies and industries. The
Company's corporate management works with its local newspaper management to
approve advertising rates and to establish goals for each year during a detailed
budget process. Corporate management also works with the advertising staff of
each local newspaper to develop marketing kits and presentations. A portion of
the compensation for the Company's publishers is based upon increasing
advertising revenues. In addition, corporate management facilitates the sharing
of advertising resources and information across the Company's publications.
CIRCULATION
While circulation revenue is not as significant as advertising revenue,
circulation trends impact the decisions of advertisers and advertising rates.
Substantially all of the Company's circulation revenues are derived from home
delivery sales of publications to subscribers and single copy sales made through
retailers and vending racks. The Company continuously seeks to improve its
publications in order to attract new readers and to engage more fully existing
readers. Quality enhancements implemented by management have included:
converting selected newspapers from afternoon to morning publication; upgrading
and expanding printing facilities and printing presses; increasing the use of
color and color photographs; improving graphic design and, when appropriate,
implementing complete redesigns; and developing creative and interactive
promotional campaigns.
Circulation accounted for approximately 22.6% of the Company's total
revenues in 1997. Approximately 78.4% of 1997 circulation revenues were derived
from subscription sales and approximately 21.6% were derived from single copy
sales. Single copy sales rates currently range from $0.35 to $0.50 per daily
copy. The Company owns and operates 55 paid daily publications that range in
circulation from approximately 1,100 to 12,500 and 34 paid non-daily
publications that range in circulation from approximately 100 to 41,000. The
Company's corporate management works with its local newspaper management to
establish subscription and single copy rates. The Company also implements
creative and interactive programs and promotions to increase readership through
both subscription and single copy sales.
43
<PAGE> 48
NEWSPRINT
The Company's typical local paid daily or non-daily local newspaper has 8
to 14 broadsheet pages. Newsprint represents the largest raw material expense of
the Company, but is not the most significant operating expense. The Company has
relatively low exposure to fluctuations in newsprint prices due to much lower
page counts than large metropolitan newspapers, with newsprint comprising 6.2%
of the Company's total 1997 revenues compared to approximately 25% for large
metropolitan newspapers. Newsprint expense increased significantly in 1995 on an
industry-wide basis, peaking at $770 per metric ton in the first quarter of 1996
(based on average East Coast transaction prices), as reported by the trade
publication Pulp and Paper Weekly. Prices began to decrease in the second
quarter of 1996, and by December 1996, had decreased to $500 per metric ton
(based on East Coast transaction prices). At December 31, 1997, newsprint prices
were $595 per metric ton (based on East Coast transaction prices). The Company
seeks to manage the effects of increases in prices of newsprint through a
combination of, among other things, technology improvements, including web width
reduction, inventory management and advertising and circulation price increases.
For example, the Company has been able to successfully pass on some of its
historical newsprint increases to consumers through increases in the cover
prices of its newspapers and reduced page counts. The Company has no long-term
contracts to purchase newsprint. The Company's newspapers purchase a portion of
their newsprint direct from paper mills and also make opportunistic spot market
purchases within their geographic region. The Company believes that its
purchasing policies have resulted in the Company's publications obtaining
favorable newsprint prices.
EMPLOYEES
The Company employs approximately 1,900 employees in 11 states and has
agreements with 6 local collective bargaining agents representing, in the
aggregate, approximately 30 employees. The Company has not experienced any
strikes or general work stoppages in the past ten years and believes that its
relations with its employees are excellent.
SEASONALITY
Newspaper companies tend to follow a distinct and recurring seasonal
pattern. The first quarter of the year tends to be the weakest quarter because
advertising volume is then at its lowest level. Conversely, the fourth quarter
includes the effects of holiday season advertising. However, the Company
believes that seasonality has not had a material impact on the Company's
historical results of operations.
COMPETITION
Each of the Company's newspapers competes to varying degrees with
magazines, radio, television and cable television, as well as with some weekly
publications and other advertising media, including electronic media, for
advertising and circulation revenue. Competition for newspaper advertising is
largely based upon circulation, price and content of the newspaper. The
Company's paid daily newspapers are the dominant local news and information
source, with strong name recognition in their markets and virtually no direct
competition from similar daily newspapers published in their markets. In certain
of the Company's markets, some circulation competition exists from larger daily
newspapers that are published in metropolitan areas. However, the Company
believes that local newspaper publications such as the Company's newspapers have
several advantages over metropolitan newspaper publications, including a lower
cost structure, the ability to publish only on their most profitable days (i.e.
paid non-daily newspapers), the ability to offer local advertisements more
effectively and the ability to avoid expensive investments in wire services and
syndicated feature material. The Company's advertising permits small merchants,
individual classified and other advertisers to advertise solely in their own
local areas at a cost lower than that of a full-run metropolitan newspaper
publication. Thus, the typical local newspaper has a broader advertiser base
than, and does not rely to the same degree as a metropolitan newspaper
publication on, major retailers for advertising revenues. In addition, the
Company believes advertisers generally regard newspaper advertising as the most
effective method of advertising promotions and pricing as compared to
television, which is generally used to advertise image.
44
<PAGE> 49
PROPERTIES AND FACILITIES
The Company has 91 operating and production facilities for its community
publications in the United States. Of the 91 operating and production
facilities, 71 are owned and the remaining 20 are leased for terms ranging from
one to five years. These facilities range in size from approximately 800 to
23,000 square feet. The Company uses modern data processing equipment in its
business management operations and in its typesetting. The Company believes that
all of its properties are in generally good condition, are well maintained and
are adequate for their current operations.
45
<PAGE> 50
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of individuals
who serve as directors of Holdings and executive officers of Holdings and
Liberty Group Operating. Each director of Holdings will hold office until the
next annual meeting of the stockholders or until his successor has been elected.
Qualified officers of Holdings and Liberty Group Operating are elected by their
respective Boards of Directors and serve at the discretion of such Boards.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Kenneth L. Serota......................... 36 President and Chief Executive Officer and Director
Kenneth W. Cope........................... 62 Executive Vice President and Director
Scott T. Champion......................... 36 Senior Vice President
Gene A. Hall.............................. 46 Senior Vice President
Joseph C. Piccirillo...................... 62 Senior Vice President
Leonard I. Green.......................... 64 Chairman of the Board of Directors
Gregory J. Annick......................... 34 Director
John G. Danhakl........................... 41 Director
Peter J. Nolan............................ 39 Director
</TABLE>
Kenneth L. Serota is President and Chief Executive Officer. Mr. Serota is
also a director of Holdings and the Company. He served as Vice President--Law &
Finance and Secretary of Hollinger from May 1995 to December 1997 and as a
director of APC from 1996 to 1997. Prior thereto, Mr. Serota served as Senior
Vice President of a privately held frozen food manufacturer from June 1992
through March 1995. Previously, Mr. Serota served as an attorney and a certified
public accountant in private practice. Mr. Serota has significant experience
negotiating and closing acquisitions of newspaper publications and primarily
focuses his efforts on executing the Company's acquisition program and
overseeing all administrative functions of Holdings and the Company.
Kenneth W. Cope is Executive Vice President and has primary responsibility
for newspaper publications in the western region of the United States. Mr. Cope
is also a director of Holdings and the Company. He served as Deputy Chairman of
APC from August 1996 to January 1998. Prior thereto, he served as Executive Vice
President and a member of APC's Board of Directors from 1989 to 1996. Mr. Cope
had been employed at APC since 1987 and had completed more than 50 acquisitions
of local publications during his tenure at APC. Prior to his employment at APC,
Mr. Cope was an owner of the Neosho Daily News in Neosho, Missouri, which is a
publication acquired by the Company in the Acquisition. Mr. Cope has more than
38 years' experience in the newspaper industry. Mr. Cope is also a director of
Community Bank & Trust.
Scott T. Champion is a Senior Vice President and has primary responsibility
for newspaper publications in the central region of the United States. He served
as a Senior Vice President of APC from 1996 to 1998. Prior thereto, he served as
a regional manager and district manager of APC and had been employed at APC
since 1988. Prior to his employment at APC, Mr. Champion served as the publisher
of a group of privately owned newspaper publications. Mr. Champion currently
serves as the publisher of the Daily Review Atlas and Pennysaver in Monmouth,
Illinois, which publications were acquired by the Company in the Acquisition,
and has served in such position since 1984. Mr. Champion has more than 18 years'
experience in the newspaper industry.
Gene A. Hall is a Senior Vice President and has primary responsibility for
newspaper publications in the midwestern region of the United States. He served
as a Senior Vice President of APC from 1992 to 1998. Prior thereto, he served as
a regional manager of APC and had been employed at APC since 1988. Prior to his
employment at APC, Mr. Hall was the owner and publisher of the Charles City
Press, Six County Shopper and The Extra in Charles City, Iowa. Mr. Hall
currently serves as the publisher of the Charles City Press, Six County Shopper
and The Extra, which publications were acquired by the Company in the
Acquisition, and has
46
<PAGE> 51
served in such positions since 1986. Mr. Hall has more than 28 years' experience
in the newspaper industry. Mr. Hall is also a director of First Security Bank &
Trust.
Joseph C. Piccirillo is a Senior Vice President and has primary
responsibility for newspaper publications in the eastern region of the United
States. He served as a Senior Vice President of APC from 1994 to 1998. Prior
thereto, he served as a regional manager of APC and had been employed at APC
since 1987. Prior to his employment at APC, Mr. Piccirillo served as regional
manager for the Bradford, Pennsylvania newspaper group that formed the core
group of APC. Mr. Piccirillo currently serves as the publisher of The Ridgway
Record and Shop-Right in Ridgway, Pennsylvania, which publications were acquired
by the Company in the Acquisition, and has served in such position since 1971.
Mr. Piccirillo has more than 40 years' experience in the newspaper industry.
Leonard I. Green is the Chairman of the Board of Directors of Holdings. He
has been an executive officer and an equity owner of LGP, a merchant banking
firm that manages GEI, since the formation of LGP and GEI in 1994 by the
principals of Leonard Green & Associates, L.P. ("LGA"). Mr. Green has also been,
individually or through a corporation, a partner in LGA, a merchant banking
firm, since its inception in 1989. Prior to forming LGA, Mr. Green had been a
partner of Gibbons, Green, van Amerongen for more than five years. Mr. Green is
also a director of Rite Aid Corporation, Carr-Gottstein Foods Co.,
Communications & Power Industries, Inc. and Hechinger Company.
Gregory J. Annick is a director of Holdings. He has been an executive
officer and an equity owner, through a trust, of LGP, a merchant banking firm
that manages GEI, since the formation of LGP and GEI in 1994 by the principals
of LGA. He joined LGA as an associate in 1989, became a principal in 1993, and
through a corporation became a partner of LGA in 1994. From 1988 to 1989, Mr.
Annick was an associate with the merchant banking firm of Gibbons, Green, van
Amerongen. Before that time, Mr. Annick was a financial analyst in mergers and
acquisitions with Goldman, Sachs & Co. Mr. Annick is also a director of
Carr-Gottstein Foods Co., Communications & Power Industries, Inc., Leslie's
Poolmart, Inc. and Hechinger Company.
John G. Danhakl is a director of Holdings. He has been an executive officer
and an equity owner of LGP, a merchant banking firm that manages GEI, since
1995. Mr. Danhakl had previously been a Managing Director at Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") and had been with DLJ since 1990. Prior
to joining DLJ, Mr. Danhakl was a Vice President at Drexel Burnham Lambert
Incorporated ("Drexel"). Mr. Danhakl is also a director of Big 5 Corp.,
Communications & Power Industries, Inc., Leslie's Poolmart, Inc., Hechinger
Company, Twinlab Corporation and The Arden Group, Inc.
Peter J. Nolan is a director of Holdings. He has been an executive officer
and an equity owner of LGP, a merchant banking firm that manages GEI, since
April 1997. Mr. Nolan had previously been a Managing Director of DLJ and Co-Head
of DLJ's Los Angeles Investment Banking Division and had been with DLJ since
1990. Prior to joining DLJ, Mr. Nolan was a First Vice President at Drexel. Mr.
Nolan is also a member of the Supervisory Board of adidas AG and a director of
Wavetek Corporation.
47
<PAGE> 52
EXECUTIVE COMPENSATION
The information set forth in this section relates to Mr. Serota, who serves
as President and Chief Executive Officer of Holdings and the Company, and the
four next most highly compensated employees of Holdings and the Company who
serve as executive officers of Holdings and the Company and whose total
compensation for services rendered for 1997 exceeded $100,000 (collectively, the
"Named Executive Officers").
The following table summarizes the compensation received by the Named
Executive Officers from Hollinger or its wholly owned subsidiaries for the year
ended December 31, 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARD
-------------------------------------- ------------------------------------
SECURITIES
RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($) AWARDS($) SARS(#) PAYOUTS($) COMPENSATION($)
- --------------------------- --------- -------- --------------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Kenneth L. Serota........ 206,600 44,000 -- -- 30,000 -- 29,833(1)
Chief Executive Officer
and President
Kenneth W. Cope.......... 187,500 10,000 -- -- 10,000 -- 31,000(2)
Executive Vice President
Scott T. Champion........ 56,160 106,898 6,000(3) -- -- -- 5,000(4)
Senior Vice President
Gene A. Hall............. 47,960 68,990 11,000(3) -- -- -- 5,000(4)
Senior Vice President
Joseph C. Piccirillo..... 80,800 53,400 -- -- -- -- 5,000(4)
Senior Vice President
</TABLE>
- ---------------
(1) Represents fees paid of $24,333 to Mr. Serota for services as a director of
APC and a car allowance of $5,500.
(2) Represents fees paid of $26,000 to Mr. Cope for services as a director of
APC and $5,000 as a deferred compensation contribution.
(3) Amounts based on a payment of $1,000 per operating facility in the region
managed.
(4) Amounts paid as deferred compensation contribution.
EMPLOYMENT CONTRACTS, CHANGE IN CONTROL ARRANGEMENTS AND OTHER PAYMENTS
The Company, Holdings and Kenneth Serota have entered into an employment
agreement, dated as of November 21, 1997 (the "Employment Agreement"), whereby
Mr. Serota has agreed to serve as President and Chief Executive Officer of the
Company for a period of three years commencing January 1, 1998 and for
additional successive one-year periods thereafter, unless either party gives
timely notice to the other that the employment term shall not be so extended.
The Employment Agreement provides for a base salary of $350,000, $375,000 and
$400,000 for the years 1998, 1999 and 2000, respectively, and those benefits
generally available to the employees of the Company, including life insurance,
health insurance, deferred compensation and profit sharing. In addition to
receiving a base salary, Mr. Serota is eligible to receive a bonus based on the
attainment of applicable performance standards agreeable to the Company and Mr.
Serota, including standards based on annual revenue growth, EBITDA growth,
completion of reasonably acceptable acquisitions and growth of acquired
properties. The Employment Agreement also provides, subject to certain
exceptions, that upon a termination of Mr. Serota's employment during the term
thereof (other than for "cause" as defined therein or voluntary resignation),
the Company is generally obligated to pay Mr. Serota the greater of one year's
salary or an amount equal to his base salary for the remaining term under the
Employment Agreement plus, in either case, a portion of his bonus for the year
of termination. The Company has also loaned to Mr. Serota $250,000 pursuant to
an Unsecured Promissory Note dated January 27, 1998. The amount of the loan will
be forgiven by the Company pro rata on a daily basis during the initial
three-year term of the Employment Agreement and shall be forgiven in its
entirety if Mr. Serota is terminated by the
48
<PAGE> 53
Company without cause, if Mr. Serota terminates his employment for good reason
(as defined therein), death or disability, or upon the consummation of an
initial public offering of securities of the Company or Holdings.
On January 27, 1998, in satisfaction of Holdings' and the Company's
obligations under the terms of the Employment Agreement, GEI transferred to Mr.
Serota 2% of the fully-diluted equity of Holdings and, in addition, Mr. Serota
purchased from GEI an additional 2% of the fully-diluted equity of Holdings for
the price and on the terms and conditions such equity was purchased by GEI. The
Company loaned to Mr. Serota 50% of the purchase price of such shares pursuant
to a Secured Recourse Promissory Note dated January 27, 1998. Such loan bears
interest at a rate equal to the applicable federal rate for loans of the same
maturity as of the date of the loan. The outstanding principal amount of the
loan, together with all interest accrued thereon, will be due and payable in
full upon the earlier of (i) a change in control (as defined in the Employment
Agreement) or (ii) January 1, 2001. The Employment Agreement provides certain
"call" rights to Holdings, which are generally exercisable upon Mr. Serota's
termination of employment with the Company.
MANAGEMENT SHARES
On January 27, 1998, GEI transferred an aggregate of 3,200 shares of
Holdings Common Stock ("Management Shares") to the Chief Executive Officer of
the Company, Mr. Serota, pursuant to a management stockholders agreement (the
"Management Stockholders Agreement"). The Management Stockholders Agreement
contains a "call" option exercisable by Holdings upon termination of Mr.
Serota's employment with Holdings or Liberty Group Operating, a right of first
refusal in favor of Mr. Serota, certain "piggyback" registration rights,
"tag-along" sale rights and "drag-along" sale obligations consistent with the
terms the Employment Agreement. In addition, Holdings or GEI may sell shares of
Holdings Common Stock to other current or prospective officers and employees of
Liberty Group Operating (together with the Senior Management Investors, the
"Management Investors"). As of the date hereof, no Management Shares have been
transferred to any officer or employee other than Mr. Serota.
Shares of Holdings Common Stock will be sold to Management Investors
pursuant to Management Subscription and Stockholders Agreements among Holdings,
GEI and the respective Management Investor (each such agreement, a "Management
Share Agreement"). Pursuant to the Management Share Agreements, transfers of the
Management Shares (other than transfers to certain related transferees) will be
subject to various restrictions, including a right of first refusal in favor of
Holdings. Each Management Share Agreement also contains a "call" option
exercisable by Holdings upon termination of the Management Investor's employment
with Holdings, Liberty Group Operating and their subsidiaries. The Management
Share Agreements also contain certain "piggyback" registration rights,
"tag-along" sale rights and "drag-along" sale obligations. These rights and
obligations lapse upon the occurrence of certain events.
COMPENSATION OF DIRECTORS
Individuals who are officers of Liberty Group Operating and Holdings, as
well as Messrs. Green, Annick, Danhakl and Nolan, do not receive any
compensation directly for their service on Holdings' and Liberty Group
Operating's Boards of Directors. Liberty Group Operating has agreed, however, to
pay LGP certain fees for various management, consulting and financial planning
services, including assistance in strategic planning, providing market and
financial analyses, negotiating and structuring financing and exploring
expansion opportunities. See "Certain Relationships and Related Transactions."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Upon the consummation of the Acquisition, LGP received a fee of $6.8
million for its services in arranging and structuring the Transactions.
In connection with the Acquisition, Liberty Group Operating entered into a
Management Agreement with LGP pursuant to which Liberty Group Operating agreed
to pay LGP an annual management fee of $1.0 million. Such fee is payable in
equal monthly installments, but is subordinated in right of payment to the New
Debentures and the New Senior Subordinated Notes. See "Principal Stockholders,"
"Management--Directors and Executive Officers" and "--Compensation of
Directors."
49
<PAGE> 54
THE ACQUISITION
GENERAL
On January 27, 1998, the Company acquired all of the assets that were used
primarily in the business of publishing, marketing and distributing the Local
Publication pursuant to an Asset Purchase Agreement, dated as of November 21,
1997, by and among Holdings, Liberty Group Operating, GEI, Hollinger and certain
of Hollinger's subsidiaries and an Asset Purchase Agreement, dated as of
November 21, 1997, by and among Holdings, Liberty Group Operating, GEI,
Hollinger and certain of Hollinger's subsidiaries, and American Publishing
Company of Illinois, a wholly-owned subsidiary of Hollinger, (collectively, the
"Asset Purchase Agreements"). In consideration of the transfer of such assets,
the Company paid Hollinger (including its affiliates) the contractual purchase
price of $309.1 million, plus interest of $1.1 million, calculated pursuant to
the Asset Purchase Agreements, and received from Hollinger a cash adjustment of
$3.0 million, which resulted in a net Purchase Price of $307.2 million. In
addition, the Company assumed certain specified liabilities of the Local
Publications. The aggregate Purchase Price may be adjusted further to the extent
the dollar amounts of the accounts receivable of the Local Publications existing
as of December 31, 1997 have not been collected by the Company (or its
affiliates) within 120 days of December 31, 1997 and exceed the full amount of
the reserve for receivables reflected in the Net Current Assets.
The liabilities of the Local Publications assumed (collectively, the
"Assumed Liabilities") include (i) liabilities reflected on the balance sheet
included in the financial statements dated as of September 30, 1997, (ii) other
liabilities incurred by the Local Publications since September 30, 1997 not in
breach of the Asset Purchase Agreements and in the ordinary course of business
that were of the type that would be reflected in a balance sheet prepared in
conformity with generally accepted accounting principles and consistent with the
financial statements referred to above, and (iii) certain other limited types of
liabilities specified in the Asset Purchase Agreements. Except for the Assumed
Liabilities, Hollinger and its affiliates retained all liabilities relating to
the operation of the Local Publications prior to the Closing Date, including,
among other things, liabilities relating to litigation, governmental claims and
environmental claims relating to the pre-closing operation of the Local
Publications (collectively, the "Retained Liabilities"). See "--Indemnification
Provisions."
The Acquisition, including the payment of related fees and expenses, was
financed from (i) proceeds of $180.0 million from the issuance and sale of the
Old Senior Subordinated Notes; (ii) proceeds of $50.5 million from the issuance
and sale of the Old Debentures; (iii) proceeds of $45.0 million from the
issuance and sale of the Old Senior Preferred Stock; (iv) proceeds of $49.0
million from the issuance and sale of Holdings Junior Preferred Stock; and (v)
proceeds of $8.0 million from the issuance and sale of shares of Holdings Common
Stock. See "Description of Other Indebtedness" and "Description of Holdings'
Capital Stock."
INDEMNIFICATION PROVISIONS
The Asset Purchase Agreements contain provisions customary for transactions
of similar size and type, including representations and warranties and certain
covenants, which generally will expire at the end of the eighteenth month
following the consummation of the Acquisition.
In addition, pursuant to the terms of the Asset Purchase Agreements,
Hollinger agreed to indemnify and reimburse the Company for all losses arising
from breaches of certain covenants and agreements of Hollinger in the Asset
Purchase Agreements, all Retained Liabilities, including environmental claims
arising from the pre-closing operation of the Local Publications, and certain
other matters as specified in the Asset Purchase Agreements. In turn, the
Company agreed to indemnify and reimburse Hollinger for all losses arising from
breaches of covenants and agreements of Liberty Group Operating and Holdings in
the Asset Purchase Agreements, liabilities and obligations of Liberty Group
Operating or Holdings relating to or arising out of the conduct of the business
or the use of the assets following the Acquisition or the Assumed Liabilities.
As to such indemnification obligations of Hollinger and Liberty Group Operating,
there are no time limitations or deductibles.
50
<PAGE> 55
OTHER AGREEMENTS RELATED TO THE ACQUISITION
Non-Competition Agreement. On January 27, 1998, the Company and Hollinger
entered into the Non-Competition Agreement, whereby Hollinger agreed not to
compete, directly or indirectly, with the Company's acquired publications. The
Non-Competition Agreement is for a term of five years from the Closing Date and
its scope includes all postal zip codes in which any publication owned by the
Company as of the Closing Date is distributed. Of the total Purchase Price of
the Acquisition, approximately $30.9 million represented consideration in
connection with the Non-Competition Agreement.
Transitional Services Agreement. On January 27, 1998, the Company and APMS
entered into the Transitional Services Agreement which requires APMS to, at the
Company's option, provide certain services to the Company in order to facilitate
the transition of the Company to a stand-alone operation. Such services include,
among others: (i) accounting and finance-related information systems and
administrative processing support, (ii) employee benefits and insurance
coverage, administrative and information processing support, and (iii) treasury
and advertising services. APMS will provide such services to the Company at cost
for a period of up to three years after the Closing Date.
51
<PAGE> 56
PRINCIPAL STOCKHOLDERS
The information in the following table sets forth the ownership of Holdings
Common Stock by (i) each person who beneficially owns more than 5% of the
outstanding shares of Holdings Common Stock, (ii) each executive officer of
Holdings, (iii) each director of the Company, and (iv) all directors and
executive officers of Holdings as a group. Except as noted below, each person or
entity has sole voting and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT
--------- -------
<S> <C> <C>
Green Equity Investors II, L.P.(1).......................... 76,800 96.0%
Leonard I. Green(1)(2)...................................... 76,800 96.0
Gregory J. Annick(1)(2)..................................... 76,800 96.0
John G. Danhakl(1)(2)....................................... 76,800 96.0
Peter J. Nolan(1)(2)........................................ 76,800 96.0
Kenneth L. Serota........................................... 3,200 4.0
Kenneth W. Cope............................................. 0 0.0
Scott T. Champion........................................... 0 0.0
Gene A. Hall................................................ 0 0.0
Joseph C. Piccirillo........................................ 0 0.0
All directors and executive officers as a group (9
persons)(3)............................................... 80,000 100.0
</TABLE>
- ---------------
(1) The address of Green Equity Investors II, L.P. and Messrs. Green, Annick,
Danhakl and Nolan is 11111 Santa Monica Boulevard, Suite 2000, Los Angeles,
California 90025.
(2) The shares shown as beneficially owned by Messrs. Green, Annick, Danhakl and
Nolan represent 76,800 shares owned of record by GEI. GEI is a Delaware
limited partnership managed by LGP, which is an affiliate of the general
partner of GEI. Each of Leonard I. Green, Jonathan D. Sokoloff, John G.
Danhakl, Gregory J. Annick, Peter J. Nolan and Jennifer Holden Dunbar,
either directly (whether thorough ownership interest or position) or through
one or more intermediaries, may be deemed to control LGP and such general
partner. LGP and such general partner may be deemed to control the voting
and disposition of the shares of Holdings Common Stock owned by GEI. As
such, Messrs. Green, Annick, Danhakl and Nolan may be deemed to have shared
voting and investment power with respect to all shares held by GEI. However,
such individuals disclaim beneficial ownership of the securities held by
GEI, except to the extent of their respective pecuniary interests therein.
(3) Includes the shares referred to in Note 2 above.
REGISTRATION AND OTHER CONTRACTUAL RIGHTS OF CERTAIN STOCKHOLDERS OF HOLDINGS
The Management Investors will be granted certain registration rights and
"tag-along" rights and will be subject to certain "drag-along" obligations. See
"Management--Management Shares."
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DESCRIPTION OF NEW SENIOR PREFERRED STOCK
Set forth below is a summary of certain provisions of the Holdings Senior
Preferred Stock. The following summary of material provisions of the Holdings
Senior Preferred Stock does not purport to be complete and is qualified in its
entirety by reference to the provisions of the Certificate of Designations
relating thereto, a copy of which may be obtained upon request from Holdings.
Whenever particular provisions of the Certificate of Designations are referred
to in this summary, such provisions are incorporated by reference as a part of
the statements made and such statements are qualified in their entirety by such
references. The definition of certain capitalized terms used in the following
summary are set forth under "--Certain Definitions" below and "Description of
New Debentures--Certain Definitions." Other capitalized terms used herein and
not otherwise defined in this section shall have the meanings assigned to them
in the Certificate of Designations. See "Book-Entry; Delivery and Form" for
additional information regarding the New Senior Preferred Stock.
GENERAL
The Old Senior Preferred Stock was, and the New Senior Preferred Stock will
be, issued pursuant to the terms of the Certificate of Designations (the
"Certificate of Designations").
Holdings is authorized to issue 21,175,000 shares of preferred stock. As of
the date of this Prospectus, there are 1,800,000 shares of Old Senior Preferred
Stock and 49,000 shares of Holdings Junior Preferred Stock outstanding. The
Certificate of Incorporation of Holdings authorizes the Board of Directors,
without stockholder approval, to issue shares of preferred stock in addition to
the New Senior Preferred Stock from time to time in one or more series, with
such designations, preferences and relative participating, optional or other
special rights, qualifications, limitations or restrictions as determined by the
Board of Directors. As of the date hereof, all shares of authorized preferred
stock have been designated Holdings Senior Preferred Stock or Holdings Junior
Preferred Stock pursuant to the Certificate of Designations. The Board of
Directors of Holdings adopted resolutions creating a maximum of 21,000,000
shares of Holdings Senior Preferred Stock and Holdings filed the Certificate of
Designations with respect thereto with the Secretary of State of the State of
Delaware as required by Delaware law. Of the 21,000,000 shares of Holdings
Senior Preferred Stock, 1,800,000 shares were issued in the Offering and
1,800,000 shares are contemplated to be issued in the Exchange Offer. Subject to
certain conditions, the Holdings Senior Preferred Stock is exchangeable for
Exchange Debentures, in whole but not in part, at the option of Holdings on any
Dividend Payment Date. The New Senior Preferred Stock will be fully paid and
nonassessable, and the holders thereof (the "Holders") will not have any
subscription or preemptive rights with respect to securities of Holdings. For
purposes of this section and "Description of Exchange Debentures," the term
"Holders" shall mean the holders of either series of Holdings Senior Preferred
Stock.
RANKING
With respect to dividend distributions and distributions upon the
liquidation, winding up or dissolution of Holdings, the Holdings Senior
Preferred Stock will rank: (i) senior to all classes of Holdings Common Stock
and Holdings Junior Preferred Stock and each other class of capital stock or
series of preferred stock created hereafter (the "Junior Securities"), which
terms do not expressly provide that it ranks senior to the Holdings Senior
Preferred Stock; (ii) on a parity to each other class of capital stock or series
of preferred stock created after the Offer Date (the "Parity Securities"), which
terms expressly provide that it ranks on a parity to the Holdings Senior
Preferred Stock; and (iii) junior to each class of capital stock or series of
preferred stock created after the date hereof which terms have been approved by
the Holders of the Holdings Senior Preferred Stock and which expressly provide
that it ranks senior to the Holdings Senior Preferred Stock (the "Senior
Securities").
DIVIDENDS
Holders of Holdings Senior Preferred Stock will be entitled to receive,
when, as and if declared by the Board of Directors, out of funds legally
available therefor, distributions in the form of cash dividends on each share of
Holdings Senior Preferred Stock, at a rate per annum equal to 14 3/4% of the
liquidation preference per
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share of the Holdings Senior Preferred Stock, payable quarterly. All dividends
shall be cumulative, whether or not earned or declared, on a daily basis from
the Preferred Stock Issue Date and shall be payable quarterly in arrears on each
Dividend Payment Date, commencing on May 1, 1998; provided that if any dividend
payable on any Dividend Payment Date is not declared and paid in full in cash on
such Dividend Payment Date, the amount payable as dividends on such Dividend
Payment Date that is not paid in cash on such Dividend Payment Date shall be
paid by Holdings in additional fully paid and non-assessable shares (including
fractional shares, if applicable) of Holdings Senior Preferred Stock having an
aggregate liquidation preference equal to the amount of such dividends (rounded
to the nearest whole cent), it being understood that dividends shall begin to
accrue from such Dividend Payment Date on such additional shares of Holdings
Senior Preferred Stock whether such additional shares of Holdings Senior
Preferred Stock are issued on such date or any later date or are never issued.
The payment by Holdings in such additional shares of Holdings Senior Preferred
Stock shall constitute full payment of such dividend. Each distribution in the
form of a dividend (whether in cash or in additional shares of Holdings Senior
Preferred Stock) shall be payable to the Holders of Holdings Senior Preferred
Stock of record as they appear on the stock books of Holdings on such record
dates, not less than 10 nor more than 45 days preceding the related Dividend
Payment Date, as shall be fixed by the Board of Directors. Dividends shall cease
to accumulate in respect of shares of the Holdings Senior Preferred Stock on the
Exchange Date or on the date of their earlier redemption unless Holdings shall
have failed to issue the appropriate aggregate principal amount of Exchange
Debentures in respect of the Holdings Senior Preferred Stock on the Exchange
Date or shall have failed to pay the relevant redemption price on the date fixed
for redemption.
Dividends on account of arrears for any past Dividend Period and dividends
in connection with any optional redemption may be declared and paid at any time,
without reference to any regular Dividend Payment Date, to Holders of Holdings
Senior Preferred Stock of record on such date, not more than 45 days prior to
the payment thereof, as may be fixed by the Board of Directors.
No full dividends shall be declared by the Board of Directors or paid or
funds set apart for payment of dividends by Holdings on any Parity Securities
for any period unless full cumulative dividends shall have been or
contemporaneously are declared and paid in full, or declared and (in the case of
dividends payable in cash) a sum in cash set apart sufficient for such payment,
on the Holdings Senior Preferred Stock for all Dividend Periods terminating on
or prior to the date of payment of such full dividends on such Parity
Securities. If any dividends are not paid in full, as aforesaid, upon the shares
of the Holdings Senior Preferred Stock and any other Parity Securities, all
dividends declared upon shares of the Holdings Senior Preferred Stock and any
other Parity Securities shall be declared pro rata based on the relative
liquidation preference of the Holdings Senior Preferred Stock and such Parity
Securities. So long as any shares of the Holdings Senior Preferred Stock are
outstanding, Holdings shall not make any payment on account of, or set apart for
payment money for a sinking or other similar fund for, the purchase, redemption
or other retirement of, any of the Parity Securities or any warrants, rights,
calls or options exercisable for or convertible into any of the Parity
Securities, and shall not permit any corporation or other entity directly or
indirectly controlled by Holdings to purchase or redeem any of the Parity
Securities or any such warrants, rights, calls or options unless full dividends
on the Holdings Senior Preferred Stock shall have been paid or contemporaneously
are declared and paid in full.
So long as any shares of Holdings Senior Preferred Stock are outstanding,
and except for Restricted Payments permitted by the terms of the Certificate of
Designations, Holdings shall not (1) declare, pay or set apart for payment any
dividend on any of the Junior Securities or make any payment on account of, or
set apart for payment money for a sinking or other similar fund for, the
purchase, redemption or other retirement of, any of the Junior Securities or any
warrants, rights, calls or options exercisable for or convertible into any of
the Junior Securities (other than the repurchase, redemption or other
acquisition or retirement for value of Junior Securities (and any warrants,
rights, calls or options exercisable for or convertible into such Junior
Securities) held by certain employees of or consultants or advisors to Holdings
or any of its Subsidiaries, which repurchase, redemption or other acquisition or
retirement shall have been approved by a majority of the Board of Directors,
provided that such Junior Securities may only be repurchased, redeemed or
otherwise acquired or retired either in exchange for Junior Securities or upon
the termination, retirement, death or
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disability of such employee, consultant or advisor), or (2) make any
distribution in respect thereof, either directly or indirectly, and whether in
cash, obligations or shares of Holdings or other property (other than
distributions or dividends in Junior Securities to the holders of Junior
Securities), or (3) permit any corporation or other entity directly or
indirectly controlled by Holdings to purchase or redeem any of the Junior
Securities or any such warrants, rights, calls or options, unless in any such
case full cumulative dividends have been paid in full in cash on the Holdings
Senior Preferred Stock (such payment to include the redemption of all shares of
Holdings Senior Preferred Stock previously issued as payment for dividends) and
all other redemption or repayment obligations in respect of the Holdings Senior
Preferred Stock have been paid in full in cash. See "--Limitation on Restricted
Payments."
Dividends payable on shares of the Holdings Senior Preferred Stock for any
period less than a year shall be computed on the basis of a 360-day year of
twelve 30-day months and the actual number of days elapsed in the period for
which payable. If any Dividend Payment Date occurs on a day that is not a
Business Day, any accrued dividends otherwise payable on such Dividend Payment
Date shall be paid on the next succeeding Business Day.
OPTIONAL REDEMPTION
Holdings may (subject to contractual and other restrictions with respect
thereto and to the legal availability of funds therefor), at the option of
Holdings, redeem at any time or from time to time on or after February 1, 1999,
from any source of funds legally available therefor, in whole or in part, any or
all of the shares of the Holdings Senior Preferred Stock, at a redemption price
equal to the following percentages of the liquidation preference per share plus,
without duplication, an amount in cash equal to all accumulated and unpaid
dividends per share (including an amount in cash equal to a prorated dividend
for the period from the Dividend Payment Date immediately prior to the
Redemption Date to the Redemption Date) (the "Optional Redemption Price"), in
each case beginning on February 1 of the year indicated:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
1999............................................. 105%
2000............................................. 104%
2001............................................. 103%
2002............................................. 102%
2003............................................. 101%
2004 and thereafter.............................. 100%
</TABLE>
In the event of partial redemptions of the Holdings Senior Preferred Stock,
Holdings shall effect such redemption as it determines, pro rata, according to
the number of shares held by each Holder of Holdings Senior Preferred Stock or
by lot, as may be determined by Holdings in its sole discretion. No optional
redemption may be authorized or made at any time when Holdings is making or
required to make within the next 30 days, or purchasing shares of Holdings
Senior Preferred Stock under, a Change of Control Offer. No partial redemptions
of Holdings Senior Preferred Stock may be authorized or made at any time when
full cumulative dividends on the Holdings Senior Preferred Stock for all past
Dividend Periods have not been declared and paid in full.
MANDATORY REDEMPTION
The Holdings Senior Preferred Stock will also be subject to mandatory
redemption (subject to contractual and other restrictions with respect thereto
and to the legally availability of funds therefor) in whole on February 1, 2010
at a price equal to 100% of the liquidation preference per share, plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends per
share (including an amount equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Redemption Date to the Redemption
Date) (the "Mandatory Redemption Price").
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PROCEDURE FOR REDEMPTION
At least 15 days and not more than 60 days prior to the date fixed for any
redemption of the Holdings Senior Preferred Stock, written notice (the
"Redemption Notice") shall be given by first-class mail, postage prepaid, to
each Holder of Holdings Senior Preferred Stock of record on the record date
fixed for such redemption of the Holdings Senior Preferred Stock at such
Holder's address as the same appears on the stock register of Holdings, provided
that no failure to give such notice nor any deficiency therein shall affect the
validity of the procedure for the redemption of any shares of Holdings Senior
Preferred Stock to be redeemed except as to the Holder or Holders to whom
Holdings has failed to give said notice or except as to the Holder or Holders
whose notice was defective. The Redemption Notice shall state: (1) whether the
redemption is an optional redemption or a mandatory redemption; (2) the Optional
Redemption Price or the Mandatory Redemption Price, as the case may be; (3)
whether all or less than all the outstanding shares of the Holdings Senior
Preferred Stock are to be redeemed and the total number of shares of the
Holdings Senior Preferred Stock being redeemed; (4) the number of shares of
Holdings Senior Preferred Stock held, as of the appropriate record date, by the
Holder that Holdings intends to redeem; (5) the date fixed for redemption; (6)
that the Holder is to surrender to Holdings, at the place or places where
certificates for shares of Holdings Senior Preferred Stock are to be surrendered
for redemption, in the manner and at the price designated, his certificate or
certificates representing the shares of Holdings Senior Preferred Stock to be
redeemed; and (7) that dividends on the shares of the Holdings Senior Preferred
Stock to be redeemed shall cease to accrue on such Redemption Date unless
Holdings defaults in the payment of the Optional Redemption Price or the
Mandatory Redemption Price, as the case may be.
Holders of Holdings Senior Preferred Stock must surrender the certificate
or certificates representing shares of Holdings Senior Preferred Stock held by
the Holder to Holdings, duly endorsed, in the manner and at the place designated
in the Redemption Notice, and on the Redemption Date, the full Optional
Redemption Price or Mandatory Redemption Price, as the case may be, for such
shares shall be payable in cash to the Person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered
certificate shall be canceled and retired. In the event that less than all of
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares.
Unless Holdings defaults in the payment in full of the applicable
redemption price, dividends on the Holdings Senior Preferred Stock called for
redemption shall cease to accumulate on the Redemption Date, and the Holders of
such redemption shares shall cease to have any further rights with respect
thereto on the Redemption Date, other than the right to receive the Optional
Redemption Price or the Mandatory Redemption Price, as the case may be, without
interest.
CHANGE OF CONTROL
Subject to contractual and other restrictions with respect thereto, upon
the occurrence of a Change of Control, Holdings shall make an offer (a "Change
of Control Offer") to each Holder of Holdings Senior Preferred Stock to
repurchase any or all of such Holder's shares of Holdings Senior Preferred Stock
at a purchase price in cash equal to 100.0% of the aggregate liquidation
preference thereof plus accumulated and unpaid dividends thereon, if any, to the
date of repurchase (the "Change of Control Payment").
Within 30 days following any Change of Control, Holdings shall mail a
notice to each Holder of Holdings Senior Preferred Stock stating: (i) that the
Change of Control Offer is being made pursuant to the Certificate of
Designations and that all shares of Holdings Senior Preferred Stock tendered
will be accepted for payment; (ii) the purchase price and the purchase date,
which shall be no sooner than 30 nor later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date"); (iii) that any shares
not tendered will continue to accumulate dividends; (iv) that, unless Holdings
defaults in the payment of the Change of Control Payment, all shares of Holdings
Senior Preferred Stock accepted for payment pursuant to the Change of Control
Offer shall cease to accumulate dividends after the Change of Control Payment
Date; (v) that Holders electing to have any shares of Holdings Senior Preferred
Stock repurchased pursuant to a Change of Control Offer will be required to
surrender such shares, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the shares of Holdings Senior Preferred Stock,
completed, or transferred by
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book-entry transfer, to Holdings or its transfer 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 Holdings or the transfer agent, as the case may be,
receives, not later than the close of business on the third Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the number of
shares of Holdings Senior Preferred Stock delivered for repurchase, and a
statement that such Holder is withdrawing his election to have such shares
repurchased; and (vii) that Holders whose shares of Holdings Senior Preferred
Stock are being repurchased only in part will be issued new shares of Holdings
Senior Preferred Stock equal in liquidation preference to the unpurchased
portion of the shares of Holdings Senior Preferred Stock surrendered (or
transferred by book-entry transfer), which unpurchased portion must be equal to
$25 in liquidation preference or an integral multiple thereof.
On the Change of Control Payment Date, Holdings shall, to the extent
lawful, (i) accept for payment all shares of Holdings Senior Preferred Stock or
portions thereof properly tendered pursuant to the Change of Control Offer, (ii)
deposit with its transfer agent an amount equal to the Change of Control Payment
in respect of all shares of Holdings Senior Preferred Stock or portions thereof
so tendered, and (iii) deliver or cause to be delivered to the transfer agent
the shares of Holdings Senior Preferred Stock so accepted together with an
Officers' Certificate stating the aggregate liquidation preference of such
Holdings Senior Preferred Stock or portions thereof being repurchased by
Holdings. Holdings or its transfer agent, as the case may be, shall promptly
mail to each Holder of shares of Holdings Senior Preferred Stock so tendered the
Change of Control Payment for such shares or portions thereof. Holdings shall
promptly issue a certificate representing shares of Holdings Senior Preferred
Stock and mail (or cause to be transferred by book entry) to each Holder a new
certificate representing shares of Holdings Senior Preferred Stock equal in
liquidation preference to any unpurchased portion of such shares surrendered by
such Holder, if any; provided, that each such certificate shall have a
liquidation preference of $25.0 or an integral multiple thereof. Holdings shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
Holdings 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 shares of Holdings Senior Preferred Stock in connection with a
Change of Control.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of Holdings, the Holders of shares of Holdings Senior Preferred
Stock then outstanding will be entitled to be paid, out of the assets of
Holdings available for distribution to its stockholders, $25 per share of
Holdings Senior Preferred Stock plus an amount in cash equal to accumulated and
unpaid dividends thereon to the date fixed for liquidation, dissolution or
winding up (including an amount equal to a prorated dividend for the period from
the last Dividend Payment Date to the date fixed for liquidation, dissolution or
winding up) before any payment shall be made or any assets distributed to the
holders of any of the Junior Securities, including, without limitation, shares
of common stock of Holdings. Except as provided in the preceding sentence,
Holders of shares of Holdings Senior Preferred Stock shall not be entitled to
any distribution in the event of liquidation, dissolution or winding up of the
affairs of Holdings. If the assets of Holdings are not sufficient to pay in full
the liquidation payments payable to the holders of outstanding shares of the
Holdings Senior Preferred Stock and all Parity Securities, then the holders of
all such shares shall share equally and ratably in such distribution of assets
of Holdings in accordance with the amounts which would be payable on such
distribution if the amount to which the Holders of outstanding shares of
Holdings Senior Preferred Stock and the holders of outstanding shares of all
Parity Securities are entitled were paid in full.
Neither the sale, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
property or assets of Holdings nor the consolidation or merger of Holdings with
or into one or more corporations or other entities shall be deemed to be a
liquidation, dissolution or winding up of the affairs of Holdings (unless such
sale, conveyance, exchange or transfer is in connection with a liquidation,
dissolution or winding up of the business of Holdings).
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VOTING RIGHTS
Holders of Holdings Senior Preferred Stock, except as otherwise required
under Delaware law, as set forth herein or in the Certificate of Designations,
shall have no voting rights with respect to general corporate matters.
So long as any shares of the Holdings Senior Preferred Stock are
outstanding, Holdings shall not authorize any class of Parity Securities without
the affirmative vote or consent of Holders of at least a majority of the
outstanding shares of Holdings Senior Preferred Stock, voting or consenting, as
the case may be, separately as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting, except that
without the approval of Holders of Holdings Senior Preferred Stock, Holdings may
authorize and issue shares of Parity Securities in exchange for, or the proceeds
of which are used to redeem or repurchase, any or all shares of Holdings Senior
Preferred Stock then outstanding, provided that, in the case of Parity
Securities issued in exchange for, or the proceeds of which are used to redeem
or repurchase, less than all shares of Holdings Senior Preferred Stock then
outstanding, (i) the aggregate liquidation preference of such Parity Securities
shall not exceed the aggregate liquidation preference of, premium and accrued
and unpaid dividends on, and expenses in connection with the refinancing of, the
Holdings Senior Preferred Stock so exchanged, redeemed or repurchased, (ii) such
Parity Securities shall not be Disqualified Capital Stock, and (iii) Holdings
may pay dividends on such Parity Securities in the form of cash or such Parity
Securities.
So long as any shares of the Holdings Senior Preferred Stock are
outstanding, Holdings shall not authorize any class of new securities without
the affirmative vote or consent of Holders of at least a majority of the
outstanding shares of Holdings Senior Preferred Stock, voting or consenting, as
the case may be, separately as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting.
So long as any shares of the Holdings Senior Preferred Stock are
outstanding, Holdings shall not amend any rights provided to Holders of Holdings
Senior Preferred Stock pursuant to the Certificate of Designations so as to
affect adversely the specified rights, preferences, privileges or voting rights
of Holders of shares of Holdings Senior Preferred Stock or to authorize the
issuance of any additional shares of Holdings Senior Preferred Stock (other than
in payment of dividends on the Holdings Senior Preferred Stock) without the
affirmative vote or consent of Holders of at least a majority of the outstanding
shares of Holdings Senior Preferred Stock, voting or consenting, as the case may
be, separately as one class, given in person or by proxy, either in writing or
by resolution adopted at an annual or special meeting. The affirmative vote or
consent of Holders of at least a majority of the outstanding shares of Holdings
Senior Preferred Stock, voting or consenting, as the case may be, separately as
one class, whether voting in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting, may waive compliance with
any provision of the Certificate of Designations applicable to the Holdings
Senior Preferred Stock.
Prior to the exchange of Holdings Senior Preferred Stock for Exchange
Debentures, Holdings shall not amend or modify the Exchange Indenture (except as
expressly provided therein in respect of amendments without the consent of
holders of Exchange Debentures) without the affirmative vote or consent of
Holders of at least a majority of the outstanding shares of Holdings Senior
Preferred Stock, voting or consenting, as the case may be, separately as one
class, given in person or by proxy, either in writing or by resolution adopted
at an annual or special meeting.
Except as provided herein, (i) the creation, authorization or issuance of
any shares of any Junior Securities, Parity Securities or Senior Securities, or
(ii) the increase or decrease in the amount of authorized capital stock of any
class, including Holdings Senior Preferred Stock, Holdings Junior Preferred
Stock or any other series of preferred stock, shall not require the consent of
Holders of Holdings Senior Preferred Stock and shall not be deemed to affect
adversely the rights, preferences, privileges or voting rights of Holders of
shares of Holdings Senior Preferred Stock.
In any case in which the Holders of shares of the Holdings Senior Preferred
Stock shall be entitled to vote pursuant to the provisions discussed above or
pursuant to Delaware law, each Holder of Holdings Senior
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Preferred Stock shall be entitled to one vote for each share of Holdings Senior
Preferred Stock held and, except as otherwise required by Delaware law, in the
event of such a vote, the Holders of the Holdings Senior Preferred Stock shall
vote together as a single class.
LIMITATION ON RESTRICTED PAYMENTS
Holdings will not, and will not permit any of its Subsidiaries to, directly
or indirectly make any Restricted Payment, unless, at the time of such
Restricted Payment: (a) no Default Event shall have occurred and be continuing
or would occur as a consequence thereof and (b) such Restricted Payment,
together with the aggregate of all other Restricted Payments made by Holdings
and its Subsidiaries after the Preferred Stock Issue Date, does not exceed the
sum (the "Basket") of (i) (y) Consolidated EBITDA of Holdings for the period
(taken as one accounting period), commencing on the first day of the first
fiscal quarter commencing on or prior to the Preferred Stock Issue Date, to and
including the last day of the fiscal quarter ended immediately prior to the date
of each such calculation (or, in the event Consolidated EBITDA for such period
is a deficit, then minus such deficit) less (z) 150% of Consolidated Fixed
Charges for such period, plus (ii) the aggregate Net Cash Proceeds received by
Holdings from the sale of Holdings's Qualified Capital Stock (other than in each
case (x) to a Subsidiary of Holdings, (y) to the extent applied in connection
with a Qualified Exchange and (z) to the extent applied to repurchase Capital
Stock pursuant to clause (b) of the definition of the Other Permitted Payments
after the Preferred Stock Issue Date). The following Restricted Payments are not
prohibited by the Certificate of Designations: (a) a Qualified Exchange; (b) the
payment of any dividend within 60 days after the date of declaration thereof, if
at said date of declaration such payment would have complied with the provisions
of the Certificate of Designations; and (c) Other Permitted Payments. The full
amount of any Restricted Payment made pursuant to clause (b) of the immediately
preceding sentence (but not pursuant to clauses (a) or (c) of the immediately
preceding sentence), however, will be deducted in the calculation of the
aggregate amount of Restricted Payments available to be made pursuant to the
Basket. The amount of any Restricted Payment, if other than in cash, shall be
the fair market value thereof, as determined in the good faith reasonable
judgment of the Board of Directors of Holdings.
REPORTS
So long as any shares of Holdings Senior Preferred Stock are outstanding,
Holdings shall furnish to each Holder of Holdings Senior Preferred Stock (at
such Holder's address listed in the register of Holders maintained by the
transfer agent and registrar of the Holdings Senior Preferred Stock): (i)
beginning at the end of Holdings' first fiscal year ending after the Preferred
Stock Issue Date, 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 Holdings 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 Holdings'
certified independent accountants, and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if Holdings were required
to file such reports.
SUBORDINATION
Any and all payments and distributions at any time declared or due on
account of the Holdings Senior Preferred Stock, including, without limitation,
dividend, redemption and change of control payments, ("Preferred Stock
Payments") shall be subordinated in right of payment to the payment in full in
cash or cash equivalents of all Senior Indebtedness whether outstanding on the
date hereof or hereafter created, incurred, assumed or guaranteed, and that such
subordination is for the benefit of the holders of such Senior Indebtedness. The
term "Senior Indebtedness" means (a) indebtedness of Holdings arising under the
Revolving Credit Facility and (b) the New Debentures. As of December 31, 1997,
on a pro forma basis after giving effect to the Transactions, Holdings would
have had $89.0 million long-term Senior Indebtedness outstanding.
Upon any distribution of assets of Holdings, winding up, total or partial
liquidation or reorganization of Holdings, whether voluntary or involuntary, the
holders of all Senior Indebtedness shall be entitled to receive payment on such
Senior Indebtedness in full in cash or cash equivalents before the Holders of
Holdings Senior
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Preferred Stock shall be entitled to receive any Preferred Stock Payments. No
payment (by set-off or otherwise) may be made by or on behalf of Holdings with
respect to Preferred Stock Payments for cash or property, (x) upon the maturity
of any Senior Indebtedness of Holdings by lapse of time, acceleration or
otherwise, unless and until all principal of, premium, if any, and the interest
on and fees in respect of such Senior Indebtedness are paid in full in cash or
cash equivalents, (y) when such payment is prohibited by the indenture or credit
agreement relating to the Senior Indebtedness and (z) in the event of default in
the payment of any principal of, premium, if any, or interest on and fees in
respect of Senior Indebtedness of Holdings when it becomes due and payable,
whether at maturity or at a date fixed for prepayment or by declaration or
otherwise (a "Payment Default"), unless and until such Payment Default has been
cured or waived or otherwise has ceased to exist.
Notwithstanding the other provisions of the Certificate of Designations, in
the event that a Holder receives any Preferred Stock Payment at a time when such
Holder has actual knowledge that such payment or distribution is prohibited by
the Certificate of Designations, or any indenture or Credit Agreement relating
to any Senior Indebtedness, such Preferred Stock Payment shall be held by the
Holders in trust for the benefit of, and shall be paid forthwith over and
delivered, upon written request, to, the Holders of Senior Indebtedness
remaining unpaid or unprovided for, or to the trustee or trustees under the
indenture relating to the Senior Indebtedness, ratably according to aggregate
principal amounts remaining unpaid on account of such Senior Indebtedness held
or represented by such, for application to the payment of all obligations with
respect to Senior Indebtedness remaining unpaid, to the extent necessary to pay
or to provide for the payment of all such obligations in full in cash or cash
equivalents in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for Holders of Senior Indebtedness.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Certificate of Designations for the Holdings Senior Preferred Stock. Reference
is made to the Certificate of Designations for the full definition of such
terms, as well as any other terms used herein for which no definition is
provided.
"Asset Sale" means, with respect to any specified person, the following:
(i) (A) the sale, lease, conveyance or other disposition by such person of any
assets (including, without limitation, by way of a sale and leaseback) or (B)
the issue or sale by such person or any of its Subsidiaries of Equity Interests
of any of such person's Subsidiaries, and (ii) which occurs in a single
transaction or a series of related transactions.
"Default Event" means any of the following events: (1) any time when
Holdings fails to make a mandatory redemption of the Holdings Senior Preferred
Stock when required (whether or not any contractual or other restrictions apply
to such redemption) or (2) any time when Holdings fails to make an offer to
repurchase all of the outstanding shares of Holdings Senior Preferred Stock
following a Change of Control, if such offer to repurchase is required to be
made pursuant to the provisions of the Certificate of Designation (whether or
not any contractual or other restrictions apply to such redemption).
"Dividend Payment Date" means February 1, May 1, August 1 and November 1 of
each year.
"Dividend Period" means the Initial Dividend Period and, thereafter, each
Quarterly Dividend Period.
"Exchange Date" means a date on which shares of Holdings Senior Preferred
Stock is exchanged by Holdings for Exchange Debentures.
"Exchange Indenture" means the indenture between Liberty Group Publishing,
Inc. and State Street Bank and Trust Company, as trustee, dated as of January
27, 1998, relating to the Exchange Debentures.
"Initial Dividend Period" means the dividend period commencing on the
Preferred Stock Issue Date and ending on the day before the first Dividend
Payment Date to occur thereafter.
"Other Permitted Payments" means, without duplication, (a) the payments
provided for by clauses (a), (d) and (e) of the definition of "Exempted
Affiliate Transaction"; (b) the repurchase of common stock, stock options and
stock equivalents of Holdings held by former directors, officers or employees of
Holdings or any of its Subsidiaries ("Management Stock Repurchases") in an
aggregate amount not to exceed in any fiscal year
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$1.0 million, plus the amount of any net cash proceeds to Holdings from (I)
sales of Capital Stock of Holdings to management employees subsequent to the
Preferred Stock Issue Date (provided further that the amount of any such net
cash proceeds to Holdings to the extent used for Management Stock Repurchases
will be excluded from the calculation of the available Basket pursuant to
paragraph (m)(i)); and (II) any key-person life insurance policies, in either
case, to the extent utilized for Management Stock Repurchases; provided, that
any amount not so paid in any fiscal year may be paid in future fiscal years;
and (c) Restricted Payments in an aggregate amount not to exceed $4.0 million.
"Permitted Affiliate Transaction" means any Exempt Affiliate Transaction
and any other contract, agreement, arrangement or transaction between Holdings
or any of its Subsidiaries with any Affiliate (an "Affiliate Transaction") or
any series of related Affiliate Transactions the terms of which are fair and
reasonable to Holdings or such Subsidiary, as the case may be, and are at least
as favorable as the terms which could reasonably be expected to be obtained by
Holdings or such Subsidiary, as the case may be, in a comparable transaction
made on an arm's length basis with persons who are not Affiliates; provided that
in connection with any Affiliate Transaction or series of related Affiliate
Transactions (other than Exempted Affiliate Transactions) (1) involving
consideration to either party in excess of $1.5 million, Holdings must deliver
an Officer's Certificate to the Holders, stating that the terms of such
Affiliate Transaction are fair and reasonable to Holdings, and no less favorable
to Holdings than could reasonably be expected to have been obtained in an arm's
length transaction with a non-Affiliate and (2) involving consideration to
either party in excess of $7.5 million, Holdings must also, prior to
consummation thereof, obtain a favorable written opinion as to the fairness of
such transaction to Holdings from a financial point of view from an independent
investment banking firm of national reputation or, if pertaining to a matter for
which such investment banking firms do not customarily render such opinions, an
appraisal or valuation firm of national reputation; provided further, that these
requirements shall not apply to the sale or purchase of products or services by
Holdings or its Subsidiaries to or from any Affiliate of LGP or any Related
Party thereof, which sale or purchase is in the ordinary course of business and
in accordance with industry practice.
"Preferred Stock Issue Date" means the date on which the Holdings Senior
Preferred Stock is, or was, originally issued by Holdings.
"Quarterly Dividend Period" shall mean the quarterly period commencing on
each February 1, May 1, August 1 and November 1 and ending on the day before the
following Dividend Payment Date.
"Redemption Date" with respect to any shares of Holdings Senior Preferred
Stock, means the date on which such shares of Holdings Senior Preferred Stock
are redeemed by Holdings.
BOOK ENTRY; DELIVERY AND FORM OF NEW SENIOR PREFERRED STOCK
The New Senior Preferred Stock initially will be represented by a single
permanent global certificate in definitive, fully registered form (the "Global
Certificate"). The Global Certificate will be deposited on the effective date
with, or on behalf of, DTC and registered in the name of a nominee of DTC.
The Global Certificate. The Company expects that, pursuant to procedures
established by DTC, (i) upon the issuance of the Global Certificate, DTC or its
custodian will credit, on its internal system, the number of shares of New
Senior Preferred Stock of the individual beneficial interests represented by
such global securities to the respective accounts of persons who have accounts
with such depositary and (ii) ownership of beneficial interest in the Global
Certificate will be shown on, and the transfer of such ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interest of participants) and the records of participants (with respect to
interests of persons other than participants). Such accounts initially will be
designated by or on behalf of the Holder and ownership of beneficial interests
in the Global Certificate will be limited to persons who have accounts with DTC
("participants") or persons who hold interests through participants.
So long as DTC, or its nominee, is the registered owner or Holder of the
shares of New Senior Preferred Stock, DTC or such nominee, as the case may be,
will be considered the sole owner or Holder of the shares of New Senior
Preferred Stock represented by such Global Certificate for all purposes. No
beneficial owner of an
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interest in the Global Certificate will be able to transfer that interest except
in accordance with DTC's procedures.
Payments of the liquidation preference or redemption price and dividends on
(including Additional Dividends) the Global Certificate will be made to DTC or
its nominee, as the case may be, as the registered owner thereof. Neither
Holdings nor the Transfer Agent will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Certificate or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
Holdings expects that DTC or its nominee, upon receipt of any payment of
the liquidation preference, redemption price or dividends in respect of the
Global Certificate, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global Certificate as shown on the records of DTC or its nominee.
Holdings also expects that payments by participants to owners of beneficial
interests in the Global Certificate held through such participants will be
governed by standing instructions and customary practice, as is now the case
with securities held by the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certificated Security for any reason,
including to sell shares of New Senior Preferred Stock to persons in states that
require physical delivery of the Certificate, or to pledge such securities, such
holder must transfer its interest in the Global Certificate, in accordance with
the normal procedures of DTC and with the procedures set forth in the
Certificate of Designations.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of New Senior Preferred Stock (including the presentation of
shares of New Senior Preferred Stock for exchange as described below) only at
the direction of one or more participants to whose account the DTC interests in
the Global Certificates are credited and only in respect of such shares of New
Senior Preferred Stock as to which such participant or participants has or have
given such direction.
DTC has advised Holdings as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificate among participants of DTC, it
is under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither Holdings nor the Transfer Agent will have any
obligations under the rules and procedures governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Certificate and a successor depositary
is not appointed by Holdings within 90 days, Certificated Securities will be
issued in exchange for the Global Certificate.
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DESCRIPTION OF EXCHANGE DEBENTURES
Set forth below is a summary of certain material provisions of the Exchange
Indenture dated as of January 27, 1998 between Holdings and State Street Bank
and Trust Company, as trustee (together with any successor trustee, the
"Trustee"). The following summary of certain provisions of the Exchange
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Exchange Indenture,
including the definitions used therein of certain terms used below. The
definitions of certain capitalized terms used in the following summary are set
forth under "Description of New Debentures--Certain Definitions." Capitalized
terms used herein and not otherwise defined in this section shall have the
meanings assigned to them in the Exchange Indenture.
GENERAL
The Exchange Debentures will be general unsecured senior subordinated
obligations of Holdings and will be limited in aggregate principal amount to the
liquidation preference of the New Senior Preferred Stock, plus, without
duplication, accumulated and unpaid dividends, on the date or dates on which it
is exchanged for Exchange Debentures (plus any additional Exchange Debentures
issued in lieu of cash interest as described herein). The Exchange Debentures
will be subordinated to all existing and future Senior Indebtedness of Holdings.
The Exchange Debentures will be issued in fully registered form only,
without coupons, in denominations of $1,000 and integral multiples thereof
(other than as described in "Description of New Senior Preferred Stock" or with
respect to additional Exchange Debentures issued in lieu of cash interest as
described herein). No service charge will be made for any registration of
transfer or exchange of Exchange Debentures, but Holdings may require payment of
a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. The Exchange Debentures will not have the benefit of any
sinking fund.
The Exchange Debentures will mature on February 1, 2010. Each Exchange
Debenture will bear interest at the rate of 14 3/4% per annum from the Exchange
Date or from the most recent interest payment date to which interest has been
paid or provided for or, if no interest has been paid or provided for, from the
Exchange Date. Interest will be payable semi-annually in cash or, at the option
of Holdings, in additional Exchange Debentures in arrears on each February 1 and
August 1 commencing with the first such date after the Exchange Date to the
person in whose name the Exchange Debenture is registered at the close of
business on the January 15 or July 15 next preceding such interest payment date.
Interest on the Exchange Debentures will be calculated on the basis of a 360-day
year consisting of twelve 30-day months.
Principal of, premium, if any, and interest on the Exchange Debentures will
be payable, and the Exchange Debentures may be presented for registration of
transfer or exchange, at the office of the Paying Agent and Registrar. At
Holdings' option, interest, to the extent paid in cash, may be paid by check
mailed to the registered address of holders of the Exchange Debentures as shown
on the register for the Exchange Debentures. The Trustee will initially act as
Paying Agent and Registrar. Holdings may change any Paying Agent and Registrar
without prior notice to holders of the Exchange Debentures. Holders of the
Exchange Debentures must surrender Exchange Debentures to the Paying Agent to
collect principal payments.
EXCHANGE
Holdings may, at its option, on any Dividend Payment Date (herein the
"Exchange Date"), exchange all, but not less than all, of the then outstanding
shares of New Senior Preferred Stock into Exchange Debentures if such exchange
is then permitted by the terms of the Revolving Credit Facility and the
Indenture. To exchange New Senior Preferred Stock into Exchange Debentures,
Holdings shall send a written notice (the "Exchange Notice") of exchange by mail
to each Holder of New Senior Preferred Stock, which notice shall state: (a) that
Holdings has elected to exchange the New Senior Preferred Stock into Exchange
Debentures; (b) the Exchange Date, which shall be the next succeeding Dividend
Payment Date and shall not be less than 20 days following the date on which the
Exchange Notice is mailed; (c) that the Holder is to surrender to Holdings, at
the place or places where certificates for shares of New Senior Preferred Stock
are to be surrendered for exchange, in the manner designated in the Exchange
Notice, his certificate or certificates
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representing the shares of New Senior Preferred Stock to be exchanged (properly
endorsed or assigned for transfer); (d) that dividends on the shares of New
Senior Preferred Stock to be exchanged shall cease to accrue, and the Holders of
such shares shall cease to have any further rights with respect to such shares
(other than the right to receive Exchange Debentures), on the Exchange Date,
whether or not certificates for shares of New Senior Preferred Stock are
surrendered for exchange on the Exchange Date, unless Holdings shall default in
the delivery of Exchange Debentures; and (e) that interest on the Exchange
Debentures shall accrue from the Exchange Date whether or not certificates for
shares of New Senior Preferred Stock are surrendered for exchange on the
Exchange Date. On the Exchange Date, if the exchange is then permitted under the
Revolving Credit Facility and the Indenture, Holdings shall issue Exchange
Debentures in exchange for the New Senior Preferred Stock, provided that on the
Exchange Date: (a) there shall be legally available funds sufficient therefor
(including, without limitation, legally available funds sufficient therefor
under Sections 160 and 170 (or any successor provisions) of the Delaware General
Corporation Law); (b) either (i) a registration statement relating to the
Exchange Debentures shall have been declared effective under the Securities Act
prior to such exchange and shall continue to be in effect on the Exchange Date
or (ii)(y) Holdings shall have obtained a written opinion of counsel that an
exemption from the registration requirements of the Securities Act is available
for such exchange and that upon receipt of such Exchange Debentures pursuant to
such exchange made in accordance with such exemption, the holders (assuming such
holder is not an Affiliate of Holdings) thereof will not be subject to any
restrictions imposed by the Securities Act upon the resale thereof and (z) such
exemption is relied upon by Holdings for such exchange; (c) the Exchange
Indenture and the trustee thereunder (the "Trustee") shall have been qualified
under the Trust Indenture Act of 1939, as amended, if such qualification is
required; (d) immediately after giving effect to such exchange, no Default or
Event of Default (each as defined in the Exchange Indenture) would exist under
the Exchange Indenture; and (e) Holdings shall have delivered to the Trustee a
written opinion of counsel, dated the date of exchange, regarding the
satisfaction of the conditions set forth in clauses (a), (b) and (c).
In the event that the issuance of the Exchange Debentures is not permitted
on the Exchange Date set forth in the Exchange Notice, or any of the conditions
set forth in clauses (a) through (d) of the preceding sentence are not satisfied
on the Exchange Date set forth in the Exchange Notice, the Exchange Date shall
be deemed to be the first business day thereafter, if any, upon which all of
such conditions are satisfied.
Each Holder of outstanding shares of New Senior Preferred Stock shall be
entitled to receive Exchange Debentures in a principal amount equal to the sum
of (i) the liquidation preference of such Holder's shares of New Senior
Preferred Stock and (ii) the amount of accumulated and unpaid dividends, if any,
thereon; provided that Holdings may pay cash in lieu of issuing an Exchange Note
in a principal amount of less than $1,000.
PROCEDURE FOR EXCHANGE
On or before the Exchange Date, each Holder of New Senior Preferred Stock
shall surrender the certificate or certificates representing such shares of New
Senior Preferred Stock, in the manner and at the place designated in the
Exchange Notice. Holdings shall cause the Exchange Debentures to be executed on
the Exchange Date and, upon surrender in accordance with the Exchange Notice of
the certificates for any shares of New Senior Preferred Stock so exchanged
(properly endorsed or assigned for transfer), such shares shall be exchanged by
Holdings into Exchange Debentures. Holdings shall pay interest on the Exchange
Debentures at the rate and on the dates specified therein from the Exchange
Date.
If notice has been mailed as aforesaid, and if before the Exchange Date (i)
the Exchange Indenture shall have been duly executed and delivered by Holdings
and the Trustee and (ii) all Exchange Debentures necessary for such exchange
shall have been duly executed by Holdings and delivered to the Trustee with
irrevocable instructions to authenticate the Exchange Debentures necessary for
such exchange, then the rights of the Holders of shares of the New Senior
Preferred Stock as stockholders of Holdings shall cease (except the right to
receive Exchange Debentures), and the Person or Persons entitled to receive the
Exchange Debentures issuable upon exchange shall be treated for all purposes as
the registered Holder or Holders of such Exchange Debentures as of the date of
exchange without any further action of the Holders of New Senior Preferred
Stock.
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SUBORDINATION
The Exchange Debentures will be general, unsecured obligations of Holdings,
subordinated in right of payment to all Senior Indebtedness of Holdings. The
Exchange Debentures will be effectively subordinated to all existing and future
Indebtedness and other liabilities and commitments of Holdings' Subsidiaries
(including, without limitation, to Liberty Group Operating's obligations under
the Senior Subordinated Note Indenture and the Revolving Credit Facility, trade
payables and lease obligations). On a pro forma basis, as of December 31, 1997,
after giving effect to the Transactions, Holdings would have had $89.0 million
long-term Senior Indebtedness outstanding and Holdings' Subsidiaries would have
had $180.0 million long-term Indebtedness outstanding.
The Exchange Indenture provides that no payment (by set-off or otherwise)
may be made by or on behalf of Holdings or a Subsidiary on account of the
principal of, premium, if any, or interest on the Exchange Debentures (including
any repurchases of Exchange Debentures), or on account of the redemption
provisions of the Exchange Debentures or any Obligation in respect of the
Exchange Debentures, for cash or property, (i) upon the maturity of any Senior
Indebtedness of Holdings or such Subsidiary, as applicable, by lapse of time,
acceleration (unless waived) or otherwise, unless and until all principal of,
premium, if any, and the interest on and fees in respect of such Senior
Indebtedness are paid in full in cash or Cash Equivalents, or (ii) in the event
of default in the payment of any principal of, premium, if any, or interest on
or fee in respect of Senior Indebtedness of Holdings or such Subsidiary, as
applicable, when it becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise (a "Payment Default"),
unless and until such Payment Default has been cured or waived or otherwise has
ceased to exist.
Upon (i) the happening of an event of default (other than a Payment
Default) that permits the holders of Senior Indebtedness to declare such Senior
Indebtedness to be due and payable and (ii) written notice of such event of
default is given to Holdings and the Trustee by the Senior Discount Debentures
trustees or the holders of an aggregate of at least $25.0 million principal
amount outstanding of any other Senior Indebtedness or their representative (a
"Payment Notice"), then, unless and until such event of default has been cured
or waived or otherwise has ceased to exist, no payment (by set-off or otherwise)
may be made by or on behalf of Holdings, if Holdings is an obligor on such
Senior Indebtedness, or any Subsidiary which is an obligor under such Senior
Indebtedness on account of the principal of, premium, if any, or interest on the
Exchange Debentures (including any repurchases of any of the Exchange
Debentures), or on account of the redemption provisions of the Exchange
Debentures or any obligation in respect of the Exchange Debentures, in any such
case. Notwithstanding the foregoing, unless the Senior Indebtedness in respect
of which such event of default exists has been declared due and payable in its
entirety within 179 days after the Payment Notice is delivered as set forth
above (the "Payment Blockage Period") (and such declaration has not been
rescinded or waived), at the end of the Payment Blockage Period, Holdings and
its Subsidiaries shall be required to pay all sums not paid to the Holders of
the Exchange Debentures during the Payment Blockage Period due to the foregoing
prohibitions and to resume all other payments as and when due on the Exchange
Debentures. Any number of Payment Notices may be given; provided, however, that
(i) not more than one Payment Notice shall be given within a period of any 360
consecutive days, and (ii) no default that existed upon the date of such Payment
Notice or the commencement of such Payment Blockage Period (whether or not such
event of default is on the same issue of Senior Indebtedness) shall be made the
basis for the commencement of any other Payment Blockage Period.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of Holdings or any Subsidiary shall be received by the
Trustee or the Holders at a time when such payment or distribution is prohibited
by the foregoing provisions, such payment or distribution shall be held in trust
for the benefit of the holders of such Senior Indebtedness and shall be paid or
delivered by the Trustee or such Holders, as the case may be, to the holders of
such Senior Indebtedness remaining unpaid or unprovided for or to their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate principal
amounts remaining unpaid on account of such Senior Indebtedness held or
represented by each, for application to the payment of all such Senior
Indebtedness remaining unpaid, to the extent necessary
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to pay or to provide for the payment of all such Senior Indebtedness in full in
cash or Cash Equivalents after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness.
Upon any distribution of assets of Holdings upon any dissolution, winding
up, total or partial liquidation or reorganization of Holdings, whether
voluntary or involuntary, in bankruptcy, insolvency, receivership or a similar
proceeding or upon assignment for the benefit of creditors or any marshaling of
assets or liabilities, (i) the holders of all Senior Indebtedness of Holdings
will first be entitled to receive payment of such Senior Indebtedness in full in
cash or Cash Equivalents before the Holders are entitled to receive any payment
on account of the principal of, premium, if any, and interest on the Exchange
Debentures or any Obligation in respect of the Exchange Debentures (other than
Junior Securities) and (ii) any payment or distribution of assets of Holdings of
any kind or character from any source, whether in cash, property or securities
(other than Junior Securities) to which the Holders or the Trustee on behalf of
the Holders would be entitled (by set-off or otherwise), except for the
subordination provisions contained in the Exchange Indenture, will be paid by
the liquidating trustee or agent or other person making such a payment or
distribution directly to the holders of such Senior Indebtedness or their
representative to the extent necessary to make payment in full of all such
Senior Indebtedness remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness.
No provision contained in the Exchange Indenture or the Exchange Debentures
will affect the obligation of Holdings which is absolute and unconditional, to
pay, when due, principal of, premium, if any, and interest on the Exchange
Debentures. The subordination provisions of the Exchange Indenture and the
Exchange Debentures do not prevent the occurrence of any Default or Event of
Default under the Exchange Indenture or otherwise limit the rights of the
Trustee or any Holder, subject to the four immediately preceding paragraphs nor
do the subordination provisions of the Exchange Indenture prevent the issuance
of Secondary Debentures in lieu of a cash payment of any or all interest due on
any Interest Payment Period.
As a result of the subordination provisions contained in the Exchange
Indenture, in the event of the liquidation, bankruptcy, reorganization,
insolvency, receivership or similar proceeding or an assignment for the benefit
of the creditors of Holdings or a marshaling of assets or liabilities of
Holdings, Holders of the Exchange Debentures may receive less, ratably, and
holders of Senior Indebtedness may receive more, ratably, than other creditors
of Holdings.
OPTIONAL REDEMPTION
Holdings will not have the right to redeem any Exchange Debentures prior to
February 1, 1999. Exchange Debentures will be redeemable for cash at the option
of Holdings, in whole or in part, at any time on or after February 1, 1999, upon
not less than 30 days nor more than 60 days notice to each Holder of Exchange
Debentures, at the following redemption prices (expressed as percentages of the
principal amount) if redeemed during the 12-month period commencing February 1
of the years indicated below, in each case (subject to the right of Holders of
record on a Record Date to receive the corresponding interest due on an Interest
Payment Date corresponding to such Record Date that is on or prior to such
Redemption Date) together with accrued and unpaid interest thereon to the
Redemption Date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1999...................................................... 105.0%
2000...................................................... 104.0%
2001...................................................... 103.0%
2002...................................................... 102.0%
2003...................................................... 101.0%
2004 and thereafter....................................... 100.0%
</TABLE>
In the case of a partial redemption, the Trustee shall select the Exchange
Debentures or portions thereof for redemption on a pro rata basis, by lot or in
such other manner it deems appropriate and fair. The Exchange Debentures may be
redeemed in part in multiples of $1,000 only.
The Exchange Debentures will not have the benefit of any sinking fund.
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Notice of any redemption will be sent, by first class mail, at least 30
days and not more than 60 days prior to the date fixed for redemption to the
Holder of each Exchange Debenture to be redeemed to such Holder's last address
as then shown upon the registry books of the Registrar. Any notice which relates
to a Exchange Debenture to be redeemed in part only must state the portion of
the principal amount equal to the unredeemed portion thereof and must state that
on and after the date of redemption, upon surrender of such Exchange Debenture,
a new Exchange Debenture or Exchange Debentures in a principal amount equal to
the unredeemed portion thereof will be issued. On and after the date of
redemption, interest will cease to accrue on the Exchange Debentures or portions
thereof called for redemption, unless Holdings defaults in the payment thereof.
CERTAIN COVENANTS
REPURCHASE OF EXCHANGE DEBENTURES AT THE OPTION OF THE HOLDER UPON A CHANGE OF
CONTROL
The Exchange Indenture provides that in the event that a Change of Control
has occurred, each Holder of Exchange Debentures will have the right, at such
Holder's option, pursuant to an offer (subject only to conditions required by
applicable law, if any) by Holdings (the "Change of Control Offer"), to require
Holdings to repurchase all or any part of such Holder's Exchange Debentures
(provided, that the principal amount of such Exchange Debentures must be $1,000
or an integral multiple thereof) on a date (the "Change of Control Purchase
Date") that is no later than 45 Business Days after the occurrence of such
Change of Control, at a cash price equal to 101% of the principal amount thereof
(the "Change of Control Purchase Price") plus accrued and unpaid interest to the
Change of Control Purchase Date. The Change of Control Offer shall be made
within 15 Business Days following a Change of Control and shall remain open for
20 Business Days following its commencement (the "Change of Control Offer
Period"). Upon expiration of the Change of Control Offer Period, Holdings
promptly shall purchase all Exchange Debentures properly tendered in response to
the Change of Control Offer.
As used herein, a "Change of Control" means (i) any merger or consolidation
of Holdings with or into any person or any sale, transfer or other conveyance,
whether direct or indirect, of all or substantially all of the assets of
Holdings on a consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction(s), any
"person" or "group" (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable), other than any Excluded
Person or Excluded Persons, is or becomes the Beneficial Owner, directly or
indirectly, of more than 50% of the total voting power in the aggregate normally
entitled to vote in the election of directors, managers or trustees, as
applicable, of the transferee(s) or surviving entity or entities, (ii) any
"person" or "group," other than any Excluded Person or Excluded Persons, becomes
the Beneficial Owner, directly or indirectly, of more than 50% of the total
voting power in the aggregate of all classes of Capital Stock of Holdings then
outstanding normally entitled to vote in elections of directors, or (iii) during
any period of 12 consecutive months after the Issue Date, individuals who at the
beginning of any such 12-month period constituted the Board of Directors of
Holdings (together, in each case, with any new directors whose election by such
Board of Directors or whose nomination for election by the shareholders of
Holdings was approved by LGP or a Related Party of LGP or by the Excluded
Persons or by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of Holdings then in office.
On or before the Change of Control Purchase Date, Holdings will (i) accept
for payment Exchange Debentures or portions thereof properly tendered pursuant
to the Change of Control Offer, (ii) deposit with the Paying Agent cash
sufficient to pay the Change of Control Purchase Price of all Exchange
Debentures so tendered, and (iii) deliver to the Trustee, Exchange Debentures so
accepted together with an Officers' Certificate listing the Exchange Debentures
or portions thereof being purchased by Holdings. The Paying Agent promptly will
pay the Holders of Exchange Debentures so accepted an amount equal to the Change
of Control Purchase Price and the Trustee promptly will authenticate and deliver
to such Holders a new Exchange Debenture equal in principal amount to any
unpurchased portion of the Exchange Debenture surrendered. Any Exchange
Debenture not so accepted will be delivered promptly by Holdings to the Holder
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thereof. Holdings publicly will announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Purchase Date.
The obligations with respect to a Change of Control Offer shall be
satisfied to the extent actually performed by a third party in accordance with
the terms of the Exchange Indenture.
The Change of Control purchase feature of the Exchange Debentures may make
more difficult or discourage a takeover of Holdings and the removal of incumbent
management. The phrase "all or substantially all" of the assets of Holdings will
likely be interpreted under applicable state law and will be dependent upon
particular facts and circumstances. As a result, there may be a degree of
uncertainty in ascertaining whether a sale or transfer of "all or substantially
all" of the assets of Holdings has occurred. In addition, no assurances can be
given that Holdings will be able to acquire Exchange Debentures tendered upon
the occurrence of a Change of Control.
Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable federal and state
securities laws and any provisions of the Exchange Indenture which conflict with
such laws shall be deemed to be superseded by the provisions of such laws.
If the Change of Control Purchase Date hereunder is on or after an interest
payment Record Date and on or before the associated Interest Payment Date, any
accrued and unpaid interest due on such Interest Payment Date will be paid to
the person in whose name an Exchange Debenture is registered at the close of
business on such Record Date, and such interest will not be payable to Holders
who tender the Exchange Debentures pursuant to such Change of Control Offer.
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED CAPITAL
STOCK
The Exchange Indenture provides that, except as set forth in this covenant,
Holdings will not, and will not permit any of its Subsidiaries to, directly or
indirectly, issue, assume, guaranty, incur, become directly or indirectly liable
with respect to (including as a result of an Acquisition), or otherwise become
responsible for, contingently or otherwise (individually and collectively, to
"incur" or, as appropriate, an "incurrence"), any Indebtedness (including
Acquired Indebtedness), other than Permitted Indebtedness. Notwithstanding the
foregoing, if (i) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect on a pro forma
basis to, such incurrence of Indebtedness or Disqualified Capital Stock and (ii)
on the date of such incurrence (the "Incurrence Date"), after giving effect on a
pro forma basis to such incurrence of such Indebtedness or Disqualified Capital
Stock and the use of proceeds thereof, the Leverage Ratio shall not exceed 7.5
to 1 (the "Debt Incurrence Ratio"), then Holdings and its Subsidiaries may incur
such Indebtedness or Disqualified Capital Stock.
In addition, the foregoing limitations will not apply to:
(a) the incurrence by Holdings or any Subsidiary of Purchase Money
Indebtedness on or after the Issue Date, provided, that (i) the aggregate
principal amount of such Indebtedness incurred on or after the Issue Date
and outstanding at any time pursuant to this paragraph (a) (including any
Indebtedness issued to refinance, replace or refund such Indebtedness)
shall not exceed $15.0 million, and (ii) in each case, such Indebtedness as
originally incurred shall not constitute more than 100% of the cost
(determined in accordance with GAAP) to Holdings or such Subsidiary, as
applicable, of the property so purchased or leased;
(b) the incurrence by Holdings or any Subsidiary of Indebtedness in an
aggregate principal amount outstanding at any time (including Indebtedness
incurred to refinance, replace or refund such Indebtedness) of up to $10.0
million (which may be incurred pursuant to the Credit Agreement); and
(c) the incurrence by Holdings or any Subsidiary of Indebtedness
pursuant to the Credit Agreement up to an aggregate principal amount
outstanding at any time (including any Indebtedness incurred to refinance,
replace or refund such Indebtedness) of $175.0 million, minus the amount of
any such
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Indebtedness retired with the Net Cash Proceeds from any Asset Sale or
assumed by a transferee in an Asset Sale.
Indebtedness or Disqualified Capital Stock of any person which is
outstanding at the time such person becomes a Subsidiary of Holdings (including
upon designation of any subsidiary or other person as a Subsidiary) or is merged
with or into or consolidated with Holdings or a Subsidiary of Holdings shall be
deemed to have been incurred at the time such person becomes such a Subsidiary
of Holdings or is merged with or into or consolidated with Holdings or a
Subsidiary of Holdings, as applicable.
Notwithstanding anything to the contrary contained in the Exchange
Indenture, Holdings will not, and will not permit any of its Subsidiaries to,
incur any Indebtedness that is contractually subordinate to any other
Indebtedness of Holdings unless such Indebtedness is at least as subordinate to
the Exchange Debentures.
LIMITATION ON RESTRICTED PAYMENTS
The Exchange Indenture provides that Holdings will not, and will not permit
any of its Subsidiaries to, directly or indirectly, make any Restricted Payment
if, after giving effect to such Restricted Payment on a pro forma basis, (1) a
Default or an Event of Default shall have occurred and be continuing, (2)
Holdings is not permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Debt Incurrence Ratio in the covenant "Limitation on Incurrence
of Additional Indebtedness and Disqualified Capital Stock," or (3) the aggregate
amount of all Restricted Payments made by Holdings and its Subsidiaries,
including after giving effect to such proposed Restricted Payment, from and
after the Issue Date, would exceed the sum of (a) (i) Consolidated EBITDA of
Holdings for the period (taken as one accounting period), commencing on the
first day of the first fiscal quarter commencing on or prior to the Issue Date,
to and including the last day of the fiscal quarter ended immediately prior to
the date of each such calculation (or, in the event Consolidated EBITDA for such
period is a deficit, then minus 100% of such deficit) less (ii) 150% of
Consolidated Fixed Charges for such period, plus (b) the aggregate Net Cash
Proceeds received by Holdings as a Capital Contribution or from the sale of
Holdings' Qualified Capital Stock (other than in each case (i) to a Subsidiary
of Holdings, (ii) to the extent applied in connection with a Qualified Exchange,
and (iii) to the extent applied to repurchase Capital Stock pursuant to clause
(b) of the definition of Permitted Payments) after the Issue Date.
The provisions of the immediately preceding paragraph will not prohibit or
be violated by (A) a Qualified Exchange; (B) the payment or making of any
Restricted Payment within 60 days after the date of declaration thereof or the
making of any binding commitment in respect thereof, if at said date of
declaration or commitment, such Restricted Payment would have complied with the
provisions contained in clauses (1), (2) and (3) of the immediately preceding
paragraph; and (C) Permitted Payments. The full amount of any Restricted Payment
made pursuant to the foregoing clause (B) (but not pursuant to clauses (A) or
(C)) of the immediately preceding sentence, however, will be deducted in the
calculation of the aggregate amount of Restricted Payments available to be made
referred to in clause (3) of the immediately preceding paragraph.
For purposes of this covenant, the amount of any Restricted Payment, if
other than in cash, shall be the fair market value thereof, as determined in the
good faith reasonable judgment of the Board of Directors of Holdings.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Exchange Indenture provides that the Holdings will not, and will not
permit any of its Subsidiaries to, directly or indirectly, create, assume or
suffer to exist any consensual restriction on the ability of any Subsidiary of
Holdings to pay dividends or make other distributions to or on behalf of, or to
pay any obligation to or on behalf of, or otherwise to transfer assets or
property to or on behalf of, or make or pay loans or advances to or on behalf
of, Holdings or any Subsidiary of Holdings, except (a) restrictions imposed by
the Exchange Debentures or the Exchange Indenture or by other Indebtedness of
Holdings ranking senior to or pari passu with the Exchange Debentures, provided
such restrictions are not materially more restrictive than those imposed by the
Exchange Indenture and the Exchange Debentures, (b) restrictions imposed by
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applicable law, (c) existing restrictions under Indebtedness outstanding on the
Issue Date, (d) restrictions under any Acquired Indebtedness not incurred in
violation of the Exchange Indenture or any agreement relating to any property,
asset or business acquired by Holdings or any of its Subsidiaries, which
restrictions in each case existed at the time of Acquisition, were not put in
place in connection with or in anticipation of such Acquisition and are not
applicable to any person, other than the person acquired, or to any property,
asset or business, other than the property, assets and business so acquired, (e)
any such restriction or requirement imposed by Indebtedness incurred under the
Credit Agreement in accordance with the Exchange Indenture, provided such
restriction or requirement is not materially more restrictive than that imposed
by the Revolving Credit Facility as of the Issue Date, (f) restrictions with
respect solely to a Subsidiary of Holdings imposed pursuant to a binding
agreement which has been entered into for the sale or disposition of all or
substantially all of the Equity Interests or assets of such Subsidiary, provided
such restrictions apply solely to the Equity Interests or assets of such
Subsidiary which are being sold, (g) restrictions on transfer contained in
Purchase Money Indebtedness incurred pursuant to paragraph (a) of the covenant
"Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock," provided such restrictions relate only to the transfer of the property
acquired with the proceeds of such Purchase Money Indebtedness, and (h) in
connection with and pursuant to permitted Refinancings, replacements of
restrictions imposed pursuant to clauses (a), (c), (d), (e) or (g) of this
paragraph that are not materially more restrictive than those being replaced and
do not apply to any other person or assets than those that would have been
covered by the restrictions in the Indebtedness so refinanced. Notwithstanding
the foregoing, neither (a) customary provisions restricting subletting or
assignment of any lease entered into in the ordinary course of business,
consistent with industry practice, nor (b) Liens permitted under the terms of
the Exchange Indenture shall in and of themselves be considered a restriction on
the ability of the applicable Subsidiary to transfer such agreement or assets,
as the case may be.
LIMITATION ON LIENS SECURING INDEBTEDNESS
Holdings will not, and will not permit any of its Subsidiaries to, create,
incur, assume or suffer to exist, to secure any Indebtedness, any Lien of any
kind, other than Permitted Liens, upon any of its assets now owned or acquired
on or after the date of the Exchange Indenture or upon any income or profits
therefrom unless Holdings provides, and causes its Subsidiaries to provide,
concurrently therewith or immediately thereafter, that the Exchange Debentures,
are equally and ratably so secured for so long as such Indebtedness so secured
remains outstanding; provided that, if such Indebtedness is Subordinated
Indebtedness, the Lien securing such Subordinated Indebtedness shall be
subordinate and junior to the Lien securing the Exchange Debentures with the
same relative priority as such Subordinated Indebtedness shall have with respect
to the Exchange Debentures.
LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK
The Exchange Indenture provides that Holdings will not, and will not permit
any of its Subsidiaries to, in one or a series of related transactions, convey,
sell, transfer, assign or otherwise dispose of, directly or indirectly, any of
its property, business or assets (other than cash or Cash Equivalents),
including by merger or consolidation, and including any sale or other transfer
or issuance of any Equity Interests (other than directors' qualifying shares) of
any Subsidiary of Holdings, whether by Holdings or a Subsidiary of Holdings, and
including (except as provided in clause (vi) of the third paragraph of this
covenant) any Sale and Leaseback Transaction (any of the foregoing, an "Asset
Sale"), unless (1) (a) within 360 days after the date of such Asset Sale, the
Net Cash Proceeds therefrom (the "Asset Sale Offer Amount") are applied to the
optional redemption of the Exchange Debentures in accordance with the terms of
the Exchange Indenture and other Indebtedness of Holdings ranking on a parity
with the Exchange Debentures from time to time outstanding with similar
provisions requiring Holdings to make an offer to purchase or to redeem such
Indebtedness with the proceeds from asset sales, pro rata in proportion to the
respective principal amounts (or accreted values in the case of Indebtedness
issued with an original issue discount) of the Exchange Debentures and such
other Indebtedness then outstanding or to the repurchase of the Exchange
Debentures and such other Indebtedness pursuant to a cash offer (subject only to
conditions required by applicable law, if any (pro rata in proportion to the
respective principal amounts (or accreted values in the case of Indebtedness
issued with an original issue
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discount) of the Exchange Debentures and such other Indebtedness then
outstanding)) (the "Asset Sale Offer") at a purchase price of 100% of principal
amount (or accreted value in the case of Indebtedness issued with an original
issue discount) (the "Asset Sale Offer Price") together with accrued and unpaid
interest to the date of payment, made within 360 days of such Asset Sale, or (b)
within 360 days following such Asset Sale, the Asset Sale Offer Amount is used
(i) to make one or more Acquisitions or invested in assets and property (other
than notes, bonds, obligations and securities) which in the good faith
reasonable judgment of the Board of Directors of Holdings will constitute or be
a part of a Related Business of Holdings or such Subsidiary (if it continues to
be a Subsidiary) immediately following such transaction or (ii) to retire
permanently Indebtedness incurred under the Credit Agreement pursuant to
paragraph (c) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock" (including that in the case of a
revolver or similar arrangement that makes credit available, such commitment is
so permanently reduced by such amount), the Senior Subordinated Notes or the
Debentures of other Indebtedness ranking on a parity with any of the foregoing
Indebtedness or other Senior Indebtedness incurred pursuant to paragraph (b) of
such covenant, (2) at least 75% of the consideration for such Asset Sale or
series of related Asset Sales consists of cash or Cash Equivalents; provided
that (x) the amount of any liabilities (as shown on Holdings' most recent
consolidated balance sheet) of Holdings or any Subsidiary (other than
Subordinated Indebtedness) that are assumed by the transferee in such Asset Sale
(provided that Holdings and its Subsidiaries are released from all obligations
in respect thereof) and (y) any notes or other obligations received by Holdings
or any such Subsidiary from such transferee that are promptly (but in no event
more than 90 days after receipt) converted by Holdings or such Subsidiary into
cash or Cash Equivalents (to the extent of the cash or Cash Equivalents, as the
case may be, received), shall be deemed to be cash or Cash Equivalents, as the
case may be, for purposes of this provision, and such cash and Cash Equivalents
shall be deemed to be Net Cash Proceeds received from the Asset Sale of the
related property sold for such notes or other obligations, for purposes of this
covenant, and, provided, further, this clause (2) shall not apply to the sale or
disposition of assets as a result of a foreclosure (or a secured party taking
ownership of such assets in lieu of foreclosure) or as a result of an
involuntary proceeding in which Holdings cannot, directly or through its
Subsidiaries, direct the type of proceeds received, and (3) with respect to any
Asset Sale or series of related Asset Sales, Net Cash Proceeds of which exceed
$2.0 million, the Board of Directors of Holdings determines in good faith that
Holdings or such Subsidiary, as applicable, receives fair market value for such
Asset Sale.
The Exchange Indenture provides that an acquisition of Exchange Debentures
pursuant to an Asset Sale Offer may be deferred until the accumulated Net Cash
Proceeds from Asset Sales not applied to the uses set forth in clause 1(b) above
(the "Excess Proceeds") exceeds $10.0 million and that each Asset Sale Offer
shall remain open for 20 Business Days following its commencement (the "Asset
Sale Offer Period"). Upon expiration of the Asset Sale Offer Period, Holdings
shall apply the Asset Sale Offer Amount plus an amount equal to accrued and
unpaid interest to the purchase of all Indebtedness properly tendered (on a pro
rata basis if the Asset Sale Offer Amount is insufficient to purchase all
Indebtedness so tendered) at the Asset Sale Offer Price (together with any
accrued interest). To the extent that the aggregate amount of Indebtedness
tendered pursuant to an Asset Sale Offer is less than the Asset Sale Offer
Amount, Holdings may use any remaining Net Cash Proceeds for general corporate
purposes as otherwise permitted by the Indenture and following each Asset Sale
Offer the Excess Proceeds amount shall be reset to zero.
Notwithstanding the foregoing provisions of this covenant, the following
transactions shall not be deemed Asset Sales:
(i) Holdings and each of its Subsidiaries may convey, sell, lease,
transfer, assign or otherwise dispose of property in the ordinary course of
business;
(ii) Holdings and each of its Subsidiaries may (x) convey, sell,
lease, transfer, assign or otherwise dispose of assets pursuant to and in
accordance with the limitation on mergers, sales or consolidations
provisions in the Indenture, (y) make Restricted Payments permitted by the
covenant "Limitation on Restricted Payments", and (z) engage in Exempted
Affiliate Transactions;
(iii) Holdings and each of its Subsidiaries may convey, sell,
transfer, assign or otherwise dispose of assets or issue Capital Stock to
Holdings or any Subsidiary;
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(iv) Holdings and each of its Subsidiaries may sell or dispose of
damaged, worn out or other obsolete property in the ordinary course of
business so long as such property is no longer necessary for the proper
conduct of the business of Holdings or such Subsidiary, as applicable;
(v) Holdings and each of its Subsidiaries may exchange assets held by
Holdings or a Subsidiary for assets held by any person or entity; provided
that (A) the assets received by Holdings or a Subsidiary in any such
exchange in the good faith reasonable judgment of the Board of Directors of
Holdings will immediately constitute, be a part of, or be used in, a
Related Business, (B) the Board of Directors of Holdings has determined
that the terms of any exchange are fair and reasonable, and (C) any such
exchange shall be deemed to be an Asset Sale to the extent that Holdings or
any Subsidiary receive cash or Cash Equivalents in such exchange;
(vi) Holdings and each of its Subsidiaries may engage in Sale and
Leaseback Transactions with respect to property acquired after the Issue
Date (other than property acquired in exchange for or with the proceeds
from the sale or other disposition of property held by Holdings or any
Subsidiary on the Issue Date);
(vii) Holdings and each of its Subsidiaries may liquidate Cash
Equivalents in the ordinary course of business;
(viii) Holdings and each of its Subsidiaries may create or assume
Liens (or permit any foreclosure thereon) not prohibited by the Indenture;
(ix) Holdings and each of its Subsidiaries may surrender or waive
contract rights or the settlement, release or surrender of contract, tort
or other claims of any kind; and
(x) Holdings and each of its Subsidiaries, may convey, sell, transfer,
assign or otherwise dispose of assets having an aggregate fair market value
not exceeding $2.0 million in any fiscal year.
All Net Cash Proceeds from an Event of Loss (other than the proceeds of any
business interruption insurance) shall be invested or otherwise used as provided
in clause 1 of the first paragraph of this covenant, all within 18 months from
the occurrence of such Event of Loss.
Any Asset Sale Offer will be made in compliance with all applicable laws,
rules and regulations, including, if applicable, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable Federal and state
securities laws and any provisions of the Indenture which conflict with such
laws shall be deemed to be superseded by the provisions of such laws.
If the payment date in connection with an Asset Sale Offer hereunder is on
or after an interest payment Record Date and on or before the associated
Interest Payment Date, any accrued and unpaid interest will be paid to the
person in whose name an Exchange Debenture is registered at the close of
business on such Record Date, and such interest will not be payable to Holders
who tender Exchange Debentures pursuant to such Asset Sale Offer.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Exchange Indenture provides that Holdings will not, and will not permit
any of its Subsidiaries to, directly or indirectly, enter into any contract,
agreement, arrangement or transaction with any Affiliate (an "Affiliate
Transaction"), or any series of related Affiliate Transactions, unless the terms
of such Affiliate Transaction are fair and reasonable to Holdings or such
Subsidiary, as the case may be, and are at least as favorable as the terms which
could reasonably be expected to be obtained by Holdings or such Subsidiary, as
the case may be, in a comparable transaction made on an arm's length basis with
persons who are not Affiliates.
Without limiting the foregoing, in connection with any Affiliate
Transaction or series of related Affiliate Transactions (other than Exempted
Affiliate Transactions) (1) involving consideration to either party in excess of
$1.5 million, Holdings must deliver an Officers' Certificate to the Trustee,
stating that the terms of such Affiliate Transaction are fair and reasonable to
Holdings, and no less favorable to Holdings than could
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reasonably be expected to have been obtained in an arm's length transaction with
a non-Affiliate, and (2) involving consideration to either party in excess of
$7.5 million, Holdings must also, prior to consummation thereof, obtain a
favorable written opinion as to the fairness of such transaction to Holdings
from a financial point of view from an independent investment banking firm of
national reputation or, if pertaining to a matter for which such investment
banking firms do not customarily render such opinions, an appraisal or valuation
firm of national reputation; provided, that this sentence shall not apply to the
sale or purchase of products or services by Holdings or its Subsidiaries to or
from any Affiliate of LGP or any Related Party thereof, which sale or purchase
is in the ordinary course of business and in accordance with industry practice.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Exchange Indenture provides that Holdings will not consolidate with or
merge with or into another person or, directly or indirectly, sell, lease,
convey or transfer all or substantially all of its assets (computed on a
consolidated basis), whether in a single transaction or a series of related
transactions, to another person or group of affiliated persons or adopt a plan
of liquidation, unless (i) either (a) Holdings is the continuing entity or (b)
the resulting, surviving or transferee entity or, in the case of a plan of
liquidation, the entity which receives the greatest value from such plan of
liquidation is a corporation organized under the laws of the United States, any
state thereof or the District of Columbia and expressly assumes by supplemental
indenture all of the obligations of Holdings in connection with the Exchange
Debentures and the Exchange Indenture; (ii) no Default or Event of Default shall
exist or shall occur immediately after giving effect on a pro forma basis to
such transaction; (iii) immediately after giving effect to such transaction on a
pro forma basis, the Consolidated Net Worth of the consolidated, resulting,
surviving or transferee entity or, in the case of a plan of liquidation, the
entity which receives the greatest value from such plan of liquidation is at
least equal to the Consolidated Net Worth of Holdings immediately prior to such
transaction; and (iv) immediately after giving effect to such transaction on a
pro forma basis, the consolidated, resulting, surviving or transferee entity or,
in the case of a plan of liquidation, the entity which receives the greatest
value from such plan of liquidation would immediately thereafter be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Debt Incurrence
Ratio set forth in the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock."
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of Holdings or consummation of a plan of liquidation in
accordance with the foregoing, the successor corporation formed by such
consolidation or into which Holdings is merged or to which such transfer is made
or, in the case of a plan of liquidation, the entity which receives the greatest
value from such plan of liquidation shall succeed to and (except in the case of
a lease) be substituted for, and may exercise every right and power of, Holdings
under the Exchange Indenture with the same effect as if such successor
corporation had been named therein as Holdings, and (except in the case of a
lease) Holdings shall be released from the obligations under the Exchange
Debentures and the Exchange Indenture except with respect to any obligations
that arise from, or are related to, such transaction.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise) of all or substantially all of the properties and assets of one or
more Subsidiaries, Holdings' interest in which constitutes all or substantially
all of the properties and assets of Holdings, shall be deemed to be the transfer
of all or substantially all of the properties and assets of Holdings.
LIMITATION ON LINES OF BUSINESS
The Exchange Indenture provides that neither Holdings nor any of its
Subsidiaries shall directly or indirectly engage to any substantial extent in
any line or lines of business activity other than that which, in the reasonable
good faith judgment of the Board of Directors of Holdings, is a Related
Business.
RESTRICTION ON SALE AND ISSUANCE OF SUBSIDIARY STOCK
The Exchange Indenture provides that Holdings will not sell, and its
Subsidiaries will not issue or sell, any shares of Capital Stock (other than
directors' qualifying shares) of any Subsidiary of Holdings to any
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person other than Holdings or a wholly owned Subsidiary of Holdings, except for
shares of common stock with no preferences or special rights or privileges and
with no redemption or prepayment provisions. Notwithstanding the foregoing, (a)
Holdings and its Subsidiaries may consummate an Asset Sale of all of the Capital
Stock owned by Holdings and its Subsidiaries of any Subsidiary and (b) Holdings
or any Subsidiary may pledge, hypothecate or otherwise grant a Lien on any
Capital Stock of any Subsidiary to the extent not prohibited under the covenant
"Limitation on Liens Securing Indebtedness."
LIMITATION ON STATUS AS INVESTMENT COMPANY
The Exchange Indenture prohibits Holdings and its Subsidiaries from being
required to register as an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended), or from otherwise becoming subject
to regulation under the Investment Company Act.
REPORTS
The Exchange Indenture provides that whether or not Holdings is subject to
the reporting requirement of Section 13 or 15 (d) of the Exchange Act, Holdings
shall deliver to the Trustee and to each Holder and to prospective purchasers of
Exchange Debentures identified to Holdings, within 15 days after it is or would
have been (if it were subject to such reporting obligations) required to file
such with the Commission, annual and quarterly financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the Commission, if Holdings were subject to the
requirements of Section 13 or 15(d) of the Exchange Act, including, with respect
to annual information only, a report thereon by Holdings' certified independent
public accountants as such would be required in such reports to the Commission,
and, in each case, together with a management's discussion and analysis of
financial condition and results of operations which would be so required and,
unless the Commission will not accept such reports, file with the Commission the
annual, quarterly and other reports which it is or would have been required to
file with the Commission.
EVENTS OF DEFAULT AND REMEDIES
The Exchange Indenture defines an Event of Default as (i) the failure by
Holdings to pay any installment of interest on the Exchange Debentures as and
when the same becomes due and payable and the continuance of any such failure
for 30 days, (ii) the failure by Holdings to pay all or any part of principal,
or premium, if any, on the Exchange Debentures when and as the same becomes due
and payable at maturity, redemption, by acceleration or otherwise, including,
without limitation, payment of the Change of Control Purchase Price or the Asset
Sale Offer Price, or otherwise, (iii) the failure by Holdings or any Subsidiary
of Holdings to observe or perform any other covenant or agreement contained in
the Exchange Debentures or the Exchange Indenture and the continuance of such
failure for a period of 30 days after written notice is given to Holdings by the
Trustee or to Holdings and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Exchange Debentures outstanding, specifying
such Default, (iv) certain events of bankruptcy, insolvency or reorganization in
respect of Holdings or any of its Significant Subsidiaries, (v) a default in any
Indebtedness of Holdings or any of its Subsidiaries, with an aggregate principal
amount in excess of $15.0 million (a) resulting from the failure to pay
principal at maturity or (b) as a result of which the maturity of such
Indebtedness has been accelerated prior to its stated maturity, and (vi) final
unsatisfied judgments not covered by insurance aggregating in excess of $15.0
million, at any one time rendered against Holdings or any of its Subsidiaries
and not stayed, bonded or discharged within 60 days. The Exchange Indenture
provides that if an Event of Default occurs and is continuing, the Trustee must,
within 90 days after the occurrence of such Event of Default, give to the
Holders notice of such Event of Default.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (iv) above, relating to Holdings or any of its
Significant Subsidiaries), then in every such case, unless the principal of all
of the Exchange Debentures shall have already become due and payable, either the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Exchange Debentures then outstanding, by notice in writing to Holdings (and to
the Trustee if given by Holders) (an "Acceleration Notice"), may declare all
principal, determined as set forth below, and accrued interest thereon to be due
and payable immediately. If an Event of Default specified in clause (iv) above
relating to Holdings or any of its Significant
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Subsidiaries occurs, all principal and accrued interest thereon will be
immediately due and payable without any declaration or other act on the part of
Trustee or the Holders. Upon any acceleration of maturity of the Exchange
Debentures, all principal of and accrued interest in the Exchange Debentures
shall become due and payable. The Holders of a majority in aggregate principal
amount of Exchange Debentures generally are authorized to rescind such
acceleration if all existing Events of Default, other than the non-payment of
the principal of, premium, if any, and interest on the Exchange Debentures which
have become due solely by such acceleration and except on default with respect
to any provision requiring a supermajority approval to amend, which default may
only be waived by such a supermajority, have been cured or waived.
The Holders of a majority in aggregate principal amount of the Exchange
Debentures at the time outstanding may waive on behalf of all the Holders any
default, except a default with respect to any provision requiring a
supermajority approval to amend, which default may only be waived by such a
supermajority, and except a default in the payment of principal of or interest
on any Exchange Debenture not yet cured or a default with respect to any
covenant or provision which cannot be modified or amended without the consent of
the Holder of each outstanding Exchange Debenture affected. Subject to the
provisions of the Exchange Indenture relating to the duties of the Trustee, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Exchange Indenture at the request, order or direction of any of the
Holders, unless such Holders have offered to the Trustee reasonable security or
indemnity. Subject to all provisions of the Exchange Indenture and applicable
law, the Holders of a majority in aggregate principal amount of the Exchange
Debentures at the time outstanding will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Exchange Indenture provides that Holdings may, at its option, elect to
have its obligations discharged with respect to the outstanding Exchange
Debentures ("Legal Defeasance"). Such Legal Defeasance means that Holdings shall
be deemed to have paid and discharged the entire indebtedness represented, and
the Exchange Indenture shall cease to be of further effect as to all outstanding
Exchange Debentures, except as to (i) rights of Holders to receive payments in
respect of the principal of, premium, if any, and interest on such Exchange
Debentures when such payments are due from the trust funds; (ii) the Company's
obligations with respect to such Exchange Debentures concerning issuing
temporary Exchange Debentures, registration of Exchange Debentures, mutilated,
destroyed, lost or stolen Exchange Debentures, and the maintenance of an office
or agency for payment and money for security payments held in trust; (iii) the
rights, powers, trust, duties and immunities of the Trustee, and Holdings'
obligations in connection therewith; and (iv) the Legal Defeasance provisions of
the Exchange Indenture. In addition, Holdings may, at its option and at any
time, elect to have the obligations of Holdings released with respect to certain
covenants that are described in the Exchange 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 Exchange Debentures. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
guarantees, bankruptcy, receivership, rehabilitation and insolvency events)
described under "Events of Default" will no longer constitute an Event of
Default with respect to Holdings.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
Holdings must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Exchange Debentures, U.S. legal tender, U.S. Government
Obligations 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, premium, if any or interest on such Exchange Debentures
on the stated date for payment thereof or on the redemption date of such
principal or installment of principal of, premium, if any, or interest on such
Exchange Debentures, and the Holders of Exchange Debentures must have a valid,
perfected, exclusive security interest in such trust; (ii) in the case of Legal
Defeasance before the date that is one year prior to the Stated Maturity,
Holdings shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that (A) Holdings has
received from, or there has been published by the Internal Revenue Service, a
ruling or (B) since the date of the Exchange Indenture, there has been a change
in the applicable
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federal income tax law, in either case to the effect that, and based thereon
such opinion of counsel shall confirm that, the Holders of such Exchange
Debentures 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 before the date that is one year prior to the Stated
Maturity, Holdings shall have delivered to the Trustee an opinion of counsel in
the United States reasonably acceptable to such Trustee confirming that the
Holders of such Exchange Debentures 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
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; (v) such Legal Defeasance or Covenant
Defeasance shall not result in a breach or violation of, or constitute a default
under, the Exchange Indenture or any other material agreement or instrument to
which Holdings or any of its Subsidiaries is a party or by which Holdings or any
of its Subsidiaries is bound; (vi) Holdings shall have delivered to the Trustee
an Officers' Certificate stating that the deposit was not made by Holdings with
the interest of preferring the Holders of such Exchange Debentures over any
other creditors of Holdings or with the intent of defeating, hindering, delaying
or defrauding any other creditors of Holdings or others; and (vii) Holdings
shall have delivered to the Trustee an Officers' Certificate and an opinion of
counsel, each stating that the conditions precedent provided for in, in the case
of the Officers' Certificate, (i) through (vi) and, in the case of the opinion
of counsel, clauses (i) (with respect to the validity and perfection of the
security interest), (ii), (iii) and (v) of this paragraph have been complied
with.
AMENDMENTS AND SUPPLEMENTS
The Exchange Indenture contains provisions which permit Holdings and the
Trustee to enter into a supplemental indenture for certain limited purposes
without the consent of the Holders. The Exchange Indenture also permits Holdings
and the Trustee to enter into a supplemental indenture for the following
purposes: (i) prior to the Exchange Date, to evidence any modification to the
Indenture governing the Debentures approved by the holders of the Debentures
that does not require the consent of holders of Holdings Senior Preferred Stock
and (ii) prior to the Exchange Date, to evidence any modification to the
Exchange Indenture approved by the holders of Holdings Senior Preferred Stock.
With the consent of the Holders of not less than a majority in aggregate
principal amount of the Exchange Debentures at the time outstanding, Holdings
and the Trustee are permitted to amend or supplement the Exchange Indenture or
any supplemental indenture or modify the rights of the Holders; provided that no
such modification may, without the consent of Holders of at least 66 2/3% in
aggregate principal amount of Exchange Debentures at the time outstanding,
modify the provisions (including the defined terms used therein) of the covenant
"Repurchase of Exchange Debentures at the Option of the Holder Upon a Change of
Control" or the guarantee or subordination provisions of the Exchange Indenture
in a manner adverse to the Holders; and provided, that no such modification may,
without the consent of each Holder affected thereby: (i) change the Stated
Maturity on any Exchange Debentures, or reduce the principal amount thereof or
the rate (or extend the time for payment) of interest thereon or any premium
payable upon the redemption at the option of Holdings thereof, or change the
place of payment where, or the coin or currency in which, any Exchange
Debentures or any premium or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption at the option of
Holdings, on or after the Redemption Date), or reduce the Change of Control
Purchase Price or the Asset Sale Offer Price or alter the provisions (including
the defined terms used therein) regarding the right of Holdings to redeem the
Exchange Debentures at its option in a manner adverse to Holders, or (ii) reduce
the percentage in principal amount of the outstanding Exchange Debentures, the
consent of whose Holders is required for any such amendment, supplemental
indenture or waiver provided for in the Exchange Indenture, or (iii) modify any
of the waiver provisions, except to increase any required percentage or to
provide that certain other provisions of the Exchange Indenture cannot be
modified or waived without the consent of the Holder of each outstanding
Exchange Debenture affected thereby.
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NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS
The Exchange Indenture provides that no direct or indirect stockholder,
employee, officer or director, as such, past, present or future of Holdings or
any successor entity shall have any personal liability in connection with the
Exchange Indenture or the Exchange Debentures solely by reason of his or its
status as such stockholder, employee, officer or director. Each Holder of
Exchange Debentures by accepting an Exchange Debenture waives and releases all
such liability, and acknowledges and consents to the transactions described
under "The Acquisition." The waiver and release are part of the consideration
for the issuance of the Exchange Debentures. 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.
EXCHANGE OF BOOK-ENTRY EXCHANGE DEBENTURES FOR CERTIFICATED EXCHANGE DEBENTURES
A Global Exchange Debenture is exchangeable for definitive Exchange
Debentures in registered certificated form if (i) DTC (x) notifies Holdings that
it is unwilling or unable to continue as depositary for the Global Exchange
Debenture and Holdings thereupon fails to appoint a successor depositary or (y)
has ceased to be a clearing agency registered under the Exchange Act, (ii)
Holdings, at its option, notifies the Trustee in writing that it elects to cause
the issuance of the Exchange Debentures in certificated form or (iii) there
shall have occurred and be continuing an Event of Default or any event which
after notice or lapse of time or both would be an Event of Default with respect
to the Exchange Debentures. In addition, beneficial interests in a Global
Exchange Debenture are exchangeable for definitive Exchange Debentures upon the
request of the beneficial holder to the Trustee through the applicable
procedures of DTC. In all cases, certificated Exchange Debentures delivered in
exchange for any Global Exchange Debenture or beneficial interests therein will
be registered in the names, and issued in any approved denominations, requested
by or on behalf of the depositary (in accordance with its customary procedures)
and will bear the applicable restrictive legend referred to in "Notice to
Investors," unless Holdings determines otherwise in compliance with applicable
law.
Except as set forth below, Exchange Debentures will be issued in
registered, global form in minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof.
Exchange Debentures initially will be represented by one or more Exchange
Debentures in registered global form without interest coupons (collectively, the
"Global Exchange Debenture"). The Global Exchange Debenture will be deposited
upon issuance with the Trustee as custodian for DTC, in New York, New York and
registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described below.
Except as set forth below, the Global Exchange Debenture may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Exchange
Debenture may not be exchanged for Exchange Debentures in certificated form
except in the limited circumstances described below. See "--Exchange of
Book-Entry Exchange Debentures for Certificated Exchange Debentures."
Transfer of beneficial interests in the Global Exchange Debenture will be
subject to the applicable rules and procedures of DTC and its direct or indirect
participants, which may change from time to time.
Initially, the Trustee will act as Paying Agent and Registrar. The Exchange
Debenture may be presented for registration of transfer and exchange at the
offices of the Registrar.
DEPOSITARY PROCEDURES
DTC has advised Holdings that DTC is a limited-purpose trust company
created to hold securities for its Participants and to facilitate the clearance
and settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers (including the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations.
Access to DTC's system is also available to Indirect Participants. Persons who
are not Participants may beneficially own securities held by or on behalf of DTC
only through the Participants
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or the Indirect Participants. The ownership interests and transfer of ownership
interests of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised Holdings that, pursuant to procedures established by
it, (i) upon deposit of the Global Exchange Debenture, DTC will credit the
accounts of Participants designated by Holdings with portions of the principal
amount of the Global Exchange Debenture and (ii) ownership of such interests in
the Global Exchange Debenture will be maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with respect
to other owners of beneficial interests in the Global Exchange Debenture).
Investors in the Global Exchange Debenture may hold their interests therein
directly through DTC, if they are Participants in such system. The laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer beneficial
interests in a Global Exchange Debenture to such persons will be limited to that
extent. Because DTC can act only on behalf of Participants the ability of a
person having beneficial interests in a Global Exchange Debenture to pledge such
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the lack
of a physical certificate evidencing such interests. For certain other
restrictions on the transferability of the Exchange Debentures, see "--Exchange
of Book-Entry Exchange Debentures for Certificated Exchange Debentures."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL EXCHANGE
DEBENTURE WILL NOT HAVE EXCHANGE DEBENTURES REGISTERED IN THEIR NAMES, WILL NOT
RECEIVE PHYSICAL DELIVERY OF EXCHANGE DEBENTURES IN CERTIFICATED FORM AND WILL
NOT BE CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE EXCHANGE
INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of and premium and interest, if any,
on a Global Exchange Debenture registered in the name of DTC or its nominee will
be payable by the Trustee to DTC in its capacity as the registered Holder under
the Exchange Indenture. Under the terms of the Exchange Indenture, the Company
and the Trustee will treat the persons in whose names the Exchange Debentures,
including the Global Exchange Debenture, are registered as the owners thereof
for the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither Holdings, the Trustee nor any agent of
Holdings or the Trustee has or will have any responsibility or liability for (i)
any aspect of DTC's records or any Participant's records relating to or payments
made on account of beneficial ownership interests in the Global Exchange
Debenture, or for maintaining, supervising or reviewing any of DTC's records or
any Participant's records relating to the beneficial ownership interests in the
Global Exchange Debenture or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants. DTC has advised Holdings that its
current practice, upon receipt of any payment in respect of securities such as
the Exchange Debenture (including principal and interest), is to credit the
accounts of the relevant Participants with the payment on the payment date, in
amounts proportionate to their respective holdings in the principal amount of
beneficial interests in the relevant security as shown on the records of DTC
unless DTC has reason to believe it will not receive payment on such payment
date. Payments by the Participants to the beneficial owners of Exchange
Debenture will be governed by standing instructions and customary practices and
will be the responsibility of the Participants and will not be the
responsibility of DTC, the Trustee or Holdings. Neither Holdings nor the Trustee
will be liable for any delay by DTC or any of its Participants in identifying
the beneficial owners of the Exchange Debentures, and Holdings and the Trustee
may conclusively rely on and will be protected in relying on instructions from
DTC or its nominee for all purposes.
Interests in the Global Exchange Debenture are expected to be eligible to
trade in DTC's Same-Day Funds Settlement System and secondary market trading
activity in such interests will therefore settle in immediately available funds,
subject in all cases to the rules and procedures of DTC and its Participants.
Subject to the transfer restrictions set forth under "Notice to Investors,"
transfers between Participants in DTC will be effected in accordance with DTC's
procedures, and will be settled in same-day funds.
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DTC has advised Holdings that it will take any action permitted to be taken
by a Holder of Exchange Debentures only at the direction of one or more
Participants to whose account with DTC interests in the Global Exchange
Debenture are credited and only in respect of such portion of the aggregate
principal amount of the Exchange Debentures as to which such Participant or
Participants has or have given such direction. However, if there is an Event of
Default under the Exchange Debentures, DTC reserves the right to exchange the
Global Exchange Debenture for Exchange Debentures in certificated form, and to
distribute such Exchange Debentures to its Participants.
The information in this section concerning DTC and its book-entry systems
has been obtained from sources that Holdings believes to be reliable, but
Holdings takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Exchange Debenture among participants in DTC, it is
under no obligation to perform or to continue to perform such procedures, and
such procedures may be discontinued at any time. Neither Holdings nor the
Trustee will have any responsibility for the performance by DTC or its
participants or of their respective obligations under the rules and procedures
governing its operations.
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DESCRIPTION OF NEW DEBENTURES
Set forth below is a summary of certain material provisions of the
Indenture, dated as of January 27, 1998, by and between Holdings and State
Street Bank and Trust Company, as trustee (the "Trustee"). The following summary
of certain provisions of the Indenture and the Registration Rights Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Indenture and the
Registration Rights Agreement, including the definitions therein of certain
terms used below, copies of which are available upon request to Holdings. The
definition of certain capitalized terms used in the following summary are set
forth under "--Certain Definitions" below. Capitalized terms used herein and not
otherwise defined in this section shall have the meanings assigned to them in
the Indenture.
GENERAL
The Old Debentures were, and the New Debentures will be, general unsecured
obligations of Holdings, limited in aggregate principal amount at maturity to
$89.0 million. The Debentures rank senior in right of payment to all future
subordinated Indebtedness of Holdings and pari passu in right of payment with
all existing and future Senior Indebtedness of Holdings. As of December 31,
1997, on a pro forma basis after giving effect to the Transactions, the
aggregate amount of Indebtedness of Holdings was $50.5 million (all of which was
attributable to the Old Debentures). Holdings conducts all of its operations
through its Subsidiaries. The Debentures are effectively subordinated to all
existing and future Indebtedness and other liabilities and commitments of
Holdings' Subsidiaries (including without limitation, Liberty Group Operating's
obligations under the Senior Subordinated Notes and the Revolving Credit
Facility, trade payables and lease obligations). As of December 31, 1997, on a
pro forma basis after giving effect to the Transactions, Holdings' Subsidiaries
would have had $180.0 million of Indebtedness outstanding, consisting of
Indebtedness under the Senior Subordinated Note Indenture.
The term "Subsidiaries" as used herein does not include Unrestricted
Subsidiaries. As of the date of the Indenture and as of the date hereof, none of
Holdings' Subsidiaries were Unrestricted Subsidiaries. However, under certain
circumstances, Holdings will be able to designate current or future Subsidiaries
as Unrestricted Subsidiaries. Unrestricted Subsidiaries generally will not be
subject to the restrictive covenants set forth in the Indenture.
The Debentures will mature on February 1, 2009. The Old Debentures were
issued at a substantial discount from their principal amount at maturity to
generate gross proceeds of $50.5 million. Holdings will not receive any proceeds
from the issuance of the New Debentures. The issue price of the Old Debentures
represented a yield to maturity of 11 5/8% (computed on a semi-annual bond
equivalent basis) calculated from January 27, 1998. Until February 1, 2003, no
cash interest will accrue on the Debentures, but the Accreted Value will
increase (representing amortization of OID) between the date of original
issuance and February 1, 2003, on a semi-annual bond equivalent basis using a
360-day year comprised of twelve 30-day months, such that the Accreted Value
shall be equal to the full principal amount at maturity of the Debentures on
February 1, 2003. Beginning on February 1, 2003, cash interest on the Debentures
will accrue at the rate of 11 5/8% per annum and will be payable semi-annually
on February 1 and August 1 of each year, commencing on August 1, 2003, to
Holders of the Debentures of record on the immediately preceding January 15 and
July 15, respectively. Interest on the New Debentures will accrue from the most
recent date to which interest has been paid, or, if no interest has been paid,
from February 1, 2003. Interest will be calculated on the basis of a 360-day
year consisting of twelve 30-day months. For purposes of this section only, the
term "Holders" shall mean holders of the Debentures.
Principal, premium, if any, and interest on the Debentures will be payable,
and the Debentures may be presented for registration of transfer or exchange, at
the office or agency of Holdings maintained for such purpose, which office or
agency shall be maintained in the Borough of Manhattan, The City of New York.
Except as set forth below, at the option of Holdings, payment of interest may be
made by check mailed to the Holders at the addresses set forth upon the registry
books of Holdings. No service charge will be made for any registration of
transfer or exchange of Debentures, but Holdings may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. Until otherwise designated by
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Holdings, Holdings' office or agency will be the corporate trust office of the
Trustee presently located at the office of the Trustee in the Borough of
Manhattan, The City of New York. The Old Debentures were, and the New Debentures
will be, issued only in fully registered form, without coupons, in denominations
of $1,000 and integral multiples thereof.
OPTIONAL REDEMPTION
Holdings will not have the right to redeem any Debentures prior to February
1, 2003 (other than out of the Net Cash Proceeds of a Public Equity Offering).
The Debentures will be redeemable for cash at the option of Holdings, in whole
or in part, at any time on or after February 1, 2003, upon not less than 30 days
nor more than 60 days notice to each Holder of Debentures, at the following
redemption prices (expressed as percentages of the principal amount) if redeemed
during the 12-month period commencing February 1 of the years indicated below,
in each case (subject to the right of Holders of record on a Record Date to
receive the corresponding interest due on an Interest Payment Date corresponding
to such Record Date that is on or prior to such Redemption Date) together with
accrued and unpaid interest thereon to the Redemption Date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003...................................................... 105.813%
2004...................................................... 103.875%
2005...................................................... 101.938%
2006 and thereafter....................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to February 1, 2001,
Holdings may redeem, on one or more occasions, up to an aggregate of 35% of the
aggregate principal amount at maturity of the Debentures originally outstanding
at a redemption price equal to 111.625% of the Accreted Value thereof plus
accrued and unpaid interest to the date of redemption, with cash from the Net
Cash Proceeds to Holdings of one or more Public Equity Offerings; provided, that
at least 65% of the aggregate principal amount of the Debentures originally
outstanding remain outstanding immediately after the occurrence of each such
redemption; provided, further, that such notice of redemption shall be sent
within 30 days after the date of closing of any such Public Equity Offering, and
such redemption shall occur within 60 days after the date such notice is sent.
In the case of a partial redemption, the Trustee shall select the
Debentures or portions thereof for redemption on a pro rata basis, by lot or in
such other manner it deems appropriate and fair. The Debentures may be redeemed
in part in multiples of $1,000 only.
The Debentures will not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first class mail, at least 30
days and not more than 60 days prior to the date fixed for redemption to the
Holder of each Debenture to be redeemed to such Holder's last address as then
shown upon the registry books of the Registrar. Any notice which relates to a
Debenture to be redeemed in part only must state the portion of the principal
amount equal to the unredeemed portion thereof and must state that on and after
the date of redemption, upon surrender of such Debenture, a new Debenture or
Debentures in a principal amount equal to the unredeemed portion thereof will be
issued. On and after the date of redemption, interest will cease to accrue on
the Debentures or portions thereof called for redemption, unless Holdings
defaults in the payment thereof.
CERTAIN COVENANTS
REPURCHASE OF DEBENTURES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL
The Indenture provides that in the event that a Change of Control has
occurred, each Holder of Debentures will have the right, at such Holder's
option, pursuant to an offer (subject only to conditions required by applicable
law, if any) by Holdings (the "Change of Control Offer"), to require Holdings to
repurchase all or any part of such Holder's Debentures (provided, that the
principal amount of such Debentures must be $1,000 or an integral multiple
thereof) on a date (the "Change of Control Purchase Date") that is no later than
45 Business Days after the occurrence of such Change of Control, at a cash price
equal to 101% of the Accreted Value thereof plus accrued and unpaid interest to
the Change of Control
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Purchase Date in the case of any such purchase prior to February 1, 2003, or
101% of the principal amount at maturity thereof plus accrued and unpaid
interest to the Change of Control Purchase Date in the case of any such purchase
on or after February 1, 2003 (the "Change of Control Purchase Price"). The
Change of Control Offer shall be made within 15 Business Days following a Change
of Control and shall remain open for 20 Business Days following its commencement
(the "Change of Control Offer Period"). Upon expiration of the Change of Control
Offer Period, Holdings shall promptly purchase all Debentures properly tendered
in response to the Change of Control Offer.
As used herein, a "Change of Control" means (i) any merger or consolidation
of Holdings with or into any person or any sale, transfer or other conveyance,
whether direct or indirect, of all or substantially all of the assets of
Holdings on a consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction(s), any
"person" or "group" (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable), other than any Excluded
Person or Excluded Persons, is or becomes the Beneficial Owner, directly or
indirectly, of more than 50% of the total voting power in the aggregate normally
entitled to vote in the election of directors, managers or trustees, as
applicable, of the transferee(s) or surviving entity or entities, (ii) any
"person" or "group," other than any Excluded Person or Excluded Persons, becomes
the Beneficial Owner, directly or indirectly, of more than 50% of the total
voting power in the aggregate of all classes of Capital Stock of Holdings then
outstanding normally entitled to vote in elections of directors, or (iii) during
any period of 12 consecutive months after the Issue Date, individuals who at the
beginning of any such 12-month period constituted the Board of Directors of
Holdings (together, in each case, with any new directors whose election by such
Board of Directors or whose nomination for election by the shareholders of
Holdings was approved by LGP or a Related Party of LGP or by the Excluded
Persons or by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of Holdings then in office, as
applicable.
On or before the Change of Control Purchase Date, Holdings will (i) accept
for payment Debentures or portions thereof properly tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent cash sufficient to
pay the Change of Control Purchase Price (together with accrued and unpaid
interest) of all Debentures so tendered, and (iii) deliver to the Trustee
Debentures so accepted together with an Officers' Certificate listing the
Debentures or portions thereof being purchased by Holdings. The Paying Agent
promptly will pay the Holders of Debentures so accepted an amount equal to the
Change of Control Purchase Price (together with accrued and unpaid interest),
and the Trustee promptly will authenticate and deliver to such Holders a new
Debenture equal in principal amount to any unpurchased portion of the Debenture
surrendered. Any Debentures not so accepted will be delivered promptly by
Holdings to the Holder thereof. Holdings publicly will announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Purchase Date.
Prior to making an offer to purchase Debentures upon a Change of Control,
but in any event within 90 days following such a Change of Control, Holdings
will either repay all outstanding Indebtedness of its Subsidiaries (including
Liberty Group Operating) or obtain the requisite consents, if any, under the
Credit Agreement and the Senior Subordinated Note Indenture to permit the
repurchase of the Debentures as required by this covenant. Holdings will not be
required to purchase any Debentures until it has complied with the preceding
sentence, but Holdings' failure to make a Change of Control Offer when required
or to purchase tendered Debentures when tendered would constitute an Event of
Default under the Indenture.
The obligations with respect to a Change of Control Offer shall be
satisfied to the extent actually performed by a third party in accordance with
the terms of the Indenture.
The Change of Control purchase feature of the Debentures may make more
difficult or discourage a takeover of Holdings and the removal of incumbent
management. The phrase "all or substantially all" of the assets of Holdings will
likely be interpreted under applicable state law and will be dependent upon
particular facts and circumstances. As a result, there may be a degree of
uncertainty in ascertaining whether a sale or transfer of "all or substantially
all" of the assets of Holdings has occurred. In addition, no assurances can be
given that Holdings will be able to acquire Debentures tendered upon the
occurrence of a Change of Control.
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Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable Federal and state
securities laws and any provisions of the Indenture which conflict with such
laws shall be deemed to be superseded by the provisions of such laws.
If the Change of Control Purchase Date hereunder is on or after an interest
payment Record Date and on or before the associated Interest Payment Date, any
accrued and unpaid interest due on such Interest Payment Date will be paid to
the person in whose name a Debenture is registered at the close of business on
such Record Date, and such interest will not be payable to Holders who tender
the Debentures pursuant to such Change of Control Offer.
The Credit Agreement and the Senior Subordinated Note Indenture restrict
Liberty Group Operating from paying dividends or making other distributions to
Holdings. If Holdings is unable to obtain dividends from Liberty Group Operating
sufficient to permit the repurchase of the Debentures or does not refinance such
Indebtedness, Holdings will likely not have the financial resources to
repurchase Debentures. In any event, there can be no assurance that Holdings'
Subsidiaries will have the resources available to pay any such dividend or make
any such distribution.
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED CAPITAL
STOCK
The Indenture provides that, except as set forth in this covenant, Holdings
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, issue, assume, guaranty, incur, become directly or indirectly liable
with respect to (including as a result of an Acquisition), or otherwise become
responsible for, contingently or otherwise (individually and collectively, to
"incur" or, as appropriate, an "incurrence"), any Indebtedness (including
Acquired Indebtedness), other than Permitted Indebtedness. Notwithstanding the
foregoing, if (i) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect on a pro forma
basis to, such incurrence of Indebtedness or Disqualified Capital Stock and (ii)
on the date of such incurrence (the "Incurrence Date"), after giving effect on a
pro forma basis to such incurrence of such Indebtedness or Disqualified Capital
Stock and the use of proceeds thereof, the Leverage Ratio shall not exceed 7.5
to 1 (the "Debt Incurrence Ratio"), then Holdings and its Subsidiaries may incur
such Indebtedness or Disqualified Capital Stock.
In addition, the foregoing limitations will not apply to:
(a) the incurrence by Holdings or any of its Subsidiaries of Purchase
Money Indebtedness on or after the Issue Date, provided, that (i) the
aggregate principal amount of such Indebtedness incurred on or after the
Issue Date and outstanding at any time pursuant to this paragraph (a)
(including any Indebtedness issued to refinance, replace or refund such
Indebtedness) shall not exceed $15.0 million, and (ii) in each case, such
Indebtedness as originally incurred shall not constitute more than 100% of
the cost (determined in accordance with GAAP) to Holdings or such
Subsidiary, as applicable, of the property so purchased or leased;
(b) the incurrence by Holdings or any of its Subsidiaries of
Indebtedness in an aggregate principal amount outstanding at any time
(including Indebtedness incurred to refinance, replace or refund such
Indebtedness) of up to $10.0 million (which may be incurred pursuant to the
Credit Agreement); and
(c) the incurrence by Holdings or any of its Subsidiaries of
Indebtedness pursuant to the Credit Agreement up to an aggregate principal
amount outstanding at any time (including any Indebtedness incurred to
refinance, replace or refund such Indebtedness) of $175.0 million, minus
the amount of any such Indebtedness retired with the Net Cash Proceeds from
any Asset Sale or assumed by a transferee in an Asset Sale.
Indebtedness or Disqualified Capital Stock of any person which is
outstanding at the time such person becomes a Subsidiary of Holdings (including
upon designation of any subsidiary or other person as a Subsidiary) or is merged
with or into or consolidated with Holdings or a Subsidiary of Holdings shall be
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deemed to have been incurred at the time such person becomes such a Subsidiary
of Holdings or is merged with or into or consolidated with Holdings or a
Subsidiary of Holdings, as applicable.
Notwithstanding anything to the contrary contained in the Indenture,
Holdings will not, and will not permit any of its Subsidiaries to, incur any
Indebtedness that is contractually subordinate to any other Indebtedness of
Holdings unless such Indebtedness is at least as subordinate to the Debentures,
as applicable.
LIMITATION ON RESTRICTED PAYMENTS
The Indenture provides that Holdings will not, and will not permit any of
its Subsidiaries to, directly or indirectly, make any Restricted Payment if,
after giving effect to such Restricted Payment on a pro forma basis, (1) a
Default or an Event of Default shall have occurred and be continuing, (2)
Holdings is not permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Debt Incurrence Ratio in the covenant "Limitation on Incurrence
of Additional Indebtedness and Disqualified Capital Stock," or (3) the aggregate
amount of all Restricted Payments made by Holdings and its Subsidiaries,
including after giving effect to such proposed Restricted Payment, from and
after the Issue Date, would exceed the sum of (a)(i) Consolidated EBITDA of
Holdings for the period (taken as one accounting period), commencing on the
first day of the first fiscal quarter commencing on or prior to the Issue Date,
to and including the last day of the fiscal quarter ended immediately prior to
the date of each such calculation (or, in the event Consolidated EBITDA for such
period is a deficit, then minus such deficit) less (ii) 150% of Consolidated
Fixed Charges for such period, plus (b) the aggregate Net Cash Proceeds received
by Holdings from the sale of Holdings' Qualified Capital Stock (other than in
each case (i) to a Subsidiary of Holdings, (ii) to the extent applied in
connection with a Qualified Exchange and (iii) to the extent applied to
repurchase Capital Stock pursuant to clause (b) of the definition of Permitted
Payments) after the Issue Date.
The provisions of the immediately preceding paragraph will not prohibit or
be violated by (A) a Qualified Exchange; (B) the payment or making of any
Restricted Payment within 60 days after the date of declaration thereof or the
making of any binding commitment in respect thereof, if at said date of
declaration or commitment, such Restricted Payment would have complied with the
provisions contained in clauses (1), (2) and (3) of the immediately preceding
paragraph; and (C) Permitted Payments. The full amount of any Restricted Payment
made pursuant to the foregoing clause (B) (but not pursuant to clauses (A) or
(C)) of the immediately preceding sentence, however, will be deducted in the
calculation of the aggregate amount of Restricted Payments available to be made
referred to in clause (3) of the immediately preceding paragraph.
For purposes of this covenant, the amount of any Restricted Payment, if
other than in cash, shall be the fair market value thereof, as determined in the
good faith reasonable judgment of the Board of Directors of Holdings.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that Holdings will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, assume or suffer to exist
any consensual restriction on the ability of any Subsidiary of Holdings to pay
dividends or make other distributions to or on behalf of, or to pay any
obligation to or on behalf of, or otherwise to transfer assets or property to or
on behalf of, or make or pay loans or advances to or on behalf of, Holdings or
any Subsidiary of Holdings, except (a) restrictions imposed by the Debentures or
the Indenture or by other Indebtedness of Holdings ranking pari passu with the
Debentures, provided such restrictions are not materially more restrictive than
those imposed by the Debentures or the Indenture, (b) restrictions imposed by
applicable law, (c) existing restrictions under Indebtedness outstanding on the
Issue Date, (d) restrictions under any Acquired Indebtedness not incurred in
violation of the Indenture or any agreement relating to any property, asset or
business acquired by Holdings or any of its Subsidiaries, which restrictions in
each case existed at the time of Acquisition, were not put in place in
connection with or in anticipation of such Acquisition and are not applicable to
any person, other than the person acquired, or to any property, asset or
business, other than the property, assets and business so acquired, (e) any such
restriction or requirement imposed by Indebtedness incurred under the Credit
Agreement in accordance with the Indenture, provided such restriction or
requirement is not materially more restrictive than that imposed by the
Revolving
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Credit Facility as of the Issue Date, (f) restrictions with respect solely to a
Subsidiary of Holdings imposed pursuant to a binding agreement which has been
entered into for the sale or disposition of all or substantially all of the
Equity Interests or assets of such Subsidiary, provided such restrictions apply
solely to the Equity Interests or assets of such Subsidiary which are being
sold, (g) restrictions on transfer contained in Purchase Money Indebtedness
incurred pursuant to paragraph (a) of the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock," provided such
restrictions relate only to the transfer of the property acquired with the
proceeds of such Purchase Money Indebtedness, and (h) in connection with and
pursuant to permitted Refinancings, replacements of restrictions imposed
pursuant to clauses (a), (c), (d), (e) or (g) of this paragraph that are not
materially more restrictive than those being replaced and do not apply to any
other person or assets than those that would have been covered by the
restrictions in the Indebtedness so refinanced. Notwithstanding the foregoing,
neither (a) customary provisions restricting subletting or assignment of any
lease entered into in the ordinary course of business, consistent with industry
practice, nor (b) Liens permitted under the terms of the Indenture shall in and
of themselves be considered a restriction on the ability of the applicable
Subsidiary to transfer such agreement or assets, as the case may be.
LIMITATION ON LIENS SECURING INDEBTEDNESS
Holdings will not, and will not permit any of its Subsidiaries to, create,
incur, assume or suffer to exist, to secure any Indebtedness, any Lien of any
kind, other than Permitted Liens, upon any of their respective assets now owned
or acquired on or after the date of the Indenture or upon any income or profits
therefrom unless Holdings provides, and causes its Subsidiaries to provide,
concurrently therewith or immediately thereafter, that the Debentures are
equally and ratably so secured for so long as such Indebtedness so secured
remains outstanding; provided that, if such Indebtedness is Subordinated
Indebtedness, the Lien securing such Subordinated Indebtedness shall be
subordinate and junior to the Lien securing the Debentures with the same
relative priority as such Subordinated Indebtedness shall have with respect to
the Debentures.
LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK
The Indenture provides that Holdings will not, and will not permit any of
its Subsidiaries to, in one or a series of related transactions, convey, sell,
transfer, assign or otherwise dispose of, directly or indirectly, any of its
property, business or assets (other than cash or Cash Equivalents), including by
merger or consolidation, and including any sale or other transfer or issuance of
any Equity Interests (other than directors' qualifying shares) of any Subsidiary
of Holdings, whether by Holdings or a Subsidiary of Holdings, and including
(except as provided in clause (vi) of the third paragraph of this covenant) any
Sale and Leaseback Transaction (any of the foregoing, an "Asset Sale"), unless
(1)(a) within 360 days after the date of such Asset Sale, the Net Cash Proceeds
therefrom (the "Asset Sale Offer Amount") are applied to the optional redemption
of the Debentures in accordance with the terms of the Indenture and other
Indebtedness of Holdings ranking on a parity with the Debentures from time to
time outstanding with similar provisions requiring Holdings to make an offer to
purchase or to redeem such Indebtedness with the proceeds from asset sales, pro
rata in proportion to the respective principal amounts (or accreted values in
the case of Indebtedness issued with an OID) of the Debentures and such other
Indebtedness then outstanding or to the repurchase of the Debentures and such
other Indebtedness pursuant to a cash offer (subject only to conditions required
by applicable law, if any (pro rata in proportion to the respective principal
amounts (or accreted values in the case of Indebtedness issued with an OID) of
the Debentures and such other Indebtedness then outstanding) (the "Asset Sale
Offer") at a purchase price of 100% of principal amount (or accreted value in
the case of Indebtedness issued with an OID) (the "Asset Sale Offer Price")
together with accrued and unpaid interest to the date of payment, made within
360 days of such Asset Sale, or (b) within 360 days following such Asset Sale,
the Asset Sale Offer Amount is used (i) to make one or more Acquisitions or
invested in assets and property (other than notes, bonds, obligations and
securities) which in the good faith reasonable judgment of the Board of
Directors of Holdings will constitute or be a part of a Related Business of
Holdings or such Subsidiary (if it continues to be a Subsidiary) immediately
following such transaction or (ii) to retire permanently Indebtedness incurred
under the Credit Agreement pursuant to paragraph (c) of the covenant "Limitation
on Incurrence of Additional Indebtedness and Disqualified Capital Stock"
(including that in the case of a revolver or similar arrangement that makes
credit available, such commitment is so permanently
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reduced by such amount) the Senior Subordinated Notes or other Indebtedness
ranking on a parity with either the foregoing Indebtedness or other
Indebtedness, incurred pursuant to paragraph (b) of such covenant, (2) at least
75% of the consideration for such Asset Sale or series of related Asset Sales
consists of cash or Cash Equivalents, provided that (x) the amount of any
liabilities (as shown on Holdings' most recent consolidated balance sheet) of
Holdings or any Subsidiary (other than Subordinated Indebtedness) that are
assumed by the transferee in such Asset Sale (provided that Holdings and its
Subsidiaries are released from all obligations in respect thereof) and (y) any
notes or other obligations received by Holdings or any such Subsidiary from such
transferee that are promptly (but in no event more than 90 days after receipt)
converted by Holdings or such Subsidiary into cash or Cash Equivalents (to the
extent of the cash or Cash Equivalents, as the case may be, received), shall be
deemed to be cash or Cash Equivalents, as the case may be, for purposes of this
provision, and such cash and Cash Equivalents shall be deemed to be Net Cash
Proceeds received from the Asset Sale of the related property sold for such
notes or other obligations, for purposes of this covenant, and, provided,
further, this clause (2) shall not apply to the sale or disposition of assets as
a result of a foreclosure (or a secured party taking ownership of such assets in
lieu of foreclosure) or as a result of an involuntary proceeding in which
Holdings cannot, directly or through its Subsidiaries, direct the type of
proceeds received, and (3) with respect to any Asset Sale or series of related
Asset Sales, Net Cash Proceeds of which exceed $2.0 million, the Board of
Directors of Holdings determines in good faith that Holdings or such Subsidiary,
as applicable, receives fair market value for such Asset Sale.
The Indenture provides that an acquisition of Debentures pursuant to an
Asset Sale Offer may be deferred until the accumulated Net Cash Proceeds from
Asset Sales not applied to the uses set forth in clause 1(b) above (the "Excess
Proceeds") exceeds $10.0 million and that each Asset Sale Offer shall remain
open for 20 Business Days following its commencement (the "Asset Sale Offer
Period"). Upon expiration of the Asset Sale Offer Period, Holdings shall apply
the Asset Sale Offer Amount plus an amount equal to accrued and unpaid interest
to the purchase of all Indebtedness properly tendered (on a pro rata basis if
the Asset Sale Offer Amount is insufficient to purchase all Indebtedness so
tendered) at the Asset Sale Offer Price (together with any accrued and unpaid
interest). To the extent that the aggregate amount of Indebtedness tendered
pursuant to an Asset Sale Offer is less than the Asset Sale Offer Amount,
Holdings may use any remaining Net Cash Proceeds for general corporate purposes
as otherwise permitted by the Indenture and following each Asset Sale Offer the
Excess Proceeds amount shall be reset to zero.
Notwithstanding the foregoing provisions of this covenant, the following
transactions shall not be deemed Asset Sales:
(i) Holdings and each of its Subsidiaries may convey, sell, lease,
transfer, assign or otherwise dispose of property in the ordinary course of
business;
(ii) Holdings and each of its Subsidiaries may (x) convey, sell,
lease, transfer, assign or otherwise dispose of assets pursuant to and in
accordance with the limitation on mergers, sales or consolidations
provisions in the Indenture, (y) make Restricted Payments permitted by the
covenant "Limitation on Restricted Payments," and (z) engage in Exempted
Affiliate Transactions;
(iii) Holdings and each of its Subsidiaries may convey, sell,
transfer, assign or otherwise dispose of assets or issue Capital Stock to
Holdings or any of its Subsidiaries;
(iv) Holdings and each of its Subsidiaries may sell or dispose of
damaged, worn out or other obsolete property in the ordinary course of
business so long as such property is no longer necessary for the proper
conduct of the business of Holdings or such Subsidiary, as applicable;
(v) Holdings and each of its Subsidiaries may exchange assets held by
Holdings or a Subsidiary for assets held by any person or entity; provided
that (A) the assets received by Holdings or a Subsidiary in any such
exchange in the good faith reasonable judgment of the Board of Directors of
Holdings will immediately constitute, be a part of, or be used in, a
Related Business, (B) the Board of Directors of Holdings has determined
that the terms of any exchange are fair and reasonable, and (C) any such
exchange shall be deemed to be an Asset Sale to the extent that Holdings or
any Subsidiary receive cash or Cash Equivalents in such exchange;
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(vi) Holdings and each of its Subsidiaries may engage in Sale and
Leaseback Transactions with respect to property acquired after the Issue
Date (other than property acquired in exchange for or with the proceeds
from the sale or other disposition of property held by Holdings or any
Subsidiary on the Issue Date);
(vii) Holdings and each of its Subsidiaries may liquidate Cash
Equivalents in the ordinary course of business;
(viii) Holdings and each of its Subsidiaries may create or assume
Liens (or permit any foreclosure thereon) not prohibited by the Indenture;
(ix) Holdings and each of its Subsidiaries may surrender or waive
contract rights or the settlement, release or surrender of contract, tort
or other claims of any kind; and
(x) Holdings and its Subsidiaries, collectively, may convey, sell,
transfer, assign or otherwise dispose of assets having an aggregate fair
market value not exceeding $2.0 million in any fiscal year.
All Net Cash Proceeds from an Event of Loss (other than the proceeds of any
business interruption insurance) shall be invested or otherwise used as provided
in clause 1 of the first paragraph of this covenant, all within 18 months from
the occurrence of such Event of Loss.
Any Asset Sale Offer will be made in compliance with all applicable laws,
rules and regulations, including, if applicable, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable Federal and state
securities laws and any provisions of the Indenture which conflict with such
laws shall be deemed to be superseded by the provisions of such laws.
If the payment date in connection with an Asset Sale Offer hereunder is on
or after an interest payment Record Date and on or before the associated
Interest Payment Date, any accrued and unpaid interest will be paid to the
person in whose name a Debenture is registered at the close of business on such
Record Date, and such interest will not be payable to Holders who tender
Debentures pursuant to such Asset Sale Offer.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Indenture provides that neither Holdings nor any of its Subsidiaries
will be permitted after the Issue Date to enter into any contract, agreement,
arrangement or transaction with any Affiliate (an "Affiliate Transaction"), or
any series of related Affiliate Transactions (other than Exempted Affiliate
Transactions), unless the terms of such Affiliate Transaction are fair and
reasonable to Holdings or such Subsidiary, as the case may be, and are at least
as favorable as the terms which could reasonably be expected to be obtained by
Holdings or such Subsidiary, as the case may be, in a comparable transaction
made on an arm's length basis with persons who are not Affiliates.
Without limiting the foregoing, in connection with any Affiliate
Transaction or series of related Affiliate Transactions (other than Exempted
Affiliate Transactions) (1) involving consideration to either party in excess of
$1.5 million, Holdings must deliver an Officers' Certificate to the Trustee,
stating that the terms of such Affiliate Transaction are fair and reasonable to
Holdings, and no less favorable to Holdings than could reasonably be expected to
have been obtained in an arm's length transaction with a non-Affiliate, and (2)
involving consideration to either party in excess of $7.5 million, Holdings must
also, prior to consummation thereof, obtain a favorable written opinion as to
the fairness of such transaction to Holdings from a financial point of view from
an independent investment banking firm of national reputation or, if pertaining
to a matter for which such investment banking firms do not customarily render
such opinions, an appraisal or valuation firm of national reputation; provided,
that this sentence shall not apply to the sale or purchase of products or
services by Holdings or its Subsidiaries to or from any Affiliate of LGP or any
Related Party thereof, which sale or purchase is in the ordinary course of
business and in accordance with industry practice.
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that Holdings will not consolidate with or merge
with or into another person or, directly or indirectly, sell, lease, convey or
transfer all or substantially all of its assets (computed on a
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consolidated basis), whether in a single transaction or a series of related
transactions, to another person or group of affiliated persons or adopt a plan
of liquidation, unless (i) either (a) Holdings is the continuing entity or (b)
the resulting, surviving or transferee entity or, in the case of a plan of
liquidation, the entity which receives the greatest value from such plan of
liquidation is a corporation organized under the laws of the United States, any
state thereof or the District of Columbia and expressly assumes by supplemental
indenture all of the obligations of Holdings in connection with the Debentures
and the Indenture; (ii) no Default or Event of Default shall exist or shall
occur immediately after giving effect on a pro forma basis to such transaction;
(iii) immediately after giving effect to such transaction on a pro forma basis,
the Consolidated Net Worth of the consolidated, resulting, surviving or
transferee entity or, in the case of a plan of liquidation, the entity which
receives the greatest value from such plan of liquidation is at least equal to
the Consolidated Net Worth of Holdings immediately prior to such transaction;
and (iv) immediately after giving effect to such transaction on a pro forma
basis, the consolidated, resulting, surviving or transferee entity or, in the
case of a plan of liquidation, the entity which receives the greatest value from
such plan of liquidation would immediately thereafter be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio set
forth in the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock."
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of Holdings or consummation of a plan of liquidation in
accordance with the foregoing, the successor corporation formed by such
consolidation or into which Holdings is merged or to which such transfer is made
or, in the case of a plan of liquidation, the entity which receives the greatest
value from such plan of liquidation shall succeed to and (except in the case of
a lease) be substituted for, and may exercise every right and power of, Holdings
under the Indenture with the same effect as if such successor corporation had
been named therein as Holdings, and (except in the case of a lease) Holdings
shall be released from the obligations under the Debentures and the Indenture
except with respect to any obligations that arise from, or are related to, such
transaction.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise) of all or substantially all of the properties and assets of one or
more Subsidiaries, Holdings' interest in which constitutes all or substantially
all of the properties and assets of Holdings, shall be deemed to be the transfer
of all or substantially all of the properties and assets of Holdings.
LIMITATION ON LINES OF BUSINESS
The Indenture provides that neither Holdings nor any of its Subsidiaries
shall directly or indirectly engage to any substantial extent in any line or
lines of business activity other than that which, in the reasonable good faith
judgment of the Board of Directors of Holdings, is a Related Business.
RESTRICTION ON SALE AND ISSUANCE OF SUBSIDIARY STOCK
The Indenture provides that Holdings will not sell, and its Subsidiaries
will not issue or sell, any shares of Capital Stock (other than directors'
qualifying shares) of any Subsidiary of Holdings to any person other than
Holdings or a wholly owned Subsidiary of Holdings, except for shares of common
stock with no preferences or special rights or privileges and with no redemption
or prepayment provisions. Notwithstanding the foregoing, (a) Holdings and its
Subsidiaries may consummate an Asset Sale of all of the Capital Stock owned by
Holdings and its Subsidiaries of any Subsidiary and (b) Holdings or any
Subsidiary may pledge, hypothecate or otherwise grant a Lien on any Capital
Stock of any Subsidiary to the extent not prohibited under the covenant
"Limitation on Liens Securing Indebtedness."
LIMITATION ON STATUS AS INVESTMENT COMPANY
The Indenture prohibits Holdings and its Subsidiaries from being required
to register as an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended), or from otherwise becoming subject
to regulation under the Investment Company Act.
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REPORTS
The Indenture provides that whether or not Holdings is subject to the
reporting requirement of Section 13 or 15(d) of the Exchange Act, Holdings shall
deliver to the Trustee and to each Holder and to prospective purchasers of
Debentures identified to Holdings, within 15 days after it is or would have been
(if it were subject to such reporting obligations) required to file such with
the Commission, annual and quarterly financial statements substantially
equivalent to financial statements that would have been included in reports
filed with the Commission, if Holdings were subject to the requirements of
Section 13 or 15(d) of the Exchange Act, including, with respect to annual
information only, a report thereon by Holdings' certified independent public
accountants as such would be required in such reports to the Commission, and, in
each case, together with a management's discussion and analysis of financial
condition and results of operations which would be so required and, unless the
Commission will not accept such reports, file with the Commission the annual,
quarterly and other reports which it is or would have been required to file with
the Commission.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by Holdings to
pay any installment of interest on the Debentures as and when the same becomes
due and payable and the continuance of any such failure for 30 days, (ii) the
failure by Holdings to pay all or any part of principal, or premium, if any, on
the Debentures when and as the same becomes due and payable at maturity,
redemption, by acceleration or otherwise, including, without limitation, payment
of the Change of Control Purchase Price or the Asset Sale Offer Price, or
otherwise, (iii) the failure by Holdings or any Subsidiary of Holdings to
observe or perform any other covenant or agreement contained in the Debentures
or the Indenture and the continuance of such failure for a period of 30 days
after written notice is given to Holdings by the Trustee or to Holdings and the
Trustee by the Holders of at least 25% in aggregate principal amount of the
Debentures outstanding, specifying such Default, (iv) certain events of
bankruptcy, insolvency or reorganization in respect of Holdings or any of its
Significant Subsidiaries, (v) a default in any Indebtedness of Holdings or any
of its Subsidiaries, with an aggregate principal amount in excess of $15.0
million (a) resulting from the failure to pay principal at maturity or (b) as a
result of which the maturity of such Indebtedness has been accelerated prior to
its stated maturity, and (vi) final unsatisfied judgments not covered by
insurance aggregating in excess of $15.0 million, at any one time rendered
against Holdings or any of its Subsidiaries and not stayed, bonded or discharged
within 60 days. The Indenture provides that if an Event of Default occurs and is
continuing, the Trustee must, within 90 days after the occurrence of such Event
of Default, give to the Holders notice of such Event of Default.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (iv) above, relating to Holdings or any of its
Significant Subsidiaries), then in every such case, either the Trustee or the
Holders of at least 25% in aggregate principal amount of the Debentures then
outstanding, by notice in writing to Holdings (and to the Trustee if given by
Holders) (an "Acceleration Notice"), may declare all the Debentures to be due
and payable immediately. If an Event of Default specified in clause (iv) above
relating to Holdings or any of its Significant Subsidiaries occurs, all
outstanding Debentures will be immediately due and payable without any
declaration or other act on the part of Trustee or the Holders. Upon any
acceleration of maturity of the Debentures, all principal of and accrued
interest on (if on or after February 1, 2003) or Accreted Value on (if prior to
February 1, 2003) the Debentures shall be due and payable immediately. The
Holders of a majority in aggregate principal amount of Debentures generally are
authorized to rescind such acceleration if all existing Events of Default, other
than the non-payment of the principal of, premium, if any, and interest on the
Debentures which have become due solely by such acceleration and except on
default with respect to any provision requiring a supermajority approval to
amend, which default may only be waived by such a supermajority, have been cured
or waived.
The Holders of a majority in aggregate principal amount of the Debentures
at the time outstanding may waive on behalf of all the Holders any default,
except a default with respect to any provision requiring a supermajority
approval to amend, which default may only be waived by such a supermajority, and
except a default in the payment of principal of or interest on any Debenture not
yet cured or a default with respect to any covenant or provision which cannot be
modified or amended without the consent of the Holder of each
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outstanding Debenture affected. Subject to the provisions of the Indenture
relating to the duties of the Trustee, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request,
order or direction of any of the Holders, unless such Holders have offered to
the Trustee reasonable security or indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the Debentures at the time outstanding will have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that Holdings may, at its option, elect to have its
obligations discharged with respect to the outstanding Debentures ("Legal
Defeasance"). Such Legal Defeasance means that Holdings shall be deemed to have
paid and discharged the entire indebtedness represented, and the Indenture shall
cease to be of further effect as to all outstanding Debentures, except as to (i)
rights of Holders to receive payments in respect of the principal of, premium,
if any, and interest on such Debentures when such payments are due from the
trust funds; (ii) Holdings' obligations with respect to such Debentures
concerning issuing temporary Debentures, registration of Debentures, mutilated,
destroyed, lost or stolen Debentures, and the maintenance of an office or agency
for payment and money for security payments held in trust; (iii) the rights,
powers, trust, duties and immunities of the Trustee, and Holdings' obligations
in connection therewith; and (iv) the Legal Defeasance provisions of the
Indenture. In addition, Holdings may, at its option and at any time, elect to
have the obligations of Holdings 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 Debentures. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Debentures.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
Holdings must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Debentures, U.S. legal tender, U.S. Government Obligations 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, premium, if any, and interest on such Debentures on the stated
date for payment thereof or on the redemption date of such principal or
installment of principal of, premium, if any, or interest on such Debentures,
and the Holders of Debentures must have a valid, perfected, exclusive security
interest in such trust; (ii) in the case of Legal Defeasance before the date
that is one year prior to the Stated Maturity, Holdings shall have delivered to
the Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that (A) Holdings has 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 such Debentures 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 before the date that is
one year prior to the Stated Maturity, Holdings shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to such
Trustee confirming that the Holders of such Debentures 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 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; (v) such
Legal Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under the Indenture or any other material
agreement or instrument to which Holdings or any of its Subsidiaries is a party
or by which Holdings or any of its Subsidiaries is bound; (vi) Holdings shall
have delivered to the Trustee an Officers' Certificate stating that the deposit
was not made by Holdings with the interest of preferring the Holders of such
Debentures over any other creditors of Holdings or with the intent of defeating,
hindering, delaying or defrauding any other creditors of Holdings or others; and
(vii) Holdings shall have
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delivered to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that the conditions precedent provided for in, in the case of the
Officers' Certificate, (i) through (vi) and, in the case of the opinion of
counsel, clauses (i) (with respect to the validity and perfection of the
security interest), (ii), (iii) and (v) of this paragraph have been complied
with.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions which permit Holdings and the Trustee to
enter into a supplemental indenture for certain limited purposes without the
consent of the Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of the Debentures at the time
outstanding, Holdings and the Trustee are permitted to amend or supplement the
Indenture or any supplemental indenture or modify the rights of the Holders;
provided that no such modification may, without the consent of Holders of at
least 66 2/3% in aggregate principal amount of Debentures at the time
outstanding, modify the provisions (including the defined terms used therein) of
the covenant "Repurchase of Debentures at the Option of the Holder Upon a Change
of Control" of the Indenture in a manner adverse to the Holders; and provided,
that no such modification may, without the consent of each Holder affected
thereby: (i) change the Stated Maturity on any Debenture, or reduce the
principal amount thereof, or amend or modify the calculation on the Accreted
Value so as to reduce the amount of Accreted Value of the Debentures or the rate
of accretion on the Debentures, or reduce the rate (or extend the time for
payment) of interest thereon or any premium payable upon the redemption at the
option of Holdings thereof, or change the place of payment where, or the coin or
currency in which, any Debenture or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case of redemption
at the option of Holdings, on or after the Redemption Date), or reduce the
Change of Control Purchase Price or the Asset Sale Offer Price or alter the
provisions (including the defined terms used therein) regarding the right of
Holdings to redeem the Debentures at its option in a manner adverse to Holders,
or (ii) reduce the percentage in principal amount of the outstanding Debentures,
the consent of whose Holders is required for any such amendment, supplemental
indenture or waiver provided for in the Indenture, or (iii) modify any of the
waiver provisions, except to increase any required percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Debenture affected thereby.
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS
The Indenture provides that no direct or indirect stockholder, employee,
officer or director, as such, past, present or future of Holdings or any
successor entity shall have any personal liability in connection with the
Indenture or the Debentures solely by reason of his or its status as such
stockholder, employee, officer or director. Each Holder of Debentures by
accepting a Debenture waives and releases all such liability, and acknowledges
and consents to the transactions described under "The Acquisition." The waiver
and release are part of the consideration for the issuance of the Debentures.
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.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in the
Certificate of Designations, the Exchange Indenture and the Indenture relating
to the Debentures. Reference is made to the Certificate of Designations, the
Exchange Indenture and the Indenture for the full definitions of such terms, as
well as any other terms used in "Description of New Senior Preferred Stock,"
"Description of Exchange Debentures" or "Description of New Debentures."
"Accreted Value" means, as of any date of determination, the sum (rounded
to the nearest whole dollar) of (a) the initial offering price of the Debentures
or the Exchange Debentures, as the case may be, and (b) the portion of the
excess of the principal amount at maturity of the Debentures or the Exchange
Debentures, as the case may be, over such initial offering price which shall
have been accreted thereon through such date, such amount to be so accreted on a
daily basis at the rate of 11 5/8% per annum, in the case
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of the Debentures, 14 3/4% per annum, in the case of the Exchange Debentures,
compounded semi-annually on each February 1 and August 1 from the date of
issuance of the Debentures or the Exchange Debentures, as the case may be,
through the date of determination. On and after February 1, 2003, the Accreted
Value of the Debentures shall be equal to the principal amount at maturity.
"Acquired Indebtedness" means Indebtedness or Disqualified Capital Stock of
any person existing at the time such person becomes a Subsidiary of Holdings,
including by designation, or is merged or consolidated into or with Holdings or
one of its Subsidiaries.
"Acquisition" means the purchase or other acquisition of, or combination
with, any person (including, without limitation, the acquisition of more than
50% of the Equity Interests of any person) or all or substantially all the
assets of any person by any other person, whether by purchase, stock purchase,
merger, consolidation or other transfer, and whether or not for consideration.
"Affiliate" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with Holdings. For
purposes of this definition, the term "control" means the power to direct the
management and policies of a person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by contract,
or otherwise, provided, that, with respect to ownership interest in Holdings and
its Subsidiaries, a Beneficial Owner of 10% or more of the total voting power
normally entitled to vote in the election of directors, managers or trustees, as
applicable, shall for such purposes be deemed to constitute control.
"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (i) the sum of the
products (a) of the number of months from the date of determination to the date
or dates of each successive scheduled principal (or redemption) payment of such
security or instrument and (b) the amount of each such respective principal (or
redemption) payment by (ii) the sum of all such principal (or redemption)
payments.
"Beneficial Owner" or "beneficial owner" for purposes of the definition of
Change of Control and Affiliate has the meaning attributed to it in Rules 13d-3
and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether or
not applicable.
"Board of Directors" means, with respect to any person, the Board of
Directors of such person or any committee of the Board of Directors of such
person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capitalized Lease Obligation" means, as to any person, the obligations of
such person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness or Senior Indebtedness that is not itself otherwise capital stock),
warrants, options, participations or other equivalents of or interests (however
designated) in stock issued by that corporation.
"Cash Equivalent" means (a) 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 one year from the
date of acquisition thereof; (b) marketable general obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within one year from the
date of acquisition thereof and, at the time of acquisition thereof, having a
credit rating of "A" or better from either Standard & Poor's Ratings Group or
Moody's Investors Service, Inc.; (c) certificates of deposit, time deposits,
eurodollar time deposits, overnight bank deposits or bankers' acceptances having
maturities of not more than one year from the date of acquisition thereof of any
domestic
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commercial bank, the long-term debt of which is rated at the time of acquisition
thereof at least "A" or the equivalent thereof by either Standard & Poor's
Ratings Group or Moody's Investors Service, Inc. and having capital and surplus
in excess of $500,000,000; (d) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (a),
(b) and (c) above entered into with any bank meeting the qualifications
specified in clause (c) above; (e) commercial paper rated at the time of
acquisition thereof at least A-2 or the equivalent thereof by Standard & Poor's
Ratings Group or P-2 or the equivalent thereof by Moody's Investors Service,
Inc., or carrying an equivalent rating by a nationally recognized rating agency,
if both of the two named rating agencies cease publishing ratings of
investments, and in either case maturing within 270 days after the date of
acquisition thereof; and (f) interests in any investment company which invests
solely in instruments of the type specified in clauses (a) through (e) above.
"Consolidated EBITDA" means, with respect to any person, for any period,
the Consolidated Net Income of such person for such period adjusted to add
thereto (to the extent deducted from net revenues in determining Consolidated
Net Income), without duplication, the sum of (i) consolidated income taxes, (ii)
consolidated depreciation and amortization (including amortization of debt
issuance costs in connection with any Indebtedness of such person and its
Subsidiaries), (iii) Consolidated Fixed Charges and (iv) all other non-cash
charges; provided that consolidated income taxes, depreciation and amortization
of a Subsidiary of such person that is less than wholly owned shall only be
added to the extent of the equity interest of such person in such Subsidiary.
"Consolidated Fixed Charges" of any person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of (a) interest expensed or capitalized, paid, accrued, or scheduled
to be paid or accrued (including, in accordance with the following sentence,
interest attributable to Capitalized Lease Obligations) of such person and its
Consolidated Subsidiaries during such period, excluding amortization of debt
issuance costs incurred in connection with the Holdings Senior Preferred Stock,
the Exchange Debentures, the Debentures, the Senior Subordinated Notes or the
Credit Agreement but including (i) original issue discount and non-cash interest
payments or accruals on any Indebtedness, (ii) the interest portion of all
deferred payment obligations, and (iii) all commissions, discounts and other
fees and charges owed with respect to bankers' acceptances and letters of credit
financings and currency and Interest Swap and Hedging Obligations, in each case
to the extent attributable to such period, and (b) the amount of cash dividends
paid by such person or any of its Consolidated Subsidiaries in respect of
Preferred Stock (other than by Subsidiaries of such person to such person or
such person's wholly owned Subsidiaries). For purposes of this definition, (x)
interest on a Capitalized Lease Obligation shall be deemed to accrue at an
interest rate reasonably determined by Holdings to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance with GAAP and (y) to
the extent such expense would result in a liability upon the consolidated
balance sheet of such person in accordance with GAAP, interest expense
attributable to any Indebtedness represented by the guaranty by such person or a
Subsidiary of such person of an obligation of another person shall be deemed to
be the interest expense attributable to the Indebtedness guaranteed.
Notwithstanding the foregoing, Consolidated Fixed Charges shall not include
costs, fees and expenses incurred in connection with the Transactions, and any
non-cash charge or expense associated with the write-off of deferred debt
issuance costs associated with the Credit Agreement, the Senior Subordinated
Notes, the Holdings Senior Preferred Stock, the Exchange Debentures, or the
Debentures.
"Consolidated Net Income" means, with respect to any person for any period,
the net income (or loss) of such person and its Consolidated Subsidiaries
(determined on a consolidated basis in accordance with GAAP) for such period,
adjusted to exclude (only to the extent included in computing such net income
(or loss) and without duplication): (a) all gains and losses which are either
extraordinary (as determined in accordance with GAAP) or are either unusual or
nonrecurring (including any gain from the sale or other disposition of assets
outside the ordinary course of business or from the issuance or sale of any
Capital Stock), (b) the net income, if positive, of any person, other than a
Consolidated Subsidiary, in which such person or any of its Consolidated
Subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in cash to such person or a
Consolidated Subsidiary of such person during such period, but in any case not
in excess of such person's pro rata share of such person's net income for such
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period, (c) the net income or loss of any person acquired in a pooling of
interests transaction for any period prior to the date of such Acquisition, (d)
the net income, if positive, of any of such person's Consolidated Subsidiaries
in the event and solely to the extent that the declaration or payment of
dividends or similar distributions is not at the time permitted by operation of
the terms of its charter or bylaws or any other agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Consolidated Subsidiary, (e) the effects of changes in accounting principles,
(f) any non-cash compensation expense in connection with the exercise of, grant
to or repurchase from officers, directors and employees of stock, stock options
or stock equivalents, (g) any non-cash charge or expense associated with the
write-off of deferred debt issuance costs associated with the Credit Agreement,
the Senior Subordinated Notes or the Debentures, and (h) costs, fees and
expenses incurred in connection with the Transactions.
"Consolidated Net Worth" of any person at any date means the aggregate
consolidated stockholders' equity of such person (plus amounts of equity
attributable to preferred stock) and its Consolidated Subsidiaries, as would be
shown on the consolidated balance sheet of such person prepared in accordance
with GAAP, adjusted to exclude (to the extent included in calculating such
equity), (a) the amount of any such stockholders' equity attributable to
Disqualified Capital Stock or treasury stock of such person and its Consolidated
Subsidiaries, (b) all upward revaluations and other write-ups in the book value
of any asset of such person or a Consolidated Subsidiary of such person
subsequent to the Issue Date, and (c) all investments in Subsidiaries that are
not Consolidated Subsidiaries and in persons that are not Subsidiaries.
"Consolidated Subsidiary" means, for any person, each Subsidiary of such
person (whether now existing or hereafter created or acquired) the financial
statements of which are consolidated for financial statement reporting purposes
with the financial statements of such person in accordance with GAAP.
"consolidated" means, with respect to Holdings, the consolidated accounts
of its Subsidiaries with those of Holdings, all in accordance with GAAP;
provided that "consolidated" will not include consolidation of the accounts of
any Unrestricted Subsidiary with the accounts of Holdings.
"Credit Agreement" means the one or more credit agreements (including,
without limitation, the Revolving Credit Facility) entered into by and among
Holdings, certain of its subsidiaries (if any) and certain financial
institutions, which provide for in the aggregate one or more term loans and/or
revolving credit and letter of credit facilities, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, as such credit agreement and/or related documents may be
amended, restated, supplemented, renewed, replaced or otherwise modified from
time to time whether or not with the same agent, trustee, representative lenders
or holders, and, subject to the proviso to the next succeeding sentence
irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of foregoing, the term "Credit Agreement" shall include
any amendment, amendment and restatement, renewal, extension, restructuring,
supplement or modification to any such credit agreement and all refundings,
refinancings and replacements of any such credit agreement, including any
agreement (i) extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (ii) adding or deleting borrowers or guarantors
thereunder, so long as borrowers and issuers include one or more of Holdings and
its Subsidiaries and their respective successors and assigns, (iii) increasing
the amount of Indebtedness incurred thereunder or available to be borrowed
thereunder, provided that on the date such Indebtedness is incurred it would not
be prohibited by the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock," or (iv) otherwise altering the
terms and conditions thereof in a manner not prohibited by the terms hereof.
"Disqualified Capital Stock" means (a) except as set forth in (b), with
respect to any person, any Equity Interest of such person that, by its terms or
by the terms of any security into which it is convertible, exercisable or
exchangeable, is, or upon the happening of an event or the passage of time or
both would be, required to be redeemed or repurchased (including at the option
of the holder thereof) by such person or any of its Subsidiaries, in whole or in
part, on or prior to the Stated Maturity of the Debentures or the Exchange
Debentures, as the case may be, and (b) with respect to any Subsidiary of such
person (including with respect to any Subsidiary of Holdings), any Equity
Interests other than any common equity with no preference,
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privileges, or redemption or repayment provisions and preferred equity owned by
Holdings or one of its Subsidiaries.
"Equity Interest" of any person means any shares, interests, participations
or other equivalents (however designated) in such person's equity, and shall in
any event include any Capital Stock issued by, or partnership or membership
interests in, such person.
"Event of Loss" means, with respect to any property or asset, (i) any loss,
destruction or damage of such property or asset or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"Excluded Person" means GEI and its Related Parties.
"Exempted Affiliate Transaction" means (a) compensation, indemnification
and other benefits paid or made available (x) pursuant to the employment
agreements between Holdings and members of its senior management, or (y) for or
in connection with services actually rendered to Holdings and comparable to
those generally paid or made available by entities engaged in the same or
similar businesses (including reimbursement or advancement of reasonable
out-of-pocket expenses, directors' and officers' liability insurance and loans
to officers, directors and employees (i) in the ordinary course of business and
(ii) to purchase Holdings Common Stock in an amount not to exceed $1.0 million),
(b) transactions, expenses and payments in connection with the Transactions, (c)
any Restricted Payments or other payments or transactions expressly permitted
under the covenant "Limitation on Restricted Payments," (d) payments to LGP for
management services under the Management Services Agreement in an amount not to
exceed $1.5 million in any fiscal year, plus reimbursement of reasonable
out-of-pocket costs and expenses, (e) payments to LGP for reasonable and
customary fees and expenses for financial advisory and investment banking
services provided to Holdings in connection with major financial transactions,
and (f) transactions between or among Holdings and its Subsidiaries or between
or among Subsidiaries of Holdings, provided that any ownership interest in any
such Subsidiary which is not beneficially owned directly or indirectly by
Holdings or any of its Subsidiaries is not beneficially owned by an Affiliate of
Holdings other than by virtue of the direct or indirect ownership interest in
such Subsidiary held (in the aggregate) by Holdings and/or one or more of its
Subsidiaries.
"GAAP" means United States 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 approved by a significant segment of the
accounting profession in the United States as in effect on the Issue Date.
"GEI" means Green Equity Investors II, L.P.
"Indebtedness" of any person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of any such person, to the
extent such liabilities and obligations would appear as a liability upon the
consolidated balance sheet of such person in accordance with GAAP, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors; (b) all liabilities
and obligations, contingent or otherwise, of such person (i) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks, (ii)
relating to any Capitalized Lease Obligation, or (iii) evidenced by a letter of
credit or a reimbursement obligation of such person with respect to any letter
of credit; (c) all net obligations of such person under Interest Swap and
Hedging Obligations; (d) all liabilities and obligations of others of the kind
described in the preceding clauses (a), (b) or (c) that such person has
guaranteed or that is otherwise its legal liability or which are secured by one
or more Liens on any assets or property of such person; provided that if the
liabilities or obligations which are secured by a Lien have not been assumed in
full by such person or are not such person's legal liability in full, the amount
of such Indebtedness for the purposes of this definition shall be limited to the
lesser of the amount of such Indebtedness secured by such Lien or the fair
market value of the assets or property securing such Lien; (e) any and all
deferrals, renewals, extensions,
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refinancing and refundings (whether direct or indirect) of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (a), (b), (c) or (d), or this clause (e), whether or not
between or among the same parties; and (f) all Disqualified Capital Stock of
such person (measured at the greater of its voluntary or involuntary maximum
fixed repurchase price plus accrued and unpaid dividends). For purposes hereof,
the "maximum fixed repurchase price" of any Disqualified Capital Stock which
does not have a fixed repurchase price shall be calculated in accordance with
the terms of such Disqualified Capital Stock as if such Disqualified Capital
Stock were purchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture, and if such price is based upon, or
measured by, the Fair Market Value of such Disqualified Capital Stock, such Fair
Market Value to be determined in good faith by the Board of Directors of the
issuer (or managing general partner of the issuer) of such Disqualified Capital
Stock.
"Interest Swap and Hedging Obligation" means any obligation of any person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"Investment" by any person in any other person means (without duplication)
(a) the acquisition (whether by purchase, merger, consolidation or otherwise) by
such person (whether for cash, property, services, securities or otherwise) of
capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities, including any options or warrants, of such other
person or any agreement to make any such acquisition; (b) the making by such
person of any deposit with, or advance, loan or other extension of credit to,
such other person (including the purchase of property from another person
subject to an understanding or agreement, contingent or otherwise, to resell
such property to such other person) or any commitment to make any such advance,
loan or extension (but excluding accounts receivable, endorsements for
collection or deposits arising in the ordinary course of business); (c) other
than guarantees of Indebtedness of Holdings or any Subsidiary to the extent
permitted by the covenant "Limitation on Incurrence of Additional Indebtedness
and Disqualified Capital Stock," the entering into by such person of any
guarantee of, or other credit support or contingent obligation with respect to,
Indebtedness or other liability of such other person; (d) the making of any
capital contribution by such person to such other person; and (e) the
designation by the Board of Directors of Holdings of any person to be an
Unrestricted Subsidiary. Holdings shall be deemed to make an Investment in an
amount equal to the fair market value of the net assets of any subsidiary (or,
if neither Holdings nor any of its Subsidiaries has theretofore made an
Investment in such subsidiary, in an amount equal to the Investments being
made), at the time that such subsidiary is designated an Unrestricted
Subsidiary, and any property transferred to an Unrestricted Subsidiary from
Holdings or a Subsidiary of Holdings shall be deemed an Investment valued at its
fair market value at the time of such transfer. The amount of any such
Investment shall be reduced by any liabilities or obligations of Holdings or any
of its Subsidiaries to be assumed or discharged in connection with such
Investment by an entity other than Holdings or any of its Subsidiaries. For
purposes of clarification and greater certainty, the designation of a newly
formed subsidiary as an Unrestricted Subsidiary shall not constitute an
Investment.
"Issue Date" means January 27, 1998.
"Leverage Ratio" on any date of determination (the "Transaction Date")
means the ratio, on a pro forma basis, of (a) the aggregate amount of
Indebtedness of Holdings and its Subsidiaries on a consolidated basis to (b) the
aggregate amount of Consolidated EBITDA of Holdings attributable to continuing
operations and businesses (exclusive of amounts attributable to operations and
businesses permanently discontinued or disposed of) for the Reference Period;
provided, that for purposes of calculating Consolidated EBITDA for this
definition, (i) Acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date shall
be assumed to have occurred on the first day of the Reference Period, (ii)
transactions giving rise to the need to calculate the Leverage Ratio shall be
assumed to have occurred on the first day of the Reference Period, (iii) the
incurrence of any Indebtedness or issuance of
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any Disqualified Capital Stock during the Reference Period or subsequent to the
Reference Period and on or prior to the Transaction Date (and the application of
the proceeds therefrom to the extent used to refinance or retire other
Indebtedness) shall be assumed to have occurred on the first day of the
Reference Period, and (iv) the Consolidated Fixed Charges of such person
attributable to interest on any Indebtedness or dividends on any Disqualified
Capital Stock bearing a floating interest (or dividend) rate shall be computed
on a pro forma basis as if the average rate in effect from the beginning of the
Reference Period to the Transaction Date had been the applicable rate for the
entire period, unless such person or any of its Subsidiaries is a party to an
Interest Swap or Hedging Obligation (which shall remain in effect for the
12-month period immediately following the Transaction Date) that has the effect
of fixing the interest rate on the date of computation, in which case such rate
(whether higher or lower) shall be used.
"LGP" means Leonard Green & Partners, L.P.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired.
"Management Agreement" means the management agreement, dated as of the
Issue Date, between Liberty Group Operating and LGP substantially as in effect
on the Issue Date.
"Net Cash Proceeds" means the aggregate amount of cash or Cash Equivalents
received by Holdings in the case of a sale of Qualified Capital Stock and by
Holdings and its Subsidiaries in respect of an Asset Sale plus, in the case of
an issuance of Qualified Capital Stock upon any exercise, exchange or conversion
of securities (including options, warrants, rights and convertible or
exchangeable debt) of Holdings that were issued for cash on or after the Issue
Date, the amount of cash originally received by Holdings upon the issuance of
such securities (including options, warrants, rights and convertible or
exchangeable debt) less, in each case, the sum of all payments, fees,
commissions and (in the case of Asset Sales, reasonable and customary) expenses
(including, without limitation, the fees and expenses of legal counsel and
investment banking fees and expenses) incurred in connection with such Asset
Sale or sale of Qualified Capital Stock, and, in the case of an Asset Sale only,
less (i) the amount (estimated reasonably and in good faith by Holdings) of
income, franchise, sales and other applicable taxes required to be paid by
Holdings or any of its respective Subsidiaries in connection with such Asset
Sale; (ii) the amounts of any repayments of Indebtedness secured, directly or
indirectly, by Liens on the assets which are the subject of such Asset Sale or
Indebtedness associated with such assets which is due by reason of such Asset
Sale (i.e., such disposition is permitted by the terms of the instruments
evidencing or applicable to such Indebtedness, or by the terms of a consent
granted thereunder, on the condition that the proceeds (or portion thereof) of
such disposition be applied to such Indebtedness), and other fees, expenses and
other expenditures, in each case, reasonably incurred as a consequence of such
repayment of Indebtedness (whether or not such fees, expenses or expenditures
are then due and payable or made, as the case may be); (iii) all amounts deemed
appropriate by Holdings (as evidenced by a signed certificate of the Chief
Financial Officer of Holdings delivered to the Trustee) to be provided as a
reserve, in accordance with GAAP, against any liabilities associated with such
assets which are the subject of such Asset Sale; and (iv) with respect to Asset
Sales by Subsidiaries of Holdings, the portion of such cash payments
attributable to persons holding a minority interest in such Subsidiary.
"Permitted Indebtedness" means any of the following:
(a) that Holdings may incur Indebtedness evidenced by the Debentures
and represented by the Indenture and Indebtedness evidenced by the Exchange
Debentures and reprepresented by the Exchange Indenture up to the amounts
specified therein as of the date thereof and Liberty Group Operating and
its Subsidiaries may incur Indebtedness evidenced by the Senior
Subordinated Notes and the guarantees thereof and represented by the
indenture related thereto up to the amounts specified therein as of the
date hereof;
(b) that Holdings and its Subsidiaries, as applicable, may incur
Refinancing Indebtedness with respect to any Indebtedness or Disqualified
Capital Stock, as applicable, that was permitted by the
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Indenture to be incurred and any Indebtedness of Holdings outstanding on
the Issue Date after giving effect to the Transactions;
(c) Holdings and its Subsidiaries may incur Indebtedness solely in
respect of bankers's acceptances and letters of credit (in addition to any
such Indebtedness incurred under the Credit Agreement in accordance with
the Indenture) (to the extent that such incurrence does not result in the
incurrence of any obligation to repay any obligation relating to borrowed
money of others), all in the ordinary course of business in accordance with
customary industry practices, in amounts and for the purposes customary in
Holdings' industry; provided, that the aggregate principal amount
outstanding of such Indebtedness (including any Indebtedness issued to
refinance, refund or replace such Indebtedness) shall not exceed $5.0
million;
(d) Holdings and its Subsidiaries may incur Indebtedness arising from
tender, bid, performance or government contract bonds, other obligations of
like nature, or warranty or contractual service obligations of like nature,
in any case, incurred by Holdings or its Subsidiaries in the ordinary
course of business;
(e) Holdings and its Subsidiaries may incur Interest Swap and Hedging
Obligations that are incurred for the purpose of fixing or hedging interest
rate or currency risk with respect to any fixed or floating rate
Indebtedness that is permitted by the Indenture to be outstanding or any
receivable or liability the payment of which is determined by reference to
a foreign currency; provided, that the notional amount of any such Interest
Swap and Hedging Obligation does not exceed the principal amount of
Indebtedness to which such Interest Swap and Hedging Obligation relates;
and
(f) Holdings may incur Indebtedness to any Subsidiary, and any
Subsidiary may incur Indebtedness to any other Subsidiary or to Holdings;
provided, that, in the case of Indebtedness of Holdings, such obligations
shall be unsecured and subordinated in all respects to Holdings'
obligations pursuant to the New Debentures and the date of any event that
causes such Subsidiary no longer to be a Subsidiary shall be an Incurrence
Date.
"Permitted Investment" means Investments in (a) any of the Debentures or
Exchange Debentures; (b) Cash Equivalents; (c) intercompany notes to the extent
permitted under clause (f) of the definition of "Permitted Indebtedness,"
provided that Indebtedness under any such notes of a Subsidiary shall be deemed
to be a Restricted Investment if such person ceases to be a Subsidiary; (d)
Investments in the form of promissory notes of members of Holdings' management
not to exceed $1.0 million in principal amount at any time outstanding solely in
consideration of the purchase by such persons of Qualified Capital Stock of
Holdings; (e) Investments by Holdings or any Subsidiary in any person that is or
immediately after such Investment becomes a Subsidiary, or immediately after
such Investment merges or consolidates into Holdings or any Subsidiary in
compliance with the terms of the Indenture, provided that such person is engaged
in all material respects in a Related Business; (f) Investments in Holdings by
any Subsidiary, provided that in the case of Indebtedness constituting any such
Investment, such Indebtedness shall be unsecured and subordinated in all
respects to Holdings' obligations under the Debentures; (g) Investments in
securities of trade creditors or customers received in settlement of obligations
that arose in the ordinary course of business or pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers; (h) Investments by Holdings outstanding on the
Issue Date; (i) transactions or arrangements with officers or directors of
Holdings or any Subsidiary entered into in the ordinary course of business
(including compensation or employee benefit arrangements with any officer or
director of Holdings or any Subsidiary permitted under the covenant "Limitation
on Transactions with Affiliates"); (j) Investments in persons (other than
Affiliates of Holdings) received as consideration from Asset Sales to the extent
not prohibited by the covenant "Limitation on Sale of Assets and Subsidiary
Stock"; (k) additional Investments at any time outstanding not to exceed the sum
of (i) $5.0 million and (ii) the cumulative gain (net of taxes and all payments,
fees, commissions and expenses incurred in such sale or disposition) realized by
Holdings and its Subsidiaries in cash or Cash Equivalents on the sale or other
disposition after the Issue Date of Investments (including Permitted Investments
and Restricted Investments) made after the Issue Date in accordance with the
Indenture (but only to the extent that such gain is excluded from the net income
of Holdings and the Consolidated Subsidiaries by the definition of Consolidated
Net Income); and (l) the
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acquisition of Equity Interests of a person engaged in a Related Business, other
than a person described in clause (e), through the issuance of Holdings Common
Stock.
"Permitted Lien" means (a) Liens existing on the Issue Date; (b) Liens
imposed by governmental authorities for taxes, assessments or other charges not
yet subject to penalty or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of Holdings in accordance with GAAP; (c) statutory liens
of carriers, warehousemen, mechanics, materialmen, landlords, repairmen or other
like Liens arising by operation of law in the ordinary course of business
provided that (i) the underlying obligations are not overdue for a period of
more than 60 days, or (ii) such Liens are being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of Holdings in accordance with GAAP; (d) Liens securing
the performance of bids, trade contracts (other than borrowed money), leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business; (e)
easements, rights-of-way, zoning, similar restrictions and other similar
encumbrances or title defects which, singly or in the aggregate, do not in any
case materially detract from the value of the property subject thereto (as such
property is used by Holdings or any of its Subsidiaries) or interfere with the
ordinary conduct of the business of Holdings or any of its Subsidiaries; (f)
Liens arising by operation of law in connection with judgments, only to the
extent, for an amount and for a period not resulting in an Event of Default with
respect thereto; (g) pledges or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security legislation; (h) Liens securing the Debentures or the
Exchange Debentures; (i) Liens securing Indebtedness of a person existing at the
time such person becomes a Subsidiary or is merged with or into Holdings or a
Subsidiary or Liens securing Indebtedness incurred in connection with an
Acquisition, provided that such Liens were in existence prior to the date of
such Acquisition, were not incurred in anticipation thereof, and do not extend
to any other assets; (j) Liens arising from Purchase Money Indebtedness
permitted to be incurred under paragraph (a) of the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock," provided
such Liens relate solely to the property which is subject to such Purchase Money
Indebtedness; (k) leases or subleases granted to other persons in the ordinary
course of business not materially interfering with the conduct of the business
of Holdings or any of its Subsidiaries or materially detracting from the value
of the assets of Holdings or any Subsidiary; (l) Liens arising from
precautionary Uniform Commercial Code financing statement filings regarding
operating leases entered into by Holdings or any of its Subsidiaries in the
ordinary course of business; (m) Liens securing Refinancing Indebtedness
incurred to refinance any Indebtedness that was previously so secured in
accordance with the Indenture; (n) Liens securing Indebtedness under the Credit
Agreement incurred in accordance with the Indenture; (o) Liens securing
Indebtedness incurred under paragraph (b) of the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock"; and (p)
any interest or title of a lessor under any lease, whether or not characterized
as capital or operating, provided that such Liens do not extend to any property
or assets which is not leased property subject to such lease.
"Permitted Payments" means, without duplication, (a) the payments provided
for by clauses (a), (d) and (e) of the definition of "Exempted Affiliate
Transaction"; provided that in the case of clause (d) of such definition, no
Default or Event of Default shall have occurred or be continuing and the
obligation to pay such amounts has been subordinated to the payment of the
Debentures or the Exchange Debentures, as the case may be; (b) the repurchase of
common stock, stock options and stock equivalents of Holdings held by former
directors, officers or employees of Holdings or any of its Subsidiaries in an
aggregate amount not to exceed in any fiscal year $1.0 million plus the
aggregate Net Cash Proceeds received by Holdings from the sale of Holdings
Common Stock to directors, officers or employees of Holdings; provided, that any
amount not so paid in any fiscal year may be paid in future fiscal years; and
(c) Restricted Payments in an aggregate amount not to exceed $4.0 million.
"pro forma" includes, with respect to an Acquisition or the incurrence of
Indebtedness in connection therewith, all adjustments, permitted or required to
be included pursuant to Article 11 of Regulation S-X and subject to agreed-upon
procedures to be performed by Holdings' independent accountants to determine
whether the pro forma calculations are made in accordance with Article 11 of
Regulation S-X.
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"Public Equity Offering" means an underwritten offering of common stock of
Holdings or a Subsidiary for cash pursuant to an effective registration
statement under the Securities Act, provided at the time of or upon consummation
of such offering, such common stock of Holdings or a Subsidiary is listed on a
national securities exchange or quoted on the national market system of the
Nasdaq Stock Market.
"Purchase Money Indebtedness" of any person means any Indebtedness of such
person to any seller or other person incurred to finance the acquisition or
construction (including in the case of a Capitalized Lease Obligation, the
lease) of any business or real or personal tangible property (or, in each case,
any interest therein) acquired or constructed after the Issue Date which, in the
reasonable good faith judgment of the Board of Directors of Holdings, is related
to a Related Business of Holdings and which is incurred concurrently with, or
within 180 days of, such acquisition or the completion of such construction and,
if secured, is secured only by the assets so financed.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Qualified Exchange" means any legal defeasance, redemption, retirement,
repurchase or other acquisition of Capital Stock or Indebtedness of Holdings
issued on or after the Issue Date with the Net Cash Proceeds received by
Holdings from the substantially concurrent sale of its Qualified Capital Stock
or any exchange of Qualified Capital Stock of Holdings for any Capital Stock or
Indebtedness of Holdings issued on or after the Issue Date.
"Reference Period" with regard to any person means the four full fiscal
quarters (or such lesser period during which such person has been in existence)
ended immediately preceding any date upon which any determination is to be made
pursuant to the terms of the Debentures or the Indenture; provided that
"Reference Period" with regard to Holdings shall include periods prior to the
Acquisition of its predecessors.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of which
are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, liquidation preference, not to exceed (after
deduction of the amount of fees, consents, premiums, prepayment penalties and
reasonable expenses incurred in connection with such Refinancing) the lesser of
(i) the principal amount or, in the case of Disqualified Capital Stock,
liquidation preference, of the Indebtedness or Disqualified Capital Stock so
Refinanced and (ii) if such Indebtedness being Refinanced was issued with an
original issue discount, the accreted value thereof (as determined in accordance
with GAAP) at the time of such Refinancing; provided, that (A) such Refinancing
Indebtedness of any Subsidiary of Holdings shall only be used to Refinance
outstanding Indebtedness or Disqualified Capital Stock of such Subsidiary, (B)
such Refinancing Indebtedness shall (x) not have an Average Life shorter than
the Indebtedness or Disqualified Capital Stock to be so refinanced at the time
of such Refinancing and (y) in all respects, be no less subordinated or junior,
if applicable, to the rights of Holders of the Debentures than was the
Indebtedness or Disqualified Capital Stock to be refinanced, (C) such
Refinancing Indebtedness shall have a final stated maturity or redemption date,
as applicable, no earlier than the final stated maturity or redemption date, as
applicable, of the Indebtedness or Disqualified Capital Stock to be so
refinanced, and (D) such Refinancing Indebtedness shall be secured (if secured)
in a manner no more adverse to the Holders of the Debentures than the terms of
the Liens (if any) securing such refinanced Indebtedness, including, without
limitation, the amount of Indebtedness secured shall not be increased (except by
the amount of fees, consents, premiums, prepayment penalties and reasonable
expenses incurred in connection with such Refinancing). For purposes of
clarification and greater certainty, if Indebtedness permitted by the terms of
the Indenture (including clauses (a), (b) and (c) of the second paragraph of
"Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock") is repaid, redeemed, defeased, refunded, refinanced, discharged or
otherwise retired for value from the proceeds of Refinancing Indebtedness, the
maximum amount of such Refinancing Indebtedness shall be determined in
accordance with the provisions of this definition, and the amount of such
Refinancing Indebtedness in excess of the amount of such Indebtedness (as
permitted by this definition) shall not reduce the amount of Indebtedness
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permitted by the terms of this Indenture (including, without limitation, not
reducing or counting towards the amounts set forth in such clauses (a), (b) and
(c)).
"Related Business" means the business conducted (or proposed to be
conducted, including the activities referred to as being contemplated by
Holdings, as described or referred to in this Prospectus) by Holdings as of the
Issue Date and any and all businesses that in the good faith judgment of the
Board of Directors of Holdings are reasonably related businesses, including
reasonably related extensions thereof.
"Related Party" means any partnership or corporation which is managed by or
controlled by LGP or any Affiliate thereof.
"Restricted Investment" means, in one or a series of related transactions,
any Investment, other than investments in Cash Equivalents and other Permitted
Investments; provided, however, that a merger of another person with or into
Holdings or a Subsidiary in accordance with the terms of the Indenture shall not
be deemed to be a Restricted Investment so long as the surviving entity is
Holdings or a direct wholly owned Subsidiary.
"Restricted Payment" means, with respect to any person, (a) the declaration
or payment of any dividend or other distribution in respect of Equity Interests
of such person or any Subsidiary of such person, (b) any payment on account of
the purchase, redemption or other acquisition or retirement for value of Equity
Interests of such person or any Subsidiary of such person, (c) other than with
the proceeds from the substantially concurrent sale of, or in exchange for,
Refinancing Indebtedness, any purchase, redemption or other acquisition or
retirement for value of, any payment in respect of any amendment of the terms of
or any defeasance of, any Subordinated Indebtedness, directly or indirectly, by
such person or any Subsidiary of such person prior to the scheduled maturity,
any scheduled repayment of principal, or scheduled sinking fund payment, as the
case may be, of such Indebtedness, (d) any Restricted Investment by such person
and (e) any payment provided for by clause (d) of the definition of "Exempted
Affiliate Transaction"; provided, however, that the term "Restricted Payment"
does not include (i) any dividend, distribution or other payment on or with
respect to Equity Interests of Holdings to the extent payable solely in shares
of Qualified Capital Stock of Holdings; (ii) any dividend, distribution or other
payment to Holdings, or to any of its Subsidiaries, by Holdings or any of its
Subsidiaries; (iii) payments made pursuant to the Transactions; (iv) Permitted
Investments; or (v) pro rata dividends and other distributions on Equity
Interests of any Subsidiary by such Subsidiary.
"Sale and Leaseback Transaction" means any transaction by which Holdings or
a Subsidiary, directly or indirectly, becomes liable as a lessee or as a
guarantor or other surety with respect to any lease of any property (whether
real or personal or mixed), whether now owned or hereafter acquired that
Holdings or any Subsidiary has sold or transferred or is to sell or transfer to
any other person in a substantially concurrent transaction with such assumption
of liability.
"Significant Subsidiary" shall have the meaning provided under Regulation
S-X of the Securities Act, as in effect on the Issue Date.
"Stated Maturity," when used with respect to any Debenture, means February
1, 2009 and when used in respect to any Exchange Debenture, means February 1,
2010.
"Subordinated Indebtedness" means Indebtedness of Holdings or a Subsidiary
that is subordinated in right of payment by its terms or the terms of any
document or instrument relating thereto to the Debentures or the Exchange
Debentures, as the case may be, in any respect or has a final stated maturity
after the Stated Maturity.
"Subsidiary," with respect to any person, means (i) a corporation a
majority of whose Equity Interests with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such person, by such person and one or more Subsidiaries of such person or by
one or more Subsidiaries of such person, (ii) any other person (other than a
corporation) in which such person, one or more Subsidiaries of such person, or
such person and one or more Subsidiaries of such person, directly or indirectly,
at the date of determination thereof has at least majority ownership interest,
or (iii) a partnership in which such person or
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a Subsidiary of such person is, at the time, a general partner. Notwithstanding
the foregoing, an Unrestricted Subsidiary shall not be a Subsidiary of Holdings
or of any Subsidiary of Holdings. Unless the context requires otherwise,
Subsidiary means each direct and indirect Subsidiary of Holdings.
"Unrestricted Subsidiary" means any subsidiary of Holdings that does not
own any Capital Stock of, or own or hold any Lien on any property of, Holdings
or any other Subsidiary of Holdings and that, at the time of determination,
shall be an Unrestricted Subsidiary (as designated by the Board of Directors of
Holdings); provided, that (i) such subsidiary shall not engage, to any
substantial extent, in any line or lines of business activity other than a
Related Business, (ii) neither immediately prior thereto nor after giving pro
forma effect to such designation would there exist a Default or Event of Default
and (iii) immediately after giving pro forma effect thereto, Holdings could
incur at least $1.00 of Indebtedness pursuant to the Debt Incurrence Ratio of
the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock." The Board of Directors of Holdings may designate
any Unrestricted Subsidiary to be a Subsidiary; provided that (i) no Default or
Event of Default is existing or will occur as a consequence thereof and (ii)
immediately after giving effect to such designation, on a pro forma basis,
Holdings could incur at least $1.00 of Indebtedness pursuant to the Debt
Incurrence Ratio of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock." Each such designation shall be
evidenced by filing with the Trustee a certified copy of the resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions.
"U.S. Government Obligations" means direct non-callable obligations of, or
noncallable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
BOOK-ENTRY, DELIVERY AND FORM OF NEW GLOBAL DEBENTURE
Except as set forth below, the New Debentures will be issued in registered,
global form in minimum denominations of $1,000 and integral multiples of $1,000
in excess thereof.
New Debentures initially will be represented by one or more debentures in
registered global form without interest coupons (collectively, the "New Global
Debenture"). The New Global Debenture will be deposited upon issuance with the
Trustee as custodian for DTC, in New York, New York and registered in the name
of DTC or its nominee, in each case for credit to an account of a direct or
indirect participant in DTC as described below.
Except as set forth below, the New Global Debenture may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the New Global Debenture may not be
exchanged for New Debentures in certificated form except in the limited
circumstances described below. See "--Exchange of Book-Entry New Debentures for
Certificated New Debentures."
Transfer of beneficial interests in the New Global Debenture will be
subject to the applicable rules and procedures of DTC and its direct or indirect
participants, which may change from time to time.
Initially, the Trustee will act as Paying Agent and Registrar. The New
Debentures may be presented for registration of transfer and exchange at the
offices of the Registrar.
DEPOSITARY PROCEDURES
DTC has advised Holdings that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests and transfer of ownership
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interests of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised Holdings that, pursuant to procedures established by
it, (i) upon deposit of the New Global Debenture, DTC will credit the accounts
of Participants with portions of the principal amount of the New Global
Debenture and (ii) ownership of such interests in the New Global Debenture will
be maintained by DTC (with respect to the Participants) or by the Participants
and the Indirect Participants (with respect to other owners of beneficial
interests in the New Global Debenture).
Investors in the New Global Debenture may hold their interests therein
directly through DTC, if they are Participants in such system. The laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer beneficial
interests in a New Global Debenture to such persons will be limited to that
extent. Because DTC can act only on behalf of Participants, the ability of a
person having beneficial interests in a New Global Debenture to pledge such
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the lack
of a physical certificate evidencing such interests. For certain other
restrictions on the transferability of the New Debentures, see "--Exchange of
Book-Entry New Debentures for Certificated New Debentures."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE NEW GLOBAL DEBENTURE
WILL NOT HAVE NEW DEBENTURES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE
PHYSICAL DELIVERY OF NEW DEBENTURES IN CERTIFICATED FORM AND WILL NOT BE
CONSIDERED THE REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY
PURPOSE.
Payments in respect of the principal of and premium, if any, and interest
on the New Global Debenture registered in the name of DTC or its nominee will be
payable by the Trustee to DTC in its capacity as the registered Holder under the
Indenture. Under the terms of the Indenture, Holdings and the Trustee will treat
the persons in whose names the New Debentures, including the New Global
Debenture, are registered as the owners thereof for the purpose of receiving
such payments and for any and all other purposes whatsoever. Consequently,
neither Holdings, the Trustee nor any agent of Holdings or the Trustee has or
will have any responsibility or liability for (i) any aspect of DTC's records or
any Participant's records relating to or payments made on account of beneficial
ownership interests in the New Global Debenture, or for maintaining, supervising
or reviewing any of DTC's records or any Participant's records relating to the
beneficial ownership interests in the New Global Debenture or (ii) any other
matter relating to the actions and practices of DTC or any of its Participants.
DTC has advised Holdings that its current practice, upon receipt of any payment
in respect of securities such as the New Debentures (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in the principal amount of beneficial interests in the relevant
security as shown on the records of DTC unless DTC has reason to believe it will
not receive payment on such payment date. Payments by the Participants to the
beneficial owners of New Debentures will be governed by standing instructions
and customary practices and will be the responsibility of the Participants and
will not be the responsibility of DTC, the Trustee or Holdings. Neither Holdings
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the New Debentures, and Holdings and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Interests in the New Global Debenture are expected to be eligible to trade
in DTC's Same-Day Funds Settlement System and secondary market trading activity
in such interests will therefore settle in immediately available funds, subject
in all cases to the rules and procedures of DTC and its Participants.
Subject to the transfer restrictions set forth under "Notice to Investors,"
transfers between Participants in DTC will be effected in accordance with DTC's
procedures, and will be settled in same-day funds.
DTC has advised Holdings that it will take any action permitted to be taken
by a Holder of New Debentures only at the direction of one or more Participants
to whose account with DTC interests in the New Global Debenture are credited and
only in respect of such portion of the aggregate principal amount of the New
Debentures as to which such Participant or Participants has or have given such
direction. However, if
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there is an Event of Default under the New Debentures, DTC reserves the right to
exchange the New Global Debenture for New Debentures in certificated form, and
to distribute such New Debentures to its Participants.
The information in this section concerning DTC and its book-entry systems
has been obtained from sources that Holdings believes to be reliable, but
Holdings takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the New Global Debenture among participants in DTC, it is under
no obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither Holdings nor the Trustee
will have any responsibility for the performance by DTC or its respective
participants of their respective obligations under the rules and procedures
governing its operations.
EXCHANGE OF BOOK-ENTRY NEW DEBENTURES FOR CERTIFICATED NEW DEBENTURES
A New Global Debenture is exchangeable for definitive New Debentures in
registered certificated form if (i) DTC (x) notifies Holdings that it is
unwilling or unable to continue as depositary for the New Global Debenture and
Holdings thereupon fails to appoint a successor depositary or (y) has ceased to
be a clearing agency registered under the Exchange Act, (ii) Holdings, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
the New Debentures in certificated form, or (iii) there shall have occurred and
be continuing an Event of Default or any event which after notice or lapse of
time or both would be an Event of Default with respect to the New Debentures. In
addition, beneficial interests in a New Global Debenture are exchangeable for
definitive New Debentures upon the request of the beneficial holder to the
Trustee through the applicable procedures of DTC. In all cases, certificated New
Debentures delivered in exchange for any New Global Debenture or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures) and will bear the applicable restrictive legend
referred to in "Notice to Investors," unless Holdings determines otherwise in
compliance with applicable law.
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DESCRIPTION OF OTHER INDEBTEDNESS
REVOLVING CREDIT FACILITY
On January 27, 1998, the Company entered into a five-year, $125.0 million
revolving credit facility (the "Revolving Credit Facility") with a syndicate of
financial institutions for whom Citicorp USA, Inc. acts as administrative agent.
The Revolving Credit Facility includes a $10.0 million subfacility for letters
of credit. As of , 1998, there were no borrowings outstanding under
the Revolving Credit Facility. The Revolving Credit Facility will be used by the
Company for general corporate purposes and to finance subsequent acquisitions.
The Revolving Credit Facility is secured by a first priority security
interest in substantially all of the tangible and intangible assets of Liberty
Group Operating and of Holdings and Holdings' present and future direct and
indirect subsidiaries. In addition, the loans under the Revolving Credit
Facility are guaranteed, subject to certain limitations, by Holdings and by all
future direct and indirect subsidiaries of Liberty Group Operating and of
Holdings.
Borrowings under the Revolving Credit Facility bear interest at an annual
rate, at the Company's option, equal to the Base Rate (as defined therein) or
the Eurodollar Rate (as defined therein) plus a margin that varies based upon a
ratio set forth therein. For the first six months following the Closing Date,
the interest rate for borrowings under the Revolving Credit Facility will have a
floor of the Base Rate plus 0.75% or the Eurodollar Rate plus 2.0%. Applicable
interest rates will be increased 2.0% per annum during the continuance of any
Event of Default (as defined therein) under the Revolving Credit Facility. In
addition to customary letters of credit fronting fees and other fees, the
Company pays a fee equal to the Applicable Margin for Eurodollar Rate Advances
(as defined therein) per annum on the aggregate amount of outstanding letters of
credit. The Company also pays a fee on the unused portion of the Revolving
Credit Facility.
The obligation of the lenders under the Revolving Credit Agreement to
advance funds is subject to the satisfaction of certain conditions customary in
agreements of this type. In addition, the Company is subject to certain
affirmative and negative covenants customarily contained in agreements of this
type. The Revolving Credit Facility also provides for customary events of
default. See "Risk Factors--Secured Indebtedness; Subordination."
SENIOR SUBORDINATED NOTES
Contemporaneously with the Exchange Offer, Liberty Group Operating will
offer the New Senior Subordinated Notes in exchange for any and all of its
outstanding Old Senior Subordinated Notes. The Senior Subordinated Notes are
senior subordinated unsecured obligations of Liberty Group Operating which
mature on February 1, 2008. Cash interest on the Senior Subordinated Notes
accrues at the rate of 9 3/8% per annum and will be payable semi-annually in
arrears on February 1 and August 1 of each year, commencing August 1, 1998, to
the holders of record on the immediately preceding January 15 and July 15,
respectively.
On or after February 1, 2003, the Senior Subordinated Notes may be redeemed
at the option of Liberty Group Operating, in whole at any time or in part from
time to time, at a redemption price equal to the applicable percentage of the
principal amount thereof set forth below, plus accrued and unpaid interest, if
any, to the redemption date, if redeemed during the twelve-month period
commencing on February 1, 2003 in the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2003........................................................ 104.688%
2004........................................................ 103.125%
2005........................................................ 101.563%
2006 and thereafter......................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to February 1, 2001,
Liberty Group Operating may use the net proceeds of one or more Public Equity
Offerings (as defined therein) to redeem up to 35% of the
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Senior Subordinated Notes at a redemption price equal to 109.375% of the
principal amount thereof plus accrued and unpaid interest, if any, to the
redemption date; provided, however, at least 65% of the original aggregate
principal amount of the Senior Subordinated Notes remain outstanding after each
such redemption.
The Senior Subordinated Notes Indenture contains covenants that, among
other things, limit the ability of Liberty Group Operating to enter into certain
mergers or consolidations, incur certain liens, and its subsidiaries to incur
additional indebtedness, pay dividends and make certain other restricted
payments and engage in certain transactions with affiliates.
Upon certain circumstances, including a change in control (as defined in
the Senior Subordinated Notes Indenture), Liberty Group Operating will be
required to make an offer to purchase the Senior Subordinated Notes at prices
specified in the Senior Subordinated Notes Indenture. The Senior Subordinated
Notes Indenture will contain certain customary events of default, which will
include the failure to pay interest and principal, the failure to comply with
certain covenants in the Senior Subordinated Notes or certain events occurring
under bankruptcy laws.
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DESCRIPTION OF HOLDINGS' CAPITAL STOCK
Holdings' Certificate of Incorporation authorizes Holdings to issue shares
of Holdings Common Stock and shares of Preferred Stock.
HOLDINGS COMMON STOCK
Subject to the rights of the holders of any Preferred Stock which may be
outstanding, all shares of Holdings Common Stock will participate equally in
dividends payable to holders of Holdings Common Stock when, as and if declared
by the Holdings' Board of Directors and in net assets available for distribution
to holders of Holdings Common Stock on liquidation or dissolution, will have one
vote per share on all matters submitted to a vote of the Holdings' stockholders
and will not have cumulative voting rights in the election of directors. All
issued and outstanding shares of Holdings Common Stock are fully paid and
nonassessable, and the holders thereof do not have preemptive rights. As of the
date hereof, 96.0% of the outstanding shares of Holdings Common Stock are owned
by GEI, and 4.0% are owned by the management of Holdings.
HOLDINGS PREFERRED STOCK
The Certificate of Incorporation of Holdings generally authorizes the
issuance of shares of preferred stock in series to be established by resolution
of the Holdings Board of Directors. A Certificate of Designations created two
series, the "Holdings Senior Preferred Stock" and the "Holdings Junior Preferred
Stock," and fixed for each such series the designations, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof. In connection with the
consummation of the Transactions, Holdings' Board of Directors authorized the
issuance of Holdings Senior Preferred Stock and Holdings Junior Preferred Stock.
On January 27, 1998, 1,800,000 shares of Old Senior Preferred Stock were issued
to institutional investors. Pursuant to the Exchange Offer, New Senior Preferred
Stock will be exchanged for any and all outstanding shares of Old Senior
Preferred Stock.
HOLDINGS JUNIOR PREFERRED STOCK
The Holdings Junior Preferred Stock has a liquidation preference over the
Holdings Common Stock equal to the initial liquidation value of the Holdings
Junior Preferred Stock plus accrued and unpaid dividends thereon. Such initial
liquidation value is $49.0 million in the aggregate. The Holdings Junior
Preferred Stock is subject to a mandatory redemption on February 1, 2010 at 100%
of the liquidation preference plus accrued and unpaid dividends. Holdings may,
at its option, redeem the Holdings Junior Preferred Stock at any time at 100% of
the liquidation preference plus accrued and unpaid dividends. Upon a change of
control, Holdings must offer to repurchase the Holdings Junior Preferred Stock
at 100% of its liquidation preference plus accrued and unpaid dividends. The
Holdings Junior Preferred Stock bears cumulative dividends at the rate of 10%
per annum. Dividends may, at the option of Holdings, be paid in cash or in a
number of shares of Holdings Junior Preferred Stock having a liquidation
preference equal to the amount of the dividend. The terms of the Holdings Junior
Preferred Stock contain certain restrictions on junior payments. The Holdings
Junior Preferred Stock has no voting rights with respect to general corporate
matters except as provided by law or to authorize the issuance of senior or
parity equity securities of Holdings or to modify adversely the rights of the
Holdings Junior Preferred Stock.
Other than as set forth above with respect to ranking, the powers, rights,
designations and preferences, and qualifications, restrictions and limitations
thereof, of the Holdings Junior Preferred Stock are substantially similar to
those of the Holdings Senior Preferred Stock, except that the Holdings Junior
Preferred Stock is not exchangeable for senior subordinated notes of Holdings.
All outstanding shares of the Holdings Junior Preferred Stock were purchased by
GEI on January 27, 1998.
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following discussion is a summary of the material United States federal
income tax considerations relevant to the acquisition, ownership and disposition
of the New Securities acquired in and under the terms of the Exchange Offer by
Holders of Old Securities who acquired such Old Securities at their initial
issue for cash, but does not purport 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"), Treasury Regulations, Internal Revenue Service (the
"Service") 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 New Securities. See the discussion below, "Possible Legislative
Changes Affecting Holdings Senior Preferred Stock or Exchange Debentures." The
discussion does not address all of the 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, tax-
exempt entities, insurance companies, dealers in securities, traders in
securities who elect to mark to market, and persons holding the New Securities
as part of a "straddle," "hedge" or "conversion transaction." Moreover, the
effect of any applicable state, local or foreign tax laws is not discussed. The
discussion deals only with New Securities held as "capital assets" within the
meaning of Section 1221 of the Code.
As used herein, the term "U.S. Holder" means a beneficial owner of a New
Security who or which is for U.S. federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation or partnership created or
organized in the United States or under the laws of the United States or of any
State, (iii) an estate the income of which is subject to U.S. federal income
taxation regardless of its source, or (iv) a trust if, and only if, (a) a court
within the United States is able to exercise primary supervision over the
administration of the trust and (b) one or more U.S. persons have the authority
to control all substantial decisions of the trust. The term U.S. Holder also
includes certain former U.S. citizens whose income and gain on the New
Securities will be subject to U.S. taxation. As used herein, the term "Non-U.S.
Holder" means a beneficial owner of a New Security that is not a U.S. Holder.
Unless otherwise indicated from the context, for purposes of this section,
"Holder" means either a U.S. Holder or a Non-U.S. Holder.
Holdings has not sought and will not seek any rulings from the Service with
respect to any position of Holdings discussed below. There can be no assurance
that the Service will not take a different position from Holdings concerning the
tax consequences of the acquisition, ownership or disposition of the New
Securities 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.
CONSEQUENCES OF THE EXCHANGE OFFER TO EXCHANGING AND NONEXCHANGING HOLDERS
The exchange of an Old Security for a New Security pursuant to the Exchange
Offer will not be taxable to the exchanging Holders for federal income tax
purposes. As a result (i) an exchanging Holder will not recognize any gain or
loss on the exchange; (ii) the holding period for the New Security will include
the holding period for the Old Security; (iii) the basis of the New Security
will be the same as the basis for the Old Security; and (iv) the original issue
discount on the New Debentures will be the same as on the Old Debentures.
The Exchange Offer will result in no federal income tax consequences to a
nonexchanging Holder.
LIQUIDATED DAMAGES
The treatment of interest described below with respect to the Debentures is
based in part upon Holdings' determination that, as of the date of issuance of
the Old Debentures, the possibility that Liquidated Damages would be paid to
Holders of the Old Debentures pursuant to a Registration Default was remote. The
Service may take a different position, which could affect the timing and
character of interest income reported by
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Holders of the Debentures. While not free from doubt, if such Liquidated Damages
should in fact be paid, Holdings believes the Liquidated Damages would be
taxable to a Holder as ordinary income in accordance with such Holder's method
of accounting.
DEBENTURES
Original Issue Discount. The Old Debentures were issued with original issue
discount ("OID") and thus the New Debentures will also have OID. Total OID is
equal to the excess of the stated redemption price at maturity of the Debentures
over the issue price of the Debentures. The stated redemption price at maturity
of the Debentures will equal the total of all payments required to be made
thereon, other than payments of qualified stated interest. Qualified stated
interest generally is stated interest that is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually at a
single fixed rate. Therefore, because no interest is required to be paid in cash
on the Debentures until August 1, 2003, the Debentures should be treated as
having been issued without any qualified stated interest. Accordingly, the sum
of all interest payable pursuant to the stated interest rate on the Debentures
over the entire term should be treated as part of the stated redemption price at
maturity.
A Holder of a Debenture will be required to include OID in income
periodically over the term of a Debenture before receipt of the cash or other
payment attributable to such income. In general, a Holder must include in gross
income for federal income tax purposes the sum of the daily portions of OID with
respect to the Debentures for each day during the taxable year or portion of a
taxable year on which such Holder holds the Debenture ("Accrued OID"). The daily
portion is determined by allocating to each day of any accrual period within a
taxable year a pro rata portion of an amount equal to the adjusted issue price
of the Debenture at the beginning of the accrual period multiplied by the yield
to maturity of the Debenture. For purposes of computing OID, Holdings will use
six-month accrual periods which end on the date in the calendar year
corresponding to the maturity date of the Debentures and the date six months
prior to such maturity date, with the exception of the initial accrual period.
The adjusted issue price of a Debenture at the beginning of any accrual period
is the issue price of the Debenture increased by the Accrued OID for all prior
accrual periods (less any cash payments on the Debentures). Under these rules,
Holders will have to include in gross income increasingly greater amounts of OID
in each successive accrual period. Each payment made under a Debenture will be
treated first as a payment of OID to the extent of OID that has accrued as of
the date of payment and has not been allocated to prior payments and second as a
payment of principal.
For purposes of calculating OID on the Debentures, Holdings' option to
redeem the Debentures at any time and the right of a Holder to tender Debentures
in certain circumstances will not affect the determination of the yield or the
maturity of the Debentures.
Taxable Disposition of Debentures. Generally, any sale or redemption of
Debentures will result in taxable gain or loss equal to the difference between
the amount of cash or other property received and the Holder's adjusted tax
basis in the Debentures. A Holder's adjusted tax basis will be the Holder's
initial tax basis, increased by any Accrued OID with respect to any Debenture
includable in such Holder's gross income and decreased by the amount of any cash
payments received by such Holder regardless of whether such payments are
denominated as interest. Any gain or loss upon a sale or disposition of a
Debenture by an original Holder will generally be capital gain or loss. In
general, the maximum tax rate for non-corporate taxpayers on long-term capital
gains is 20% for most capital assets (including the Debentures) held for more
than 18 months. Capital gain of non-corporate taxpayers on such assets having a
holding period of more than one year but not more than 18 months will be subject
to a maximum tax rate of 28%.
HOLDINGS SENIOR PREFERRED STOCK
Distributions on Holdings Senior Preferred Stock. Distributions on Holdings
Senior Preferred Stock, whether paid in cash or in additional shares of Holdings
Senior Preferred Stock, will be taxable as ordinary dividend income to the
extent that the cash amount or the fair market value of any Holdings Senior
Preferred Stock distributed on the Holdings Senior Preferred Stock does not
exceed the Company's current and accumulated earnings and profits (as determined
for federal income tax purposes). To the extent that the
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amount of such distributions paid on the Holdings Senior Preferred Stock exceeds
the Company's current and accumulated earnings and profits, the distributions
will be treated as a return of capital, thus reducing the Holder's adjusted tax
basis in such Holdings Senior Preferred Stock. The amount of any such excess
distribution that is greater than the Holder's adjusted basis in the Holdings
Senior Preferred Stock will be taxed as capital gain. There can be no assurance
that the Company will have sufficient earnings and profits to cause
distributions on Holdings Senior Preferred Stock to be treated as dividends for
federal income tax purposes, particularly in light of the fact that the Company
is newly-formed, and expects to generate significant losses for its first
several years of operation. For purposes of the remainder of this discussion,
the term "dividend" refers to a distribution paid out of allocable earnings and
profits, unless the context indicates otherwise.
A Holder's initial tax basis in any additional shares of Holdings Senior
Preferred Stock distributed by the Company will be equal to the fair market
value of such additional shares on their date of distribution. A Holder's
holding period for such additional shares will commence with their distribution,
and will not include such Holder's holding period for the shares of Holdings
Senior Preferred Stock with respect to which the additional shares are
distributed.
To the extent that dividends are treated as ordinary income, dividends
received by corporate Holders that are U.S. Holders will be eligible for the 70%
dividends-received deduction under Section 243 of the Code, subject to
limitations generally applicable to the dividends-received deduction, including
those contained in Sections 246 and 246A of the Code and the provisions for
computation of adjusted current earnings for purposes of the corporate
alternative minimum tax. The 70% dividends-received deduction may be reduced if
a Holder's shares of Holdings Senior Preferred Stock are debt financed. Under
Section 246(c) of the Code, the 70% dividends-received deduction will not be
available with respect to stock that is held for 45 days or less during the
90-day period beginning on the date which is 45 days before the date on which
such stock becomes ex-dividend with respect to such dividend (90 days or less
during the 180-day period beginning on the date which is 90 days before the date
on which such stock becomes ex-dividend with respect to such dividend in the
case of a dividend on preferred stock attributable to a period or periods
aggregating more than 366 days). The length of time that a Holder is deemed to
have held stock for these purposes is reduced by periods during which the
Holder's risk of loss with respect to the stock is diminished by reason of the
existence of certain options, contracts to sell, short sales or similar
transactions. Section 246(c) also denies the 70% dividends-received deduction to
the extent that a corporate Holder is under an obligation, with respect to
substantially similar or related property, to make payments corresponding to the
dividend received. The Clinton Administration has proposed legislation which
would, if enacted, affect the availability of the dividends-received deduction
for dividends on Holdings Senior Preferred Stock. See "--Possible Legislative
Changes."
Under Section 1059 of the Code, the tax basis of Holdings Senior Preferred
Stock that has been held by a corporate Holder for two years or less (ending on
the earliest of the date on which the Company declares, announces or agrees to
the amount or payment of an actual or constructive dividend) is reduced (but not
below zero) by the non-taxed portion of an "extraordinary dividend" for which a
dividends-received deduction is allowed, with such reduction treated as
occurring at the beginning of the ex-dividend date of such dividend; provided,
however, that in the case of certain redemptions of Holdings Senior Preferred
Stock, amounts of redemption proceeds that are treated as a dividend (as
described below under "--Redemption, Sale or Exchange of Holdings Senior
Preferred Stock") are treated as an extraordinary dividend without regard to the
period of time such stock was held. To the extent a corporate Holder's tax basis
would have been reduced below zero but for the foregoing limitation, such Holder
must treat such amount as gain recognized on the sale or exchange of such
Holdings Senior Preferred Stock for the taxable year in which such dividend is
received. Generally, in the case of Holdings Senior Preferred Stock, an
"extraordinary dividend" would be a dividend that (i) equals or exceeds 5% of
the Holder's adjusted basis in such stock (treating all dividends having ex-
dividend dates within an 85-day period as a single dividend); or (ii) exceeds
20% of the Holder's adjusted basis in such stock (treating all dividends having
ex-dividend dates within a 365-day period as a single dividend). If an election
is made by the Holder, under certain circumstances the fair market value of
Holdings Senior Preferred Stock as of the day before the ex-dividend date may be
substituted for the Holder's adjusted basis in applying these tests.
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Special rules exist with respect to extraordinary dividends that are
"qualified preferred dividends," which are any fixed dividends payable with
respect to any share of stock which (i) provides for fixed preferred dividends
payable not less frequently than annually; and (ii) is not in arrears as to
dividends at the time the Holder acquires such stock. A qualified preferred
dividend does not include any dividend payable with respect to any share if the
actual rate of return of such stock for the period the stock has been held by
the Holder receiving the dividend exceeds 15%.
Redemption Premium on Holdings Senior Preferred Stock. If the redemption
price of redeemable preferred stock exceeds its issue price by more than a de
minimis amount, such excess may be treated as a constructive distribution of
additional stock on preferred stock over the term of the preferred stock using a
constant interest rate method similar to that described above for accruing OID.
See the discussion above under "--Debentures--Original Issue Discount." Such
excess will generally be considered de minimis as long as it is less than the
redemption price of the preferred stock multiplied by 1/4 of 1% multiplied by
the number of complete years until the issuer must redeem the preferred stock.
The issue price of the Holdings Senior Preferred Stock for purposes of
determining whether there will be constructive distributions of additional stock
thereon should be equal to the initial offering price to the public (excluding
bond houses and brokers) at which price a substantial amount of the Holdings
Senior Preferred Stock was sold. Thus, there should be no redemption premium on
such Holdings Senior Preferred Stock subject to the rules discussed above.
Because the issue price as determined for federal income tax purposes of the
Holdings Senior Preferred Stock distributed in lieu of payments of cash
dividends will be equal to its fair market value at the time of distribution,
however, it is possible, depending on its fair market value at that time, that
such Holdings Senior Preferred Stock will be issued with a redemption premium
large enough to be considered a dividend under the above rules. In such event,
as noted above, Holders would be required to include such premium in income as a
distribution over some period in advance of receiving the cash attributable to
such income and such Holdings Senior Preferred Stock might not trade separately,
which circumstances together might adversely affect the liquidity of the
Holdings Senior Preferred Stock.
Neither the mandatory redemption feature nor the Holder put of the Holdings
Senior Preferred Stock should affect the amount or timing of any constructive
distributions on the Holdings Senior Preferred Stock.
Redemption, Sale or Exchange of Holdings Senior Preferred Stock. A
redemption of shares of Holdings Senior Preferred Stock in exchange for Exchange
Debentures or for cash, and a sale of Holdings Senior Preferred Stock will be
taxable events.
A redemption of shares of Holdings Senior Preferred Stock for cash will
generally be treated as a sale or exchange if the Holder does not own, actually
or constructively within the meaning of Section 318 of the Code, any stock of
the Company other than the Holdings Senior Preferred Stock. If a Holder does
own, actually or constructively, such other stock (including stock redeemed), a
redemption of Holdings Senior Preferred Stock may be treated as a dividend to
the extent of the Company's current and accumulated earnings and profits (as
determined for federal income tax purposes). Such dividend treatment would not
be applied if the redemption is "substantially disproportionate" with respect to
the Holder under Section 302(b)(2) of the Code or is "not essentially equivalent
to a dividend" with respect to a Holder under Section 302(b)(1) of the Code. A
distribution to a Holder will be "not essentially equivalent to a dividend" if
it results in a "meaningful reduction" in the Holder's stock interest in the
Company. For these purposes, a redemption of Holdings Senior Preferred Stock for
cash that results in a reduction in the proportionate interest in the Company
(taking into account any constructive ownership) of a Holder whose relative
stock interest in the Company is minimal and who exercises no control over
corporate affairs should be regarded as a meaningful reduction in the Holder's
stock interest in the Company.
If the redemption of the Holdings Senior Preferred Stock for cash is not
treated as a distribution taxable as a dividend or if the Holdings Senior
Preferred Stock is sold, the redemption or sale would result in capital gain or
loss equal to the difference between the amount of cash and the fair market
value of other proceeds received in such sale or redemption and the Holder's
adjusted tax basis in the Holdings Senior Preferred Stock sold or redeemed. For
a description of the treatment of capital gain, see the discussion above under
"--Debentures--Taxable Disposition of Debentures."
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A redemption of Holdings Senior Preferred Stock in exchange for Exchange
Debentures will be subject to the same general rules as a redemption for cash,
except that the Holder would have capital gain or loss equal to the difference
between the issue price of the Exchange Debentures received and the Holder's
adjusted tax basis in the Holdings Senior Preferred Stock redeemed. The issue
price of the Exchange Debentures would be determined in the manner described
below for purposes of computing original issue discount on the Exchange
Debentures. See the discussion below under "--Exchange Debentures--Original
Issue Discount."
If a redemption of Holdings Senior Preferred Stock is treated as a
distribution that is taxable as a dividend, the amount of the distribution will
be measured by the amount of cash or the issue price of the Exchange Debentures
received by the Holder. The Holder's adjusted tax basis in the redeemed Holdings
Senior Preferred Stock will be transferred to any remaining stock holdings in
the Company. If the Holder does not retain any stock ownership in the Company,
the Holder may lose such basis entirely. Under the "extraordinary dividend"
provisions of Section 1059 of the Code, a corporate Holder may, under certain
circumstances, be required to reduce its basis in its remaining shares of stock
of the Company (and possibly recognize gain upon such distribution) to the
extent the Holder claims the 70% dividends-received deduction with respect to
the dividend.
EXCHANGE DEBENTURES
Original Issue Discount. If the Holdings Senior Preferred Stock is
exchanged for Exchange Debentures at a time when the stated redemption price at
maturity of the Exchange Debentures exceeds their issue price by more than a de
minimis amount, the Exchange Debentures will be treated as having OID equal to
the entire amount of such excess. OID will generally be considered de minimis as
long as it is less than the stated redemption price at maturity of the Exchange
Debentures multiplied by 1/4 of 1% multiplied by the number of complete years to
maturity. If the Exchange Debentures are deemed to be traded on an established
securities market at any time during the 60-day period ending 30 days after
their issue date, the issue price of the Exchange Debentures will be their fair
market value as determined as of their issue date. Subject to certain
limitations described in the Treasury Regulations governing OID, the Exchange
Debentures will be deemed to be traded on an established securities market if,
among other things, price quotations are readily available from dealers, brokers
or traders. Similarly, if the Holdings Senior Preferred Stock, but not the
Exchange Debentures issued and exchanged therefor, is deemed to be traded on an
established securities market at the time of the exchange, then the issue price
of each Exchange Debenture should be the fair market value of the Holdings
Senior Preferred Stock exchanged therefor at the time of the exchange. The
Holdings Senior Preferred Stock will generally be deemed to be traded on an
established securities market if it appears on a system of general circulation
that provides a reasonable basis to determine fair market value based either on
recent price quotations or recent sales transactions. In the event that neither
the Holdings Senior Preferred Stock nor the Exchange Debentures are deemed to be
traded on an established securities market, the issue price of the Exchange
Debentures will be their stated principal amount or, in the event the Exchange
Debentures do not bear "adequate stated interest" within the meaning of Section
1274 of the Code, their "imputed principal amount," which is generally the sum
of the present values of all payments due under the Exchange Debentures,
discounted from the date of payment to their issue date at the appropriate
"applicable federal rates."
The stated redemption price at maturity of the Exchange Debentures would
equal the total of all payments required to be made thereon, other than payments
of qualified stated interest (as defined above under "--Debentures--Original
Issue Discount"). Therefore, because the Company has the option to pay interest
thereon in additional Exchange Debentures, the Exchange Debentures should be
treated as having been issued without any qualified stated interest.
Accordingly, the sum of all interest payable pursuant to the stated interest
rate on the Exchange Debentures over the entire term should be treated as OID
and accrued into income under a constant yield method by the Holder, and the
Holder should not treat the receipt of stated interest on the Exchange
Debentures as interest for federal income tax purposes. See the discussion above
under "--Debentures--Original Issue Discount."
An additional Exchange Debenture (a "Secondary Debenture") issued in
payment of interest with respect to an initially issued Exchange Debenture (an
"Initial Debenture") will not be considered as a
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payment made on the Initial Debenture and will be aggregated with the Initial
Debenture for purposes of computing and accruing OID on the Initial Debenture.
As between the Initial Debenture and the Secondary Debenture, the Company will
allocate the adjusted issue price of the Initial Debenture between the Initial
Debenture and the Secondary Debenture in proportion to their respective
principal amounts. That is, upon its issuance of a Secondary Debenture with
respect to an Initial Debenture, the Company intends to treat the Initial
Debenture and the Secondary Debenture as initially having the same adjusted
issue price and inherent amount of OID per dollar of principal amount. The
Initial Debenture and the Secondary Debenture derived therefrom will be treated
as having the same yield to maturity. Similar treatment will be applied when
additional Exchange Debentures are issued on Secondary Debentures.
Redemption or Sale of Exchange Debentures. Generally, any redemption or
sale of Exchange Debentures by a Holder would result in taxable gain or loss
equal to the difference between the amount of cash received and the Holder's tax
basis in the Exchange Debentures. The tax basis of a Holder who receives an
Exchange Debenture in exchange for Holdings Senior Preferred Stock will
generally be equal to the issue price of the Exchange Debenture on the date the
Exchange Debenture is issued plus any OID on the Exchange Debenture included in
the Holder's income prior to sale or redemption of the Exchange Debenture,
reduced by any amortizable bond premium applied against the Holder's income
prior to sale or redemption of the Exchange Debenture and by any payments on the
Exchange Debenture. Such gain or loss would be capital gain or loss.
NON-U.S. HOLDERS OF SECURITIES
On October 14, 1997, final Treasury Regulations (the "1997 Final
Regulations") were issued that affect the U.S. taxation of Non-U.S. Holders of
the Securities. The 1997 Final Regulations generally are effective for payments
made after December 31, 1998, regardless of the issue date of the Securities
with respect to which such payments are made, subject to certain transition
rules. The discussion under this heading and under "--Backup Withholding" below
is for informational purposes only and is not intended to be a complete
discussion of either the statutory and regulatory provisions that apply to
payments made on the Securities before January 1, 1999, or the provisions of the
1997 Final Regulations. Prospective Non-U.S. Holders are urged to consult their
tax advisors with respect to the possible applicability of the various
withholding provisions of the Code and the Treasury Regulations promulgated
thereunder.
Dividends on Holdings Senior Preferred Stock. Dividends paid to a Non-U.S.
Holder are subject to a U.S. withholding tax at a 30% rate, or if applicable, a
lower treaty rate, unless the dividend is effectively connected with the conduct
of trade or business in the United States by a Non-U.S. Holder (and, if certain
tax treaties apply, is attributable to a United States permanent establishment
maintained by such Non-U.S. Holder). A dividend that is effectively connected
with the conduct of a trade or business in the United States by a Non-U.S.
Holder (and, if certain tax treaties apply, is attributable to a United States
permanent establishment maintained by such Non-U.S. Holder) will be taxed to
such Holder as though such Holder were a U.S. Holder, in the manner described
below under "--Interest and OID on Debentures and Exchange Debentures" with
respect to effectively connected interest income.
Interest and OID on Debentures and Exchange Debentures. Payments of
interest and Accrued OID on the Debentures and Exchange Debentures by Holdings
or any paying agent to a beneficial owner of a Debenture or an Exchange
Debenture that is a Non-U.S. Holder will not be subject to U.S. federal
withholding tax, provided that (i) such Holder does not own, actually or
constructively, 10 percent or more of the total combined voting power of all
classes of stock of Holdings entitled to vote; (ii) such Holder is not, for U.S.
federal income tax purposes, a controlled foreign corporation related, directly
or indirectly, to Holdings through stock ownership; (iii) such Holder is not a
bank receiving interest described in Section 881(c)(3)(A) of the Code; and (iv)
certain certification requirements (summarized below) are met (the "Portfolio
Interest Exception"). If a Non-U.S. Holder of a Debenture or an Exchange
Debenture is engaged in a trade or business in the United States, and if
interest or OID on the Debenture or the Exchange Debenture is effectively
connected with the conduct of such trade or business (and, if certain tax
treaties apply, is attributable to a U.S. permanent establishment maintained by
the Non-U.S. Holder) the Non-U.S. Holder, although exempt from U.S. withholding
tax, will generally be subject to regular U.S. income tax on such interest or
OID in the same manner as if it were a U.S. Holder. In addition, if such
Non-U.S. Holder is a
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foreign corporation, it may be subject to a branch profits tax equal to 30% (or
such lower rate provided by an applicable treaty) of its effectively connected
earnings and profits for the taxable year, subject to certain adjustments. For
purposes of the branch profits tax, interest or OID on a Debenture or an
Exchange Debenture will be included in the earnings and profits of such Non-U.S.
Holder if such interest or OID is effectively connected with the conduct by the
Non-U.S. Holder of a trade or business in the United States.
For payments of interest and Accrued OID on the Debentures and Exchange
Debentures made prior to January 1, 1999, in order to qualify for the Portfolio
Interest Exception, either (i) the beneficial owner of a Debenture or an
Exchange Debenture must certify on Internal Revenue Service Form W-8 or a
substitute form that is substantially similar to Form W-8, under penalties of
perjury, to Holdings or a paying agent, as the case may be, that such owner is a
Non-U.S. Holder and must provide such owner's name and address or (ii) a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"Financial Institution") and holds the Debenture or the Exchange Debenture on
behalf of the beneficial owner thereof must certify, under penalties of perjury,
to Holdings or paying agent, as the case may be, that such certificate has been
received from the beneficial owner by it or by a Financial Institution between
it and the beneficial owner and must furnish the payor with a copy thereof. A
certificate described in this paragraph is effective only with respect to
payments of interest or Accrued OID made to the certifying Non-U.S. Holder after
delivery of the certificate in the calendar year of its delivery and the two
immediately succeeding calendar years. In lieu of the certificate described in
this paragraph, a Non-U.S. Holder engaged in a trade or business in the United
States (with which interest payments or OID accruals on the Debenture or the
Exchange Debenture are effectively connected) must provide to Holdings a
properly executed Internal Revenue Service Form 4224 in order to claim an
exemption from withholding tax.
A payment of interest or Accrued OID on the Debentures and Exchange
Debentures made to a foreign beneficial owner after December 31, 1998, generally
will qualify for the Portfolio Interest Exception or, as the case may be, the
exception from withholding for income effectively connected with the conduct of
a trade or business in the United States if, at the time such payment is made,
the withholding agent holds a valid Form W-8 (or an acceptable substitute form)
from the beneficial owner and can reliably associate such payment with such Form
W-8. In addition, under certain circumstances a withholding agent is allowed
under the 1997 Final Regulations to rely on Form W-8 (or an acceptable
substitute form) furnished by a financial institution or other intermediary on
behalf of one or more beneficial owners (or other intermediaries) without having
to obtain copies of the beneficial owner's Form W-8 (or substitute thereof),
provided that the financial institution or intermediary has entered into a
withholding agreement with the Service and thus is a "qualified intermediary,"
and may not be required to withhold on payments made to certain other
intermediaries if certain conditions are met.
Disposition of Securities. Under current law, a Non-U.S. Holder of a
Security generally will not be subject to U.S. federal income tax on any gain
recognized on the sale, exchange or other disposition of such Security, unless
(i) the gain is effectively connected with the conduct of a trade or business in
the United States of the Non-U.S. Holder (and, if certain tax treaties apply, is
attributable to a U.S. permanent establishment maintained by the Non-U.S.
Holder); (ii) the Non-U.S. Holder is an individual who holds the Security as a
capital asset, is present in the United States for 183 days or more in the
taxable year of the disposition and either (a) such individual has a U.S. "tax
home" (as defined for U.S. federal income tax purposes) or (b) the gain is
attributable to an office or other fixed place of business maintained in the
United States by such individual; (iii) the Non-U.S. Holder is subject to tax
pursuant to the Code provisions applicable to certain U.S. expatriates; or (iv)
in the case of Holdings Senior Preferred Stock, Holdings is or has been during
the five-year period ending on the date of disposition a "United States real
property holding corporation" for U.S. federal income tax purposes (which
Holdings does not believe that it has been and does not anticipate becoming). In
the case of a Non-U.S. Holder that is described under clause (i) above, its gain
will be subject to the U.S. federal income tax on net income that applies to
U.S. persons and, in addition, if such Non-U.S. Holder is a foreign corporation,
it may be subject to the branch profits tax as described above. An individual
Non-U.S. Holder that is described under clause (ii) above will be subject to a
flat 30% tax on gain derived from the sale, which may be offset by U.S. capital
losses (notwithstanding the fact that he or she is not considered a U.S.
resident). Thus, individual Non-U.S. Holders who have spent 183 days or more in
the
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United States in the taxable year in which they contemplate a sale of a
Debenture are urged to consult their tax advisors as to the tax consequences of
such sale.
Estate Tax Consequences. A Security held by an individual who is not a U.S.
citizen or resident (as specially defined for United States federal estate tax
purposes) at the time of his or her death will not be subject to U.S. federal
estate tax as a result of such individual's death, provided that, at the time of
such individual's death, the individual does not own, actually or
constructively, 10% or more of the total combined voting power of all classes of
stock of Holdings entitled to vote and payments with respect to such Security
would not have been effectively connected with the conduct by such individual of
a trade or business in the United States.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO HOLDINGS AND TO CORPORATE HOLDERS
If the yield to maturity on a debt instrument equals or exceeds the sum of
the relevant applicable federal rate (the "AFR") plus five percentage points, in
certain circumstances, such debt instrument is considered an "applicable high
yield discount obligation" ("AHYDO") for federal income tax purposes. Further,
if the yield to maturity of a debt instrument should equal or exceed the sum of
the relevant AFR plus six percentage points, the portion of such yield on such
AHYDO that equals or exceeds the AFR plus six percentage points is considered
"Excess Yield" for federal income tax purposes.
The Debentures constitute AHYDOs because the yield to maturity of the
Debentures is equal to or greater than the sum of the AFR plus five percentage
points. Therefore, a portion of the tax deductions that would otherwise be
available to Holdings in respect of such Debentures will be deferred, which, in
turn, may reduce the after-tax cash flows of Holdings. Holdings will not be
entitled to deduct OID that accrues with respect to the Debentures until amounts
attributable to OID are paid in cash. Because the yield to maturity of the
Debentures does not equal or exceed the sum of the relevant AFR plus six
percentage points, no portion of the OID accruing on the Debentures will be
characterized as Excess Yield.
It is impossible to determine at the present time whether the Exchange
Debentures will have a yield to maturity that equals or exceeds the sum of the
AFR plus five or six percentage points. If the Exchange Debentures should have a
yield to maturity that equals or exceeds the AFR plus five percentage points,
but does not equal or exceed the AFR plus six percentage points, the Exchange
Debentures will be AHYDOs and the Company's interest deductions on the Exchange
Debentures will be subject to the same restrictions described as affecting the
Debentures in the immediately preceding paragraph.
If, moreover, the Exchange Debentures should have a yield to maturity that
equals or exceeds the sum of the relevant AFR plus six percentage points, with
such excess constituting Excess Yield as defined above, the "disqualified
portion" (as defined in the following sentence) of the OID accruing on the
Exchange Debentures would be characterized as a non-deductible dividend with
respect to the Company and also may be treated as a dividend distribution solely
for purposes of the dividends-received deduction of Sections 243, 246 and 246A
of the Code with respect to U.S. Holders which are corporations. In general, the
"disqualified portion" of OID for any accrual period will be equal to the
product of (i) a percentage determined by dividing the Excess Yield by the yield
to maturity; and (ii) the OID for the accrual period. Subject to otherwise
applicable limitations, such a corporate Holder would be entitled to a
dividends-received deduction with respect to the disqualified portion of the
accrued OID if the Company has sufficient current or accumulated earnings and
profits. To the extent that the Company's earnings and profits are insufficient,
any portion of the OID that otherwise would have been recharacterized as a
dividend for purposes of the dividends-received deduction will continue to be
taxed to the Holder as ordinary OID income in accordance with the rules
described above in "--Exchange Debentures--Original Issue Discount."
POSSIBLE LEGISLATIVE CHANGES AFFECTING HOLDINGS SENIOR PREFERRED STOCK OR
EXCHANGE DEBENTURES
On a number of recent occasions, most recently in February, 1998, the
Clinton Administration has proposed tax law changes that, if enacted into law
substantially as proposed, would affect the tax treatment of corporate Holders
of Holdings Senior Preferred Stock or Exchange Debentures that are treated as
AHYDOs. See the discussion of AHYDOs under "--Certain Federal Income Tax
Consequences to Holdings and
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Corporate Holders." In particular, the Clinton Administration's February, 1998,
proposal would eliminate entirely the 70% dividends-received deduction for
certain debt-like preferred stock, effective for stock issued after the date of
enactment of such legislation (which could include Holdings Senior Preferred
Stock paid as a dividend after such date of enactment). Earlier proposals of the
Clinton Administration would have reduced the dividends-received deduction in
other ways, and as proposed would have restricted deductions for dividends paid
after the proposal's effective date even with respect to stock issued before
such effective date. It cannot be predicted with certainty whether this proposal
or other similar proposals will be introduced in Congress as proposed
legislation, or, if introduced, whether, or in what form, such proposed
legislation may be enacted and, if enacted, what the effective date or dates
would be. Corporate Holders of Holdings Senior Preferred Stock are urged to
consult their own tax advisors regarding the possible effects of this proposed
legislation.
BACKUP WITHHOLDING
A Holder may be subject, under certain circumstances, to backup withholding
at a 31% rate with respect to "reportable payments" on the Securities. This
withholding generally applies only if the Holder (i) fails to furnish his or her
social security or other taxpayer identification number ("TIN"); (ii) furnishes
an incorrect TIN; (iii) is notified by the Service that he or she has failed to
report properly payments of interest and dividends and the Service has notified
Holdings that the Holder is subject to backup withholding; or (iv) fails, under
certain circumstances, to provide a certified statement, signed under penalty of
perjury, that the TIN provided is his or her correct number and that he or she
is not subject to backup withholding. Any amount withheld from payment to a
Holder under the backup withholding rules is allowable as a credit against such
Holder's federal income tax liability, provided that the required information is
furnished to the Service. Certain Holders (including, among others, corporations
and foreign individuals who comply with certain certification requirements) are
not subject to backup withholding. Holders should consult their tax advisors as
to their qualifications for exemption from backup withholding and the procedure
for obtaining such an exemption.
INFORMATION REPORTING
The Company is required to furnish certain information to the Service and
will furnish annually to record Holders of the Securities information with
respect to dividends or interest paid, or OID accruing, as the case may be, on
the Securities during the calendar year. The information with respect to OID
accruing on the Debentures or Exchange Debentures will be based on the adjusted
issue price of the Debentures or Exchange Debentures and will be applicable if
the Holder is an original Holder of the Debentures or Exchange Debentures who
purchased the Debentures at the issue price or received the Exchange Debentures
in exchange for Holdings Senior Preferred Stock. Subsequent Holders who purchase
Debentures or Exchange Debentures for an amount other than the adjusted issue
price and/or on a date other than the last day of an accrual period will be
required to determine for themselves the amount of OID, if any, they are
required to include in gross income for federal income tax purposes.
SUBSEQUENT PURCHASERS
The foregoing does not discuss special rules that may affect the treatment
of purchasers that acquire the Securities other than at the time of original
issuance at the issue price, including those provisions of the Code relating to
the treatment of "market discount" and "acquisition premium." For example, the
market discount provisions of the Code may require a subsequent purchaser of
Debentures or Exchange Debentures at a market discount to treat all or a portion
of any gain recognized upon sale or other disposition of such Debentures or
Exchange Debentures as ordinary income and to defer a portion of any interest
expense that would otherwise be deductible on any Indebtedness incurred or
maintained to purchase or carry such Debentures or Exchange Debentures until the
holder disposes of such Debentures or Exchange Debentures in a taxable
transaction.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Securities 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 Securities. 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 Debentures or New Senior
Preferred Stock received in exchange for Old Debentures or Old Senior Preferred
Stock, respectively, where such Old Securities were acquired as a result of
market-making activities or other trading activities and not acquired directly
from Holdings. Holdings has agreed that for a period of 180 days 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.
Holdings will not receive any proceeds from any sale of New Securities by
broker-dealers. New Securities 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 Securities or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer that resells New Securities 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 Securities may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of New Securities and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a Prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, Holdings 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. Holdings has agreed to pay the expenses incident to the Exchange
Offer and will indemnify the Holders of the Old Securities against certain
liabilities, including liabilities under the Securities Act, in connection with
the Exchange Offer.
LEGAL MATTERS
Mayer, Brown & Platt, Chicago, Illinois will pass upon certain legal
matters regarding the legality of the New Securities for Holdings.
EXPERTS
The combined financial statements of the Company as of December 31, 1996
and 1997, and for each of the years in the three-year period ended December 31,
1997 and the balance sheet of Liberty Group Publishing, Inc. as of December 31,
1997, included elsewhere in the Prospectus have been included herein in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
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AVAILABLE INFORMATION
Holdings has filed with the Commission a Registration Statement on Form S-4
(the "Registration Statement") under the Securities Act with respect to the
Securities being offered by this Prospectus. This Prospectus does not contain
all the information set forth in the Registration Statement and the exhibits
thereto, to which reference is hereby made. Any statements made in this
Prospectus concerning the provisions of certain documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement.
The Registration Statements and exhibits thereto may be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
at the Commission's Regional Offices at 7 World Trade Center, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such materials may be obtained by mail from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Web site (http://www.sec.gov) that contains reports and information
statements and other information regarding registrants, such as Holdings, that
file electronically with the Commission.
Holdings currently is not subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a result of
the Exchange Offer, Holdings will become subject to such requirements. In
addition, pursuant to the Indenture and the Exchange Indenture, Holdings has
agreed to file with the Commission and provide to the Holders of the Old
Securities annual reports and the information to be delivered pursuant to
Sections 13 and 15(d) of the Exchange Act.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
LIBERTY GROUP PUBLISHING, INC.
Independent Auditors' Report................................ F-2
Balance Sheet as of November 30, 1997....................... F-3
Notes to Balance Sheet...................................... F-4
LOCAL NEWSPAPER GROUP OF AMERICAN PUBLISHING COMPANY
Independent Auditors' Report................................ F-6
Combined Financial Statements:
Combined Statements of Net Assets as of December 31, 1996
and 1997............................................... F-7
Combined Statements of Operations and Changes in Net
Assets for the Years Ended December 31, 1995, 1996 and
1997................................................... F-8
Combined Statements of Cash Flows for the Years Ended
December 31, 1995, 1996 and 1997....................... F-9
Notes to Combined Financial Statements.................... F-10
</TABLE>
F-1
<PAGE> 124
INDEPENDENT AUDITORS' REPORT
The Directors
Liberty Group Publishing, Inc.:
We have audited the accompanying balance sheet of Liberty Group Publishing,
Inc. as of November 30, 1997. This financial statement is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
financial statement 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 balance sheet is free of material
misstatement. An audit of a balance sheet includes examining, on a test basis,
evidence supporting the amounts and disclosures in that balance sheet. An audit
of a balance sheet also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
balance sheet presentation. We believe that our audit of the balance sheet
provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Liberty Group Publishing, Inc. as
of November 30, 1997, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Chicago, Illinois
December 9, 1997
F-2
<PAGE> 125
LIBERTY GROUP PUBLISHING, INC.
BALANCE SHEET
NOVEMBER 30, 1997
<TABLE>
<S> <C>
ASSETS
Total assets................................................ $ --
=====
LIABILITIES AND STOCKHOLDERS' EQUITY
Total liabilities........................................... $ --
-----
STOCKHOLDERS' EQUITY:
Common stock, par value $0.01; 1,000 shares authorized,
100 shares subscribed for.............................. 100
Subscription receivable................................... (100)
-----
Total stockholders' equity............................. --
-----
Total liabilities and stockholders' equity............. $ --
=====
</TABLE>
See accompanying notes to balance sheet.
F-3
<PAGE> 126
LIBERTY GROUP PUBLISHING, INC.
NOTES TO BALANCE SHEET
NOVEMBER 30, 1997
(1) FORMATION OF COMPANY
Liberty Group Publishing, Inc. (the "Holdings") was formed on November 19,
1997 under the laws of the State of Delaware. Holdings has entered into a
subscription agreement dated November 19, 1997 to issue 100 shares of common
stock for total consideration of $100 to Green Equity Investors II, L.P.
Holdings entered into a subscription agreement dated November 19, 1997 to
acquire 100 shares of common stock, representing 100% of the issued share
capital, of Liberty Group Operating, Inc. (the "Company") for total
consideration of $100.
(2) SUBSEQUENT EVENTS (UNAUDITED)
On January 23, 1998, Holdings amended and restated its certificate of
incorporation to, among other things, increase the authorized number of shares
of all classes of common stock which Holdings has the authority to issue to
21,225,000 shares, of which 21,175,000 shares are designated as preferred stock,
par value $0.01 per share, and 80,000 shares are designated as common stock,
$0.01 per share.
On January 27, 1998, the Company acquired, for cash payments of $307.2
million, consisting of the contractual purchase price of $309.1 million, plus
interest of $1.1 million and a cash adjustment of $3.0 million, from
wholly-owned subsidiaries of Hollinger International, Inc. ("Hollinger")
virtually all of the assets and assumed certain liabilities that were used
primarily in the business of publishing, marketing and distributing certain
local newspapers. Of the total purchase price, approximately $31.0 million
represented consideration in connection with a non-competition agreement whereby
Hollinger and its affiliates have agreed not to compete, directly or indirectly,
with the Company's acquired operations for a period of five years.
The acquisition, including the payment of related fees and expenses, was
financed from the (i) proceeds of $180.0 million from the issuance and sale by
the Company of $180.0 million aggregate principal amount of 9.375% Senior
Subordinated Notes due February 1, 2008, (ii) proceeds of $50.5 million from the
issuance and sale by Holdings of $89.0 million aggregate principal amount at
maturity of 11.625% Senior Discount Debentures (the "Debentures") due February
1, 2009, (iii) proceeds of $45.0 million from the issuance and sale of 1.8
million shares of 14.75% Senior Redeemable Exchangeable Cumulative Preferred
Stock (the "Senior Preferred Stock"), (iv) proceeds of $49.0 million from the
issuance and sale of 49,000 shares of 10% Series B Junior Redeemable Cumulative
Preferred Stock (the "Junior Preferred Stock"), and (v) proceeds of $8.0 million
from the issuance and sale of 80,000,000 shares of Holdings common stock. In
connection with the financing of the acquisition, Holdings made a capital
contribution of $129.1 million, representing the net proceeds from the sale by
Holdings of the securities described above, to the Company.
The Debentures issued by Holdings are general unsecured obligations and pay
no cash interest until February 1, 2003. The Debentures will, however, accrete
on a semi-annual equivalent bond basis to a principal amount at maturity of
$89.0 million on February 1, 2003. Thereafter, cash interest on the Debentures
will accrue and be payable semi-annually on February 1 and August 1 of each
year. The Debentures are redeemable for cash at the option of Holdings anytime
after February 1, 2003 at stipulated redemption amounts, or in certain limited
circumstances, are partially redeemable on or prior to February 1, 2001 at a
redemption amount of 111.625% of the accreted value.
The Senior Preferred Stock issued by Holdings is, with respect to dividend
distributions and distributions upon the liquidation, winding up or dissolution
of Holdings, senior to the common stock and Junior Preferred Stock of Holdings.
Dividends may be paid, at Holdings' option, on any dividend payment date in cash
or in additional shares of Senior Preferred Stock having a liquidation
preference equal to the dividend amount. The liquidation preference of the
Senior Preferred Stock is $25 per share. The Senior Preferred Stock is
redeemable at the option of Holdings anytime after February 1, 1999 at
stipulated redemption amounts and is mandatorily redeemable, subject to certain
conditions, on February 1, 2010 at a price equal to 100% of its
F-4
<PAGE> 127
liquidation preference per share. In the event of a change in control of
Holdings, Holdings must offer to repurchase the Senior Preferred Stock at 100%
of its liquidation preference per share. The holders of shares of Senior
Preferred Stock are not entitled or permitted to vote on any matters voted upon
by the stockholders of Holdings. Subject to certain conditions, the Senior
Preferred Stock is exchangeable, on any dividend payment date, in whole, but not
in part, at the option of Holdings for Holdings 14.375% Senior Subordinated
Debentures (the "Exchange Debentures") maturing February 1, 2010. The Exchange
Debentures are redeemable prior to maturity on substantially the same terms as
the Senior Preferred Stock.
The Junior Preferred Stock issued by Holding is, with respect to dividend
distributions and distributions upon the liquidation, winding up or dissolution
of holdings, senior to the common stock of Holdings. The Junior Preferred Stock
is redeemable at the option of Holdings at 2010 at a price equal to 100% of its
liquidation preference per share and is mandatorily redeemable on February 1,
2010 at a price equal to 100% of its liquidation preference per share. In the
event of a change in control of Holdings, Holdings must offer to repurchase the
Holdings Junior Preferred Stock at 100% of its liquidation preference per share.
The holders of shares of Junior Preferred Stock are not entitled to vote on any
matters voted upon by the stockholders of Holdings.
On January 27, 1998, the Company and American Management Services, Inc.
("APMS"), a wholly-owned subsidiary of Hollinger, entered into a transitional
services agreement which provides that APMS will, at the Company's option,
provide certain services to the Company, including accounting and
finance-related information systems and administrative processing support,
employee benefits and insurance coverage, administrative and information
processing support, and treasury and advertising services. APMS will provide
such services at cost for a period of up to three years.
On January 27, 1998, the Company entered into a five-year $125.0 million
revolving credit facility (the "Revolving Credit Facility"). The Revolving
Credit Facility is secured by substantially all of the tangible and intangible
assets of the Company. Borrowings under the revolving credit facility bear
interest at an annual rate, at the Company's option equal to the Base Rate (as
defined therein) or the Eurodollar Rate (as defined therein) plus a margin that
varies based upon a ratio set forth therein (the "Applicable Margin"). For the
first six months the interest rate for borrowings under the Revolving Credit
Facility will have a floor of the Base Rate plus 0.75% or the Eurodollar Rate
plus 2.0%. Under the terms of the Revolving Credit Facility, the Company pays a
fee equal to the Applicable Margin for Eurodollar Rate Advances (as defined
therein) per annum on the aggregate amount of outstanding letters of credit. The
Company also pays a fee of 0.5% on the unused portion of the Revolving Credit
Facility.
On January 27, 1998, the Company entered into a Management Services
Agreement with Leonard Green & Partners, L.P. ("LGP"), the principal shareholder
of Holdings, whereby LGP will provide management, consulting and financial
planning services to the Company for an annual management fee of $1.0 million.
F-5
<PAGE> 128
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Hollinger International Inc.:
We have audited the accompanying combined statements of net assets of the
Local Newspaper Group of American Publishing Company, a group of publishing
businesses owned by American Publishing Company or its subsidiaries (the
"Business"), a wholly-owned subsidiary of Hollinger International Inc., as of
December 31, 1996 and 1997, and the related combined statements of operations
and changes in net assets and cash flows for each of the years in the three-year
period ended December 31, 1997. These combined financial statements are the
responsibility of the Business' management. Our responsibility is to express an
opinion on these combined 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 combined financial statements referred to above present
fairly, in all material respects, the combined net assets of the Business as of
December 31, 1996 and 1997, and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 1997 in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Chicago, Illinois
February 17, 1998
F-6
<PAGE> 129
LOCAL NEWSPAPER GROUP OF AMERICAN PUBLISHING COMPANY
COMBINED STATEMENTS OF NET ASSETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 1,768 $ 1,452
Accounts receivable, net of allowance for doubtful
accounts of $1,022 in 1996 and $1,014 in 1997.......... 10,619 10,308
Inventories............................................... 1,611 1,947
Prepaid expenses and other current assets................. 259 278
-------- --------
Total current assets................................... 14,257 13,985
Property, plant and equipment, net of accumulated
depreciation.............................................. 21,552 20,503
Intangible assets, net of accumulated amortization.......... 77,165 75,212
-------- --------
Total assets........................................... $112,974 $109,700
======== ========
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES:
Current portion of long-term liabilities.................. $ 627 $ 338
Accounts payable.......................................... 1,204 1,119
Accrued expenses.......................................... 2,016 2,223
Deferred revenue.......................................... 4,329 4,411
-------- --------
Total current liabilities.............................. 8,176 8,091
Long-term liabilities, less current portion................. 1,152 706
Deferred income taxes....................................... 666 1,764
-------- --------
Total liabilities...................................... 9,994 10,561
Net assets.................................................. 102,980 99,139
-------- --------
Total liabilities and net assets....................... $112,974 $109,700
======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-7
<PAGE> 130
LOCAL NEWSPAPER GROUP OF AMERICAN PUBLISHING COMPANY
COMBINED STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Advertising.............................................. $ 60,255 $ 66,816 $ 68,712
Circulation.............................................. 19,058 22,004 22,341
Job printing and other................................... 8,054 8,722 7,666
-------- -------- --------
Total revenues............................................. 87,367 97,542 98,719
OPERATING COSTS AND EXPENSES:
Operating costs.......................................... 29,405 31,320 29,318
Selling, general and administrative...................... 34,506 38,259 39,162
Depreciation and amortization............................ 7,290 7,854 7,470
-------- -------- --------
Income from operations..................................... 16,166 20,109 22,769
Interest expense........................................... 11,195 10,968 10,551
-------- -------- --------
Income before income taxes................................. 4,971 9,141 12,218
Income taxes............................................... 2,338 4,006 5,271
-------- -------- --------
Net income................................................. 2,633 5,135 6,947
Net assets, beginning of period............................ 96,355 106,945 102,980
Transfer (to) from APC, net................................ 7,957 (9,100) (10,788)
-------- -------- --------
Net assets, end of period.................................. $106,945 $102,980 $ 99,139
======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-8
<PAGE> 131
LOCAL NEWSPAPER GROUP OF AMERICAN PUBLISHING COMPANY
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
-------- ------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 2,633 $ 5,135 $ 6,947
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization................................................ 4,172 4,383 4,250
Depreciation................................................ 3,118 3,471 3,220
Changes in assets and liabilities, net of acquisitions:
Accounts receivable....................................... (1,391) (376) 311
Inventories............................................... (1,969) 1,850 (336)
Prepaid expenses and other current assets................. 17 (1) (19)
Accounts payable.......................................... 548 (577) (85)
Accrued expenses.......................................... 159 228 207
Deferred revenue.......................................... 602 190 82
-------- ------- --------
Cash provided by operating activities....................... 7,889 14,303 14,577
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment................... (2,255) (3,081) (1,713)
Proceeds from sales of assets............................... 29 342 35
Acquisitions, net of cash acquired.......................... (12,680) (1,781) (1,692)
-------- ------- --------
Cash used in investing activities........................... (14,906) (4,520) (3,370)
-------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term liabilities........................... (754) (844) (735)
Transfer (to) from APC, net................................. 7,957 (9,100) (10,788)
-------- ------- --------
Cash provided by (used in) financing activities............. 7,203 (9,944) (11,523)
-------- ------- --------
Net increase (decrease) in cash and cash equivalents........ 186 (161) (316)
Cash and cash equivalents, at beginning of period........... 1,743 1,929 1,768
-------- ------- --------
Cash and cash equivalents, at end of period................. $ 1,929 $ 1,768 $ 1,452
======== ======= ========
</TABLE>
See accompanying notes to combined financial statements.
F-9
<PAGE> 132
LOCAL NEWSPAPER GROUP OF AMERICAN PUBLISHING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) DESCRIPTION OF BUSINESS
The Local Newspaper Group of American Publishing Company (the "Business")
represents a portion of the small and mid-size daily and weekly newspapers owned
by American Publishing Company or its subsidiaries ("APC"), a wholly owned
subsidiary of Hollinger International Inc. The Business is located in 11 states
with the largest concentration of newspapers being in the Midwest. Raw
materials, mainly newsprint and ink, are readily available, and the Business is
not dependent on a single or limited number of suppliers. Customers range from
individual subscribers to local and national advertisers. No individual customer
accounts for a significant percentage of revenues.
(B) BASIS OF PRESENTATION
The accompanying combined financial statements represent all of the net
assets and associated revenues, expenses, and cash flows of the Business,
assuming that the Business, currently part of APC, was organized for all periods
as a separate legal entity. Intercompany transactions between entities
comprising the Business have been eliminated. Certain net assets of the Business
are to be transferred to a separate legal entity under an agreement in principle
described in Note 10.
The Business maintains its own cash only for certain daily expenses;
principal operating cash disbursements are paid by APC on behalf of the
Business. Such cash disbursements, interest, income taxes and related-party
transactions are paid by APC and are reflected as a change in the net activity
with APC.
APC has historically provided certain services to the Business, including
accounting, payroll administration, tax services, consulting assistance on
operational issues and financial reporting. The cost of providing such services
is recovered by APC by allocating to the Business a management fee using a
percentage of revenue method. The management fee, which is included in selling,
general and administrative expenses, was $2,162, $2,422 and $2,192 for the years
ended December 31, 1995, 1996 and 1997, respectively. In the opinion of
management of the Business, such management fee is representative of the cost of
performing such services.
As the Business' operations represent a portion of APC, the operations of
the Business have been financed through, and certain of the assets of the
Business have been pledged as security for borrowings of, APC. The Business'
interest expense represents an allocation of APC's interest expense (calculated
as APC's weighted average interest rate of 10.46%, 10.45% and 10.64% for the
years ended December 31, 1995, 1996 and 1997, respectively, applied to the
average balances of the net assets of the Business for each respective period).
Subsequent to completion of the transactions described in Note 10, the Business
is expected to have a capital structure different than that in the accompanying
combined statements of net assets and, accordingly, interest expense is not
necessarily indicative of the interest expense that the Business would have
incurred as a separate independent entity.
Details with respect to the transfers (to) from APC, net, follow:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Cash transferred to APC.................................... $(63,406) $(71,581) $(73,318)
Cash disbursements by APC on behalf of the Business........ 55,520 44,983 44,177
Current income tax liabilities............................. 2,486 4,108 5,271
Management fees............................................ 2,162 2,422 2,531
Interest................................................... 11,195 10,968 10,551
-------- -------- --------
$ 7,957 $( 9,100) $(10,788)
======== ======== ========
</TABLE>
F-10
<PAGE> 133
LOCAL NEWSPAPER GROUP OF AMERICAN PUBLISHING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(C) 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 amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(D) INVENTORIES
Inventories consist principally of newsprint, which is valued at the lower
of cost or not realizable value. Cost is determined using the first-in,
first-out (FIFO) or moving-average method.
(E) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost. Routine maintenance and
repairs are expensed as incurred.
Depreciation is calculated under the straight-line method over the
estimated useful lives, principally 25 years for buildings and improvements and
5 to 10 years for machinery and equipment. Leasehold improvements are amortized
using the straight-line method over the shorter of the lease term or estimated
useful life of the asset.
(F) INTANGIBLE ASSETS
Intangible assets consist principally of circulation-related assets,
noncompetition agreements with former owners of acquired newspapers, and the
excess of acquisition costs over estimated fair value of net assets acquired
(goodwill). The fair market value of intangible assets purchased is determined
primarily through the use of independent appraisals. Amortization is calculated
using the straight-line method over the respective estimated useful lives
ranging from 30 years for circulation related assets, 3 to 15 years for
noncompetition agreements, and 40 years for goodwill.
The Business assesses the recoverability of its long-lived assets, such as
property, plant and equipment and intangible assets whenever events or changes
in business circumstances indicate the carrying amount of the assets, or related
group of assets, may not be fully recoverable. Factors leading to impairment
include a combination of historical losses, anticipated future losses and
inadequate cash flow. The write-down is reported with other income in the
combined statement of operations and changes in net assets. The assessment of
recoverability is based on management's estimate. If undiscounted operating cash
flows do not exceed the net book value of the long-lived assets, then a
permanent impairment has occurred. The Business would record the difference
between the net book value of the long-lived asset and the fair value of such
asset as a charge against income in the combined statement of operations if such
a difference arose.
(G) REVENUE RECOGNITION
Circulation revenue, which is billed to the customers at the beginning of
the subscription period, is recognized on a straight-line basis over the term of
the related subscription. Advertising revenue is recognized upon publication of
the advertisements. The revenue for job printing is recognized upon delivery.
F-11
<PAGE> 134
LOCAL NEWSPAPER GROUP OF AMERICAN PUBLISHING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(H) INCOME TAXES
The Business represents a business unit of APC and as such does not file
separate income tax returns. The income tax provision included in the
accompanying combined statements of operations and changes in net assets has
been computed as if the Business were a separate company.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the difference between financial statement carrying
amounts of existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Current income taxes are
reflected as a decrease of transfers to APC as APC is responsible for the
payment of income tax liabilities. State income taxes are computed utilizing a
blended state rate of 5%, which is net of federal income tax benefit.
(I) CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent cash and highly liquid certificates of
deposit with a maximum term at origination of three months or less.
(2) ACQUISITIONS
During the years ended December 31, 1995, 1996 and 1997, the Business
acquired certain newspaper businesses for $12,680, $1,781 and $1,385. Using the
purchase method of accounting, the purchase prices were allocated to the assets
and liabilities acquired based on their estimated fair values. The excess of the
purchase prices over the estimated fair value of the tangible and identifiable
intangible assets acquired (goodwill) was $4,396, $1,369 and $1,170 for the
years ended December 31, 1995, 1996 and 1997, respectively. Results of the
acquired newspaper businesses have been included in combined statements of
operations and net assets since the dates of acquisition.
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Land....................................................... $ 1,954 $ 1,955 $ 2,131
Buildings and improvements................................. 12,544 13,386 13,906
Machinery and equipment.................................... 18,454 18,826 19,781
Furniture and fixtures..................................... 8,076 9,456 10,425
-------- -------- --------
41,028 43,623 46,243
Less accumulated depreciation.............................. (19,036) (22,071) (25,740)
-------- -------- --------
$ 21,992 $ 21,552 $ 20,503
======== ======== ========
</TABLE>
F-12
<PAGE> 135
LOCAL NEWSPAPER GROUP OF AMERICAN PUBLISHING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(4) INTANGIBLE ASSETS
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Non-compete agreements..................................... $ 28,526 $ 28,646 $ 28,646
Subscriber lists........................................... 50,741 50,741 50,741
Advertiser lists........................................... 21,214 21,214 21,214
Goodwill................................................... 37,531 36,672 38,970
-------- -------- --------
138,012 137,273 139,571
Less accumulated amortization.............................. (55,725) (60,108) (64,359)
-------- -------- --------
$ 82,287 $ 77,165 $ 75,212
======== ======== ========
</TABLE>
(5) ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Accrued payroll............................................. $ 727 $ 818 $ 944
Accrued vacation............................................ 339 330 309
Accrued bonus............................................... 392 520 554
Accrued realty tax.......................................... 90 79 101
Accrued other............................................... 240 269 315
------ ------ ------
$1,788 $2,016 $2,223
====== ====== ======
</TABLE>
(6) LONG-TERM LIABILITY
The long-term liability represents amounts due under non-interest-bearing
non-compete agreements through 2004.
The aggregate amount of principal payments at December 31, 1997 follows:
<TABLE>
<S> <C>
1998........................................................ $ 338
1999........................................................ 240
2000........................................................ 193
2001........................................................ 82
2002........................................................ 70
Thereafter.................................................. 121
------
$1,044
======
</TABLE>
F-13
<PAGE> 136
LOCAL NEWSPAPER GROUP OF AMERICAN PUBLISHING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(7) INCOME TAXES
Income tax expense (benefit) for the periods shown below consisted of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
<S> <C> <C> <C>
Year ended December 31, 1997:
U.S. Federal.............................................. $4,009 $ 659 $4,668
State and local........................................... 603 -- 603
------ ----- ------
4,612 659 5,271
====== ===== ======
Year ended December 31, 1996:
U.S. Federal.............................................. 3,599 (102) 3,497
State and local........................................... 509 -- 509
------ ----- ------
4,108 (102) 4,006
====== ===== ======
Year ended December 31, 1995:
U.S. Federal.............................................. 2,186 (148) 2,038
State and local........................................... 300 -- 300
------ ----- ------
2,486 (148) 2,338
====== ===== ======
</TABLE>
Income tax expense differed from the amounts computed by applying the U.S.
Federal income tax rate of 35% to earnings before income tax expense as a result
of the following:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Computed "expected" tax expense............................. $1,740 $3,199 $4,276
Increase in income taxes resulting from:
Amortization of goodwill.................................. 344 344 344
State and local income taxes.............................. 254 463 651
------ ------ ------
$2,338 $4,006 $5,271
====== ====== ======
</TABLE>
F-14
<PAGE> 137
LOCAL NEWSPAPER GROUP OF AMERICAN PUBLISHING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at 1997, 1996 and 1995 are
presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996 1997
------ ------ ----
<S> <C> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowance for
doubtful accounts...................................... $ 387 $ 409 $ 405
Property, plant and equipment, principally due to
differences in depreciation............................ -- 59 --
Compensated absences, principally due to accrual for
financial reporting purposes........................... 135 132 124
------ ------ ------
Deferred tax assets............................... 522 600 529
------ ------ ------
Deferred tax liabilities:
Intangible assets, principally due to differences in basis
and amortization....................................... 2,514 1,266 1,766
Property, plant, and equipment, principally due to
differences in depreciation............................ 902 -- 527
------ ------ ------
Deferred tax liabilities.......................... 3,416 1,266 2,293
------ ------ ------
Net deferred tax liability........................ $2,894 $ 666 $1,764
====== ====== ======
</TABLE>
(8) EMPLOYEE BENEFIT PLANS
The Business sponsors a noncontributory (defined contribution) retirement
savings plan for all employees satisfying minimum service requirements as
defined in the plan. The Business did not make any contributions to the plan
during 1995, 1996 or 1997.
(9) FINANCIAL INSTRUMENTS
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instruments.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and, therefore, may not represent actual values of the
financial instruments that could be realized in the future.
The carrying value of all financial instruments at December 31, 1995, 1996
and 1997 approximated their estimated fair values.
(10) SALE OF BUSINESS (UNAUDITED)
On November 21, 1997, Hollinger International Inc. and certain of its
subsidiaries executed asset purchase agreements to sell virtually all of the
assets and certain liabilities of the Business to Liberty Group Operating, Inc.
for cash consideration of $309.1 million. Such transaction was consummated on
January 27, 1998.
F-15
<PAGE> 138
======================================================
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 OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY HOLDINGS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE NEW
DEBENTURES AND NEW SENIOR PREFERRED STOCK OFFERED BY THIS PROSPECTUS, NOR DOES
IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE NEW
DEBENTURES OR NEW SENIOR PREFERRED STOCK BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF HOLDINGS
SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Summary..................................... 1
Risk Factors................................ 14
Use of Proceeds............................. 20
The Exchange Offer.......................... 20
Capitalization.............................. 27
Unaudited Pro Forma Combined Financial
Data...................................... 28
Selected Combined Historical Financial
Data...................................... 33
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ 34
Business.................................... 38
Management.................................. 46
Certain Relationships and Related
Transactions.............................. 49
The Acquisition............................. 50
Principal Stockholders...................... 52
Description of New Senior Preferred Stock... 53
Description of Exchange Debentures.......... 63
Description of New Debentures............... 79
Description of Other Indebtedness........... 104
Description of Holdings' Capital Stock...... 106
Certain United States Federal Tax
Considerations............................ 107
Plan of Distribution........................ 116
Legal Matters............................... 116
Independent Auditors........................ 116
Available Information....................... 117
Index to Financial Statements............... F-1
</TABLE>
======================================================
======================================================
LIBERTY GROUP PUBLISHING
14 3/4% NEW SENIOR REDEEMABLE EXCHANGEABLE CUMULATIVE
PREFERRED STOCK
($25 LIQUIDATION PREFERENCE
PER SHARE)
AND
11 5/8% NEW SENIOR DISCOUNT
DEBENTURES DUE 2009
-----------------------------------
PROSPECTUS
-----------------------------------
, 1998
======================================================
<PAGE> 139
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law and Article Six of the
Registrant's Bylaws provide for indemnification of the Registrant's directors
and officers in a variety of circumstances, which may include liabilities under
the Securities Act of 1933, as amended.
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 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.
(b) 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.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE> 140
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois on February 24, 1998.
LIBERTY GROUP PUBLISHING, INC.
By: /s/ KENNETH L. SEROTA
------------------------------------
Its: President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated and on February 24, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ Kenneth L. Serota President and Chief Executive Officer (Principal
- --------------------------------------------- Executive Officer, Financial Officer and Accounting
Kenneth L. Serota Officer)
/s/ KENNETH W. COPE Executive Vice President and Director
- ---------------------------------------------
Kenneth W. Cope
Chairman of the Board of Directors
- ---------------------------------------------
Leonard I. Green
Director
- ---------------------------------------------
Gregory A. Annick
/s/ JOHN G. DANHAKL Director
- ---------------------------------------------
John G. Danhakl
/s/ PETER J. NOLAN Director
- ---------------------------------------------
Peter J. Nolan
</TABLE>
<PAGE> 141
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ---------------
<C> <S> <C>
1.1 Purchase Agreement, dated January 15, 1998, among Liberty
Group Publishing, Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, Citicorp Securities, Inc., BT Alex.
Brown and Chase Securities, Inc.............................
1.2 Purchase Agreement, dated January 20, 1998, between Liberty
Group Publishing, Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation......................................
2.1 Asset Purchase Agreement, dated as of November 21, 1997,
among Liberty Group Publishing, Inc., Green Equity Investors
II, L.P. (as guarantor), Liberty Group Operating, Inc.,
Hollinger International Inc., APAC-90 Inc., American
Publishing (1991) Inc. and APAC-95 Inc......................
2.2 Asset Purchase Agreement, dated as of November 21, 1997,
among Liberty Group Publishing, Inc., Green Equity Investors
II, L.P. (as guarantor), Liberty Group Operating, Inc.,
Hollinger International Inc., American Publishing Company of
Illinois, APAC-90 Inc., American Publishing (1991) Inc. and
APAC-95 Inc.................................................
2.3 Exchange Agreement, dated as of November 21, 1997, between
American Publishing Company of Illinois and Chicago Deferred
Exchange Corporation........................................
2.4 Qualified Exchange Trust Agreement, dated as of November 21,
1997, among The Chicago Trust Company, as Trustee under
Trust No. 38347501, Chicago Deferred Exchange Corporation
and American Publishing Company of Illinois.................
2.5 Amendment to Asset Purchase Agreement, dated as of January
14, 1998, among Liberty Group Publishing, Inc., Green Equity
Investors II, L.P. (as guarantor), Liberty Group Operating,
Inc., Hollinger International Inc., APAC-90 Inc., American
Publishing (1991) Inc. and APAC-95 Inc......................
2.6 Amendment to Asset Purchase Agreement, dated as of January
14, 1998, among Liberty Group Publishing, Inc., Green Equity
Investors II, L.P. (as guarantor), Liberty Group Operating,
Inc., Hollinger International Inc., American Publishing
Company of Illinois, APAC-90 Inc., American Publishing
(1991) Inc. and APAC-95 Inc.................................
2.7 Amendment to Exchange Agreement, dated as of January 14,
1998, between American Publishing Company of Illinois and
Chicago Deferred Exchange Corporation.......................
2.8 Amendment to Qualified Exchange Trust Agreement, dated as of
January 14, 1998, among The Chicago Trust Company, as
Trustee under Trust No. 38347501, Chicago Deferred Exchange
Corporation and American Publishing Company of Illinois.....
2.9 Agreement, dated January 15, 1998, among Liberty Group
Publishing, Inc., Green Equity Investors II, L.P. (as
guarantor), Liberty Group Operating, Inc., Hollinger
International Inc., American Publishing Company of Illinois,
APAC-90 Inc., American Publishing (1991) Inc. and APAC-95
Inc.........................................................
2.10 Agreement, dated January 23, 1998, among American Publishing
Company of Illinois, Chicago Deferred Exchange Corporation
and The Chicago Trust Company...............................
2.11 Agreement, dated January 26, 1998, among Liberty Group
Publishing, Inc., Green Equity Investors II, L.P. (as
guarantor), Liberty Group Operating, Inc., Hollinger
International Inc., American Publishing Company of Illinois,
APAC-90 Inc., American Publishing (1991) Inc. and APAC-95
Inc.........................................................
3.1 Amended and Restated Certificate of Incorporation of Liberty
Group Publishing, Inc.......................................
3.2 By-Laws of Liberty Group Publishing, Inc....................
4.1 Indenture, dated as of January 27, 1998, among Liberty Group
Publishing, Inc. and State Street Bank and Trust Company, as
Trustee, including form of 11 5/8% Senior Discount
Debentures due 2009.........................................
</TABLE>
<PAGE> 142
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ---------------
<C> <S> <C>
4.2 Certificate of Designations of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights
of Series A 14 3/4% Senior Redeemable Exchangeable
Cumulative Preferred Stock and Series B 10% Junior
Redeemable Cumulative Preferred Stock, and Qualifications,
Limitations and Restrictions Thereof........................
4.3 Indenture, dated as of January 27, 1998, among Liberty Group
Publishing, Inc. and State Street Bank and Trust Company, as
Trustee, including form of 14 3/4% Senior Subordinated
Debentures due 2010.........................................
*5.1 Opinion of Mayer, Brown & Platt as to the legality of the
Debentures, Holdings Senior Preferred Stock and Exchange
Debentures..................................................
*8.1 Opinion of Mayer, Brown & Platt as to certain tax matters
(included in
exhibit 5.1)................................................
10.1 Employment Agreement, dated as of November 21, 1997, among
Liberty Group Publishing, Inc., Liberty Group Operating,
Inc. and Kenneth L. Serota..................................
10.2 Management Stockholders Agreement, dated as of January 27,
1998, among Liberty Group Publishing, Inc., Green Equity
Investors II, L.P. and Kenneth L. Serota....................
10.3 Non-Competition Agreement, dated as of January 27, 1998,
between Liberty Group Operating, Inc. and Hollinger
International Inc...........................................
10.4 Transitional Services Agreement, dated as of January 27,
1998, between American Publishing Management Services Inc.
and Liberty Group Operating, Inc............................
10.5 Credit Agreement, dated as of January 27, 1998, among
Liberty Group Operating, Inc. (as borrower), Liberty Group
Publishing, Inc. (as parent guarantor), the Subsidiary
Guarantors named therein, Citicorp USA, Inc. (as
administrative agent and swingline lender), Citibank, N.A.
(as issuing bank), Wells Fargo Bank, N.A. (as documentation
agent), BT Alex. Brown Incorporated (as syndication agent),
Bank of America, NT & SA and Citicorp Securities, Inc. (as
arranger)...................................................
10.6 Pledge Agreement, dated as of January 27, 1998, from Liberty
Group Publishing, Inc., Liberty Group Arizona Holdings,
Inc., Liberty Group Arkansas Holdings, Inc., Liberty Group
California Holdings, Inc., Liberty Group Illinois Holdings,
Inc., Liberty Group Iowa Holdings, Inc., Liberty Group
Kansas Holdings, Inc., Liberty Group Michigan Holdings,
Inc., Liberty Group Minnesota Holdings, Inc., Liberty Group
Missouri Holdings, Inc., Liberty Group New York Holdings,
Inc., Liberty Group Pennsylvania Holdings, Inc., Liberty
Group Management Services, Inc. to the lenders under the
Credit Agreement............................................
10.7 Pledge Agreement, dated as of January 27, 1998, from Liberty
Group Operating, Inc. to the lenders under the Credit
Agreement...................................................
10.8 Registration Rights Agreement, dated as of January 27, 1998,
among Liberty Group Publishing, Inc., the Subsidiary
Guarantors named therein, Donaldson, Lufkin & Jenrette
Securities Corporation, Citicorp Securities, Inc. BT Alex.
Brown and Chase Securities, Inc.............................
10.9 Registration Rights Agreement, dated as of January 27, 1998,
between Liberty Group Publishing, Inc. and Donaldson, Lufkin
& Jenrette Securities Corporation...........................
12.1 Computation of Ratios.......................................
21.1 Subsidiaries of Liberty Group Publishing, Inc...............
23.1 Consent of KPMG Peat Marwick LLP............................
</TABLE>
<PAGE> 143
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ---------------
<C> <S> <C>
* 23.2 Consent of Mayer, Brown & Platt (included in exhibit
5.1)........................................................
25.1 Statement of Eligibility and Qualification on Form T-1 of
State Street Bank and Trust Company.........................
99.1 Form of Letter of Transmittal from Liberty Group Publishing,
Inc. to Holders of its Old Debentures and Old Senior
Preferred Stock relating to the Exchange Offer..............
99.2 Form of Notice of Guaranteed Delivery.......................
</TABLE>
- -------------------------
* To be filed by Amendment.
<PAGE> 1
EXHIBIT 1.1
LIBERTY GROUP PUBLISHING, INC.
$89,000,000
11 5/8 % Series A Senior Discount Debentures due 2009
PURCHASE AGREEMENT
January 15, 1998
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
CITICORP SECURITIES, INC.
BT ALEX. BROWN
CHASE SECURITIES INC.
<PAGE> 2
$89,000,000
11 5/8% Series A Senior Discount Debentures due 2009
of
LIBERTY GROUP PUBLISHING, INC.
PURCHASE AGREEMENT
January 15, 1998
Donaldson, Lufkin & Jenrette Securities Corporation
Citicorp Securities, Inc.
BT Alex. Brown
Chase Securities Inc.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
Liberty Group Publishing, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), Citicorp Securities, Inc., BT Alex. Brown and Chase
Securities Inc. (each an "Initial Purchaser" and, together, the "Initial
Purchasers") an aggregate of $89,000,000 in principal amount at maturity of its
11 5/8% Series A Senior Discount Debentures due 2009 (the "Series A
Debentures"), subject to the terms and conditions set forth herein. The Series
A Debentures are to be issued pursuant to the provisions of an indenture (the
"Indenture"), to be dated as of the Closing Date (as defined below), between
the Company and State Street Bank and Trust Company, as trustee (the
"Trustee"). The Series A Debentures and the Series B Debentures (as defined
below) issuable in exchange therefor are collectively referred to herein as the
"Debentures." Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Offering Memorandum (as defined herein).
1. Offering Memorandum. The Series A Debentures will be offered and sold
to the Initial Purchasers pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended (the
"Act"). The Company has prepared a preliminary offering memorandum, dated
December 30, 1997 (the "Preliminary Offering Memorandum"), and a final offering
memorandum, dated January 15, 1998 as
-2-
<PAGE> 3
supplemented by the Supplement To Offering Memorandum dated January 20, 1998,
including a supplement describing the Senior Preferred Stock, dated January 20,
1998 (the "Offering Memorandum"), each relating to the Series A Debentures.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Debentures (and all
securities (other than the Series B Debentures) issued in exchange therefor or
in substitution thereof) shall bear the following legend:
"THE DEBENTURES (OR THEIR PREDECESSORS) EVIDENCED HEREBY WERE
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 DEBENTURES EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE DEBENTURES 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. THE HOLDER OF THE
DEBENTURES EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH DEBENTURES MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (a) INSIDE THE UNITED STATES TO A PERSON WHOM 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) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (c) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (d) TO
THE COMPANY, (e) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR (f)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE
COMPANY SO REQUESTS) 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
DEBENTURES EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
-3-
<PAGE> 4
2. Agreements to Sell and Purchase. On the basis of the representations,
warranties and covenants contained in this Agreement, and subject to the terms
and conditions contained herein, the Company agrees to issue and sell to the
Initial Purchasers, and each Initial Purchaser severally agrees to purchase
from the Company, the principal amount at maturity of Series A Debentures set
forth opposite the name of such Initial Purchaser on Schedule A hereto at a
purchase price equal to 54.779% of the principal amount at maturity thereof
(the "Purchase Price").
3. Terms of Offering. The Initial Purchasers have advised the Company
that the Initial Purchasers will make offers (the "Exempt Resales") of the
Series A Debentures purchased hereunder 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) to persons permitted to purchase
the Series A Debentures in offshore transactions in reliance upon Regulation S
under the Act (each, a "Regulation S Purchaser") (such persons specified in
clauses (i) and (ii) being referred to herein as the "Eligible Purchasers").
The Initial Purchasers will offer the Series A Debentures to Eligible
Purchasers initially at the offering price set forth on the cover of the
Offering Memorandum. Such price may be changed at any time without notice.
Holders (including subsequent transferees of the Series A Debentures) will
have the registration rights set forth in the registration rights agreement
(the "Registration Rights Agreement"), to be dated the Closing Date,
substantially as described in the Offering Memorandum and containing other
customary and reasonable provisions. Pursuant to the Registration Rights
Agreement, the Company 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 Company's 11 5/8% Series B Senior Discount
Debentures due 2009 (the "Series B Debentures"), to be offered in exchange for
the Series A Debentures (such offer to exchange being referred to as the
"Exchange Offer") and/or (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 Debentures and use its
reasonable best efforts to cause such Registration Statements to be declared
and remain effective and usable for the periods specified in the Registration
Rights Agreement and to consummate the Exchange Offer. This Agreement, the
Indenture, the Debentures and the Registration Rights Agreement (each as
defined herein) and the Revolving Credit Facility, the Management Agreement and
the Asset Purchase Agreements (each as defined in the Offering Memorandum) are
hereinafter sometimes referred to collectively as the "Operative Documents."
-4-
<PAGE> 5
4. Delivery and Payment.
(a) Delivery of, and payment of the Purchase Price for, the Series A
Debentures shall be made at such locations as may be mutually acceptable to the
parties hereto. Such delivery and payment shall be made at 9:00 a.m., New York
City time, on the seventh business day following the date of this Agreement
(January 27, 1998), or at such other time as shall be agreed upon by the
Initial Purchasers and the Company. The time and date of such delivery and the
payment are herein called the "Closing Date."
(b) One or more of the Series A Debentures in the definitive global
form, registered in the name of Cede & Co., as nominee of the Depository Trust
Company ("DTC"), having an aggregate principal amount at maturity corresponding
to the aggregate principal amount at maturity of the Series A Debentures
(collectively, the "Global Debenture"), shall be delivered by the Company to
the Initial Purchasers (or as the Initial Purchasers direct), in each case with
any transfer taxes thereon duly paid by the Company against payment by the
Initial Purchasers of the Purchase Price thereof by wire transfer in same day
funds to an account designated by order of the Company. The Global Debenture
shall be made available to the Initial Purchasers for inspection not later than
9:30 a.m., New York City time, on the business day immediately preceding the
Closing Date.
5. Agreements of the Company. The Company hereby agrees with each Initial
Purchaser as follows:
(a) To advise the Initial Purchasers promptly and, if requested by an
Initial Purchaser, 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 Series A Debentures for offering or sale in
any jurisdiction designated by an Initial Purchaser pursuant to Section 5(e)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose and (ii) of
the happening of any event during the period referred to in Section 5(d) below
that makes any statement of a material fact made in the Offering Memorandum, as
then amended or supplemented, untrue or that requires any additions to or
changes in the Offering Memorandum, as then amended or supplemented, in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. The Company shall use its reasonable best efforts to
prevent the issuance of any stop order or order suspending the qualification or
exemption of any Series A Debentures under any state securities or Blue Sky
laws and, if at any time any state securities commission or other federal or
state regulatory authority shall issue an order suspending the qualification or
exemption of any Series A Debentures under any state securities or Blue Sky
laws, the Company shall use its reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
-5-
<PAGE> 6
(b) To furnish the Initial Purchasers and those persons identified by
the Initial Purchasers to the Company, without charge, as many copies of the
Offering Memorandum, and any amendments or supplements thereto, as the Initial
Purchasers may reasonably request. Subject to the Initial Purchasers'
compliance with their representations and warranties and agreements set forth
in Section 7 hereof, the Company consents to the use of the Preliminary
Offering Memorandum (prior to the availability of the Offering Memorandum) and
the Offering Memorandum, and any amendments and supplements thereto, by the
Initial Purchasers in connection with Exempt Resales.
(c) During the period referred to in Section 5(d) below, (i) not to
make any amendment or supplement to the Offering Memorandum of which the
Initial Purchasers shall not previously have been advised or to which the
Initial Purchasers shall reasonably object within a reasonable time after being
so advised and (ii) to prepare promptly upon the Initial Purchasers' reasonable
request, any amendment or supplement to the Offering Memorandum which may be
necessary or advisable in connection with Exempt Resales.
(d) If, after the date hereof during such period as the Initial
Purchasers are required to deliver the Offering Memorandum in connection with
Exempt Resales by them, any event shall occur as a result of which it becomes
necessary to amend or supplement the Offering Memorandum in order to make the
statements therein, in the light of the circumstances as of the date the
Offering Memorandum is delivered to an Eligible Purchaser, not misleading, or
if it is necessary to amend or supplement the Offering Memorandum to comply
with any applicable law, promptly to prepare an appropriate amendment or
supplement to such 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 Offering Memorandum, as so amended
or supplemented, will comply with applicable law, and to furnish to the Initial
Purchasers and such other persons as the Initial Purchasers may designate such
number of copies thereof as the Initial Purchasers may reasonably request.
(e) Prior to the sale of all the Series A Debentures pursuant to Exempt
Resales as contemplated hereby, to cooperate with the Initial Purchasers and
counsel to the Initial Purchasers in connection with the registration or
qualification of the Series A Debentures for offer and sale to the Initial
Purchasers and pursuant to Exempt Resales 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 to consummate such
Exempt Resales and to file such consents to service of process or other
documents as may be necessary in order to effect such registration or
qualification; provided, however, that the Company shall not be required in
connection therewith to register or qualify as a foreign corporation in any
jurisdiction in which it is not now so qualified or to take any action that
would subject it to service of process or taxation other than as to matters and
transactions relating to Exempt Resales, in any jurisdiction in which it is not
now so subject.
-6-
<PAGE> 7
(f) For a period of five (5) years after the Closing Date and
thereafter so long as an Initial Purchaser is making a market in the
Debentures, to furnish to the Initial Purchasers as soon as available copies of
all reports or other communications furnished by the Company to its security
holders or furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed.
(g) For so long as any of the Series A Debentures remain outstanding
and during any period in which the Company is 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 of Series A Debentures in connection with any
sale thereof and any prospective purchaser of such Series A Debentures
designated by such holder, upon request, the information ("Rule 144A
Information") required by Rule 144A(d)(4) under the Act.
(h) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to performance of the obligations of the Company under this
Agreement, including, without limitation: (i) all fees and expenses in
connection with the preparation, printing and distribution of the Preliminary
Offering Memorandum, the Offering Memorandum and all amendments and supplements
thereto (including financial statements) prior to or during the period
specified in Section 5(d), including the mailing and delivering of copies
thereof to the Initial Purchasers and persons designated by them as specified
herein, (ii) all costs and expenses related to the issuance and delivery of the
Series A Debentures to the Initial Purchasers and pursuant to Exempt Resales,
including any transfer or other taxes payable thereon, (iii) all costs of
printing or reproduction of any agreements or documents in connection with the
offering, purchase, sale or delivery of the Series A Debentures, (iv) all
expenses in connection with the registration or qualification of the Series A
Debentures for offer and sale under the securities or Blue Sky laws of the
several states referred to in Section 5(e) hereof and all costs of printing or
producing any preliminary and supplemental Blue Sky memoranda in connection
therewith (including the filing fees and reasonable fees and disbursements of
counsel for the Initial Purchasers in connection with such registration or
qualification and memoranda relating thereto), (v) the cost of printing
certificates representing the Series A Debentures, (vi) all expenses and
listing fees in connection with the application for quotation of the Series A
Debentures in the National Association of Securities Dealers, Inc. ("NASD")
Automated Quotation System - PORTAL ("PORTAL"), (vii) the reasonable fees and
expenses of the Trustee and Trustee's counsel in connection with the Indenture
and the Debentures, (viii) all costs and charges of any transfer agent,
registrar and/or depositary (including DTC), (ix) any fees charged by rating
agencies for the rating of the Debentures, and (x) all costs and expenses of
the Exchange Offer and any Registration Statement.
-7-
<PAGE> 8
(i) To use its reasonable best efforts to effect the inclusion of the
Series A Debentures in PORTAL and to maintain the listing of the Series A
Debentures on PORTAL for so long as the Series A Debentures are outstanding.
(j) To use its reasonable best efforts to obtain the approval of DTC
for "book-entry" transfer of the Debentures, and to comply with all of its
agreements set forth in the representation letter of the Company to DTC
relating to the approval of the Debentures by DTC for "book entry" transfer.
(k) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise transfer or dispose of any debt securities of the Company or any
warrants rights or options to purchase or otherwise acquire debt securities of
the Company substantially similar to the Debentures (other than the Debentures)
without the prior written consent of DLJ.
(l) Not to, and not to permit any of its affiliates (as such term is
defined in Rule 501(b) under the Act) 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 reasonably be expected to be integrated with the sale of
the Series A Debentures to the Initial Purchasers or pursuant to Exempt Resales
in a manner that would require the registration of any such sale of the Series
A Debentures under the Act.
(m) Except in connection with the Exchange Offer or the filing of the
Shelf Registration Statement, as the case may be, not to, and not to authorize
or knowingly permit any person acting on its behalf to, solicit any offer to
buy or offer to sell the Debentures by means of any form of general
solicitation or general advertising (as such terms are used in Regulation D
under the 1933 Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Act.
(n) To use its reasonable best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by it prior
to the Closing Date and to satisfy all conditions precedent to the delivery of
the Series A Debentures.
6. Representations and Warranties of the Company. As of the date hereof,
the Company represents and warrants to each Initial Purchaser (it being
understood that all representations and warranties herein with respect to the
condition, financial or otherwise, or the earnings, business, management or
operations of the Company give effect to the Transactions as if they had
occurred as of the date hereof) that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum do
not, and as supplemented or amended will not, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or
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<PAGE> 9
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties contained in this paragraph (a) shall not apply to statements in or
omissions from the Preliminary Offering Memorandum or the Offering Memorandum
(or any supplement or amendment thereto) based solely upon information relating
to any Initial Purchaser furnished to the Company in writing by such Initial
Purchaser expressly for use therein. The Company acknowledges for all purposes
of this Agreement that (i) the last paragraph on the cover page of the
Preliminary Offering Memorandum and the Offering Memorandum, (ii) the
information contained in the first paragraph, the first two sentences of the
third paragraph, the fourth paragraph, the fifth sentence of the sixth
paragraph, and the eighth and ninth paragraphs under the caption "Plan of
Distribution" in the Preliminary Offering Memorandum and the Offering
Memorandum, and (iii) the information regarding stabilization on page i of the
Preliminary Offering Memorandum and the Offering Memorandum constitute the only
information relating to the Initial Purchasers furnished to the Company in
writing by any Initial Purchaser expressly for use in the Preliminary Offering
Memorandum or the Offering Memorandum and that the Initial Purchasers shall not
be deemed to have provided any other information (and therefore are not
responsible for any such statement or omission) pertaining to any arrangement
or agreement with respect to any party other than the Initial Purchasers. No
contract or document that would be required to be described in the Offering
Memorandum if the Offering Memorandum were a prospectus contained in a
registration statement on Form S-1 filed under the Act is not so described. 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.
(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware. The
Company has full corporate power and authority to carry on its business and to
own, lease and operate its properties as described in the Preliminary Offering
Memorandum and the Offering Memorandum. The Company has the requisite
corporate power and authority to authorize the offering of the Debentures and
to execute, deliver and perform its obligations under each Operative Document
to which it is a party. The Company is duly qualified and is in good standing
as a foreign corporation authorized to do business in each jurisdiction in
which such qualification is required, except where the failure to be so
qualified or in good standing would not (i) have a material adverse effect on
the business, prospects, financial condition or results of operations of the
Company and its subsidiaries taken as a whole, (ii) materially interfere with
or materially adversely affect the issuance or marketability of the Series A
Debentures pursuant hereto or (iii) adversely affect in any manner the validity
of this Agreement or any of the other Operative Documents (the events referred
to in clauses (i) through (iii), a "Material Adverse Effect").
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<PAGE> 10
(c) All of the outstanding capital stock of the Company (i) has been
duly authorized and validly issued and (ii) is fully paid, nonassessable and
not subject to any preemptive or similar rights and all of the capital stock of
the Company issued in the Transactions will be duly authorized and validly
issued and fully paid, non-assessable and not subject to any preemptive or
similar rights. The Company owns all the capital stock of Liberty Group
Operating, Inc. ("Liberty Group Operating").
(d) This Agreement has been duly authorized, executed and delivered by
the Company and, assuming the due execution and delivery by the Initial
Purchasers, is a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except (i) as the
enforceability thereof may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally, (ii) for general principles of equity (regardless
of whether enforcement is brought in a proceeding at law or in equity) and
(iii) limitations of applicable law regarding the enforceability of any rights
to contribution or indemnification.
(e) On the Closing Date, the Indenture will have been duly authorized
and validly executed and delivered by the Company. When the Indenture has been
duly executed and delivered by the Company, the Indenture will be a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms (assuming the due execution and delivery of the Indenture by the
Trustee) except (i) as the enforceability thereof may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally, (ii) for general principles of
equity (regardless of whether enforcement is brought in a proceeding at law or
in equity) and (iii) the waiver as to stay, extension or usury laws may not be
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 "TIA"), and the rules and regulations of the Commission applicable to an
indenture which is qualified thereunder.
(f) On the Closing Date, the Series A Debentures will have been duly
authorized and validly executed and delivered by the Company. When the Series
A Debentures have been issued, executed and authenticated in accordance with
the provisions of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, the Series A
Debentures will be entitled to the benefits of the Indenture and will be valid
and binding obligations of the Company, enforceable in accordance with their
terms except (i) as the enforceability thereof may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally, (ii) for general principles of
equity (regardless of whether enforcement is brought in a proceeding at law or
in equity) and (iii) the waiver as to stay, extension or usury laws may not be
enforceable. The Series A Debentures, when authenticated, executed and
delivered, will conform in all material respects to the description thereof
contained in the Offering Memorandum.
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<PAGE> 11
(g) On the Closing Date, the Series B Debentures will have been duly
authorized by the Company. When the Series B Debentures are executed and
authenticated in accordance with the provisions of the Indenture and delivered
in exchange for Series A Debentures in accordance with the Indenture and the
Exchange Offer, the Series B Debentures will be entitled to the benefits of the
Indenture and will be the valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except (i) as
the enforceability thereof may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' right generally, (ii) for general principles of equity (regardless
of whether enforcement is brought in a proceeding at law or in equity) and
(iii) the waiver as to stay, extension or usury laws may not be enforceable.
(h) On the Closing Date, the Registration Rights Agreement will have
been duly authorized and validly executed and delivered by the Company. When
the Registration Rights Agreement has been duly executed and delivered by the
Company, the Registration Rights Agreement will be a valid and binding
agreement of the Company, enforceable against the Company in accordance with
its terms (assuming the due execution and delivery of the Registration Rights
Agreement by the Initial Purchasers) except (i) as the enforceability thereof
may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, (ii) for general principles of equity (regardless of whether
enforcement is brought in a proceeding at law or in equity) and (iii)
limitations of applicable law regarding the enforceability of any rights to
contribution or indemnification. The Registration Rights Agreement conforms in
all material respects to the description thereof in the Offering Memorandum.
(i) On the Closing Date, the Asset Purchase Agreements will have been
duly authorized and validly executed and delivered by the Company and Liberty
Group Operating and will be valid and binding agreements of each respective
entity, enforceable against each in accordance with their terms (assuming the
due execution and delivery of the Asset Purchase Agreements by each other party
thereto) except (i) as the enforceability thereof may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and (ii) for general principles of
equity (regardless of whether enforcement is brought in a proceeding at law or
in equity). Each transaction comprising the Acquisition conforms to the
descriptions thereof in the Offering Memorandum.
(j) Neither the Company nor Liberty Group Operating (i) is in violation
of its certificate of incorporation or by-laws, or (ii)(a) before giving effect
to the Transactions is, or (b) assuming that the Transactions are consummated
as contemplated by the Offering Memorandum will be, in default in the
performance of any obligation, agreement, covenant or condition contained in
any indenture, loan agreement, mortgage, lease or other agreement or instrument
to which the Company or Liberty Group Operating is a party or by which the
Company, Liberty Group Operating or any of their respective
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<PAGE> 12
property is bound, except in the case of clause (ii) for any such violation and
defaults as would not, singly or in the aggregate, have a Material Adverse
Effect. There exists no condition that, with notice, the passage of time or
otherwise, would constitute a default under any such document or instrument,
except for any such defaults or violations as would not, singly or in the
aggregate, have a Material Adverse Effect.
(k) The execution, delivery and performance by the Company and Liberty
Group Operating of each Operative Agreement to which either of them is a party,
the issuance and sale of the Series A Debentures as contemplated by this
Agreement and the Offering Memorandum and the consummation of the transactions
contemplated by this Agreement, each other Operative Document and the Offering
Memorandum will not (i) require any consent, approval, authorization or other
order of, or qualification with, any court or governmental body or agency
(except such as may be required under the securities or Blue Sky laws of the
various states or as previously have been made or obtained (or in the case of
the Registration Rights Agreement, will be obtained and made in accordance
therewith) and assuming the accuracy of the representations and warranties of
the Initial Purchasers in Section 7 hereof), or (ii) violate the certificate of
incorporation or by-laws of the Company or Liberty Group Operating, or (iii)
constitute a breach of any of the terms or provisions of, or a default under,
or cause an acceleration of any obligation under, or result in the imposition
or creation of (or the obligation to create or impose) a Lien (as defined
below) with respect to, any indenture, loan agreement, mortgage, lease or other
agreement or instrument to which the Company or Liberty Group Operating is a
party or by which the Company or Liberty Group Operating or their respective
property is subject, or (iv) violate or conflict with any applicable law or any
rule, regulation, judgment, order or decree of any court or any governmental
body or agency having jurisdiction over the Company, Liberty Group Operating or
their respective property (assuming the accuracy of the representations and
warranties of the Initial Purchasers in Section 7 hereof, compliance with all
applicable state securities and Blue Sky laws, and, in the case of the
Registration Rights Agreement, compliance with the Act, the Exchange Act and
the TIA), or (v) result in the termination or revocation of any permit (as
defined below) of the Company or Liberty Group Operating or result in any other
impairment of the rights of the holder of any such permit, except, in the case
of clause (iii), (iv) or (v) above, for such conflicts or violations as would
not, singly or in the aggregate, have a Material Adverse Effect.
(l) The Company has good and marketable title to, or valid leasehold
interests in, all its properties and assets, in each case free and clear of all
liens, encumbrances, pledges, claims, security interests, mortgages,
assessments, easements, rights of way, covenants, restrictions, rights of first
refusal, defects in title, encroachments and other burdens or adverse claims
(collectively, "Liens"), except for Liens under the Revolving Credit Facility
or such as do not, singly or in the aggregate, have a Material Adverse Effect.
Any real property and buildings held under lease by the Company are held by the
Company under valid, subsisting and enforceable leases with such exceptions as
do not, singly or in the aggregate, have a Material Adverse Effect.
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<PAGE> 13
(m) There is no legal or governmental proceeding pending or, to the
Company's knowledge, threatened to which the Company or Liberty Group Operating
is bound or could reasonably be expected to be a party or to which any of their
respective property is or could reasonably be expected to be subject, except
for any such proceedings as would not, singly or in the aggregate, be
reasonably expected to have a Material Adverse Effect.
(n) To the Company's knowledge, no action has been taken and no law,
statute, rule or regulation or order has been enacted, adopted or issued by any
governmental agency or body which prevents the execution, delivery or
performance of any of the Operative Documents, the consummation of any of the
transactions contemplated thereunder or the issuance of the Series A
Debentures, or suspends the sale of the Series A Debentures in any jurisdiction
referred to in Section 5(e). No injunction, restraining order or other order
or relief of any nature by a federal or state court or other tribunal of
competent jurisdiction has been issued with respect to the Company or Liberty
Group Operating which would prevent or suspend the issuance or sale of the
Series A Debentures in any jurisdiction referred to in Section 5(e) or the
consummation of any transaction contemplated by the Operative Documents.
(o) Except as would not, singly or in the aggregate, have a Material
Adverse Effect, (i) the Company is not in violation of any Federal, state or
local laws or regulations relating to pollution or protection of human health
or the environment ("Environment Laws"), which violation includes, but is not
limited to, noncompliance with or lack of any permits (as defined below) or
other governmental authorizations; and (ii) (A) the Company has not received
any communication, whether from a governmental authority or otherwise, alleging
any such violation or noncompliance, and there are no circumstances, either
past, present or that are reasonably foreseeable, that are reasonably likely to
lead to such violation in the future, (B) there is no pending or, to the
Company's knowledge, threatened claim, action, investigation or notice by any
person or entity alleging potential liability for investigatory, cleanup, or
governmental response costs, or natural resources or property damages, or
personal injuries, attorney's fees or penalties relating to any actual, alleged
or, to the Company's knowledge, threatened pollution or contamination, or, to
the Company's knowledge, any circumstances forming the basis of any violation,
or alleged violation, of any Environmental Law (collectively, "Environmental
Claims"), and (C) there are no past or present actions, activities,
circumstances, conditions, events or incidents that could reasonably be
expected to form the basis of any Environmental Claim against the Company or
against any person or entity whose liability for any Environmental Claim the
Company has retained or assumed either contractually or by operation of law.
(p) Except for the Initial Purchasers, there are no contracts,
agreements or understandings between the Company or Liberty Group Operating and
any person granting such person the right to require the Company to include
securities held by
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<PAGE> 14
such person in the Registration Statement contemplated by the Registration
Rights Agreement.
(q) Except as would not be unlawful, neither the Company nor Liberty
Group Operating has (i) 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 Liberty Group
Operating to facilitate the sale or resale of the Debentures or (ii) since the
date of the Preliminary Offering Memorandum (A) sold, bid for, purchased or
paid any person any compensation for soliciting purchases of the Debentures or
(B) paid or agreed to pay to any person any compensation for soliciting another
to purchase any other securities of the Company or Liberty Group Operating.
(r) Except for the Initial Purchasers, there are no contracts,
agreements or understandings between the Company or Liberty Group Operating and
any person that would give rise to a valid claim against the Company, Liberty
Group Operating or any Initial Purchaser for a brokerage commission, finder's
fee or like payment in connection with the issuance, purchase and sale of the
Debentures.
(s) The Company has no knowledge of any actionable violation by the
Company of any Federal, state or local law relating to employment practices,
discrimination in the hiring, promotion or pay of employees or any applicable
wage or hour laws, or of any provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA") or the rules and regulations promulgated
thereunder, except for any such violation as would not, singly or in the
aggregate, have a Material Adverse Effect. There is (A) no material unfair
labor practice complaint pending against the Company or, to the best knowledge
of the Company, threatened against it, before the National Labor Relations
Board or any state or local labor relations board, and no significant grievance
or significant arbitration proceeding arising out of or under any collective
bargaining agreement is pending against the Company or, to the knowledge of the
Company, threatened against it, (B) no labor strike, dispute, slowdown or
stoppage ("Labor Dispute") in which the Company is involved nor, to the best
knowledge of the Company, is any Labor Dispute imminent, other than routine
disciplinary and grievance matters, except with respect to any matter specified
in clause (A) or (B) above as would not, singly or in the aggregate, have a
Material Adverse Effect. Except as set forth in the Offering Memorandum, there
exist no material employment, consulting, severance or termination agreements
or arrangements between the Company or Liberty Group Operating and any current
or former officer or director of the Company or Liberty Group Operating, and
there are no collective bargaining or other labor union agreements to which the
Company or Liberty Group Operating is a party or by which either of them is
bound.
(t) The Company has such permits, licenses, consents, exemptions,
franchises, authorizations and other approvals ("permits") of, and has made all
filings with and notice to, all governmental or regulatory authorities and
self-regulatory
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<PAGE> 15
organizations and all courts and other tribunals, including, without
limitation, under any applicable Environmental Laws, as are necessary to own,
lease, license and operate its properties and to conduct its business, except
where the failure to have any such permit or to make any such filing or notice
would not, singly or in the aggregate, have a Material Adverse Effect. Each
such permit is valid and in full force and effect and the Company is in
compliance with all the terms and conditions of its permits and with the rules
and regulations of the authorities and governing bodies having jurisdiction
with respect thereto; no event has occurred (including the receipt of any
notice from any authority or governing body) which allows or, after notice or
elapse of time or both, would allow revocation, suspension or termination of
any such permit, or results or, after notice or lapse of time or both, would
result in any other impairment of the rights of the holder of any such permit;
and such permits contain no restrictions that are unduly burdensome to the
Company, except, in each case, where such failure to be valid and in full force
and effect or to be in compliance, the occurrence of any such event or the
presence of any such restriction would not, singly or in the aggregate, have a
Material Adverse Effect.
(u) Except as would not, singly or in the aggregate, have a Material
Adverse Effect: (i) the Company owns or possesses, free and clear of all Liens
other than Liens under the Revolving Credit Facility, valid rights to all
patents, patent rights, copyrights, computer databases and software, logos,
slogans, inventions, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names and all licenses,
applications and registrations related to the foregoing used in the business of
the Company (collectively, the "Intellectual Property"); (ii) the Company has
not received any notice of infringement of or conflict with asserted rights of
others with respect to any Intellectual Property, and has no knowledge of any
infringement of the Intellectual Property by any person; and (iii) the use of
the Intellectual Property in connection with the business and operations of the
Company does not infringe on the rights of any person.
(v) The Company maintains reasonably adequate insurance covering its
properties, operations, personnel and businesses.
(w) The accountants, KPMG Peat Marwick LLP, that have certified the
financial statements and related notes included in the Preliminary Offering
Memorandum and the Offering Memorandum are independent public accountants with
respect to the Company as would be required by the Act and the Exchange Act if
the Offering Memorandum were a prospectus included in a registration statement
on Form S-1 filed with the Commission under the Act. The historical financial
statements, together with the related notes, included in the Preliminary
Offering Memorandum and the Offering Memorandum comply as to form in all
material respects with the requirements applicable to registration statements
on Form S-1 under the Act.
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<PAGE> 16
(x) The historical financial statements, together with related notes
forming part of the Preliminary Offering Memorandum and the Offering Memorandum
(and any amendment or supplement thereto), present fairly the financial
position, results of operations and changes in financial position of the
Company on the basis stated in the Preliminary Offering Memorandum and the
Offering Memorandum at the respective dates or for the respective periods to
which they apply; such statements and related notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the other
financial and statistical information and data included in the Preliminary
Offering Memorandum and the Offering Memorandum (and any amendment or
supplement thereto) are presented and prepared on a basis consistent with such
financial statements and the books and records of the Company.
(y) The pro forma financial statements and related notes thereto
included in the Preliminary Offering Memorandum and the Offering Memorandum
give effect to assumptions made on a reasonable basis and in good faith and
present fairly the historical and proposed transactions contemplated by the
Preliminary Offering Memorandum and the Offering Memorandum; and such pro forma
financial statements and related notes 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. The other pro
forma financial and statistical information and data included in the
Preliminary Offering Memorandum and the Offering Memorandum are, in all
material respects, presented and prepared on a basis consistent with such pro
forma financial statements.
(z) The Company is not and, after giving effect to the consummation of
the Transactions, will not be, an "investment company," as such term is defined
in the Investment Company Act of 1940, as amended.
(aa) Neither the Company nor any agent acting on behalf of the Company
has taken, and none of them will take, any action that would cause this
Agreement or the issuance or sale of the Series A Debentures to violate
Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220),
Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the
Board of Governors of the Federal Reserve System.
(ab) Since the respective dates as of which information is given in the
Offering Memorandum, other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management or operations of
the Company and its subsidiaries taken as a whole, (ii) there has not been any
material adverse change or any development involving a prospective material
adverse change in the capital stock or in the long-term debt of the
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<PAGE> 17
Company and its subsidiaries taken as a whole and (iii) the Company and its
subsidiaries taken as a whole has not incurred any material liability or
obligation, direct or contingent.
(ac) No "nationally recognized statistical rating organization" as such
term is defined for purposes of Rule 436(g)(2) under the Act (i) has imposed
(or has informed the Company that it is considering imposing) any condition
(financial or otherwise) on the Company's retaining any rating assigned to the
Company or any securities of the Company or (ii) has indicated to the Company
that it is considering (a) the downgrading, suspension, or withdrawal of, or
any review for a possible change in, any rating so assigned or (b) any change
in the outlook for any rating of the Company or any securities of the Company.
(ad) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Act.
(ae) No form of general solicitation or general advertising (within the
meaning of Regulation D under the Act) was or will be used by the Company,
Liberty Group Operating or any of their respective representatives (other than
the Initial Purchasers, as to whom the Company makes no representation) in
connection with the offer and sale of the Series A Debentures contemplated
hereby. No securities of the same class as the Series A Debentures have been
issued and sold by the Company within the six-month period immediately prior to
the date hereof.
(af) No registration under the Act of the Series A Debentures is
required for the sale of the Series A Debentures to the Initial Purchasers as
contemplated hereby or for the Exempt Resales, assuming the accuracy of the
Initial Purchasers' representations and warranties and agreements set forth in
Section 7 hereof.
(ag) The Company, Liberty Group Operating and their respective
affiliates and all persons acting on their behalf (other than the Initial
Purchasers, as to whom the Company and Liberty Group Operating make no
representation) have complied with and will comply with the offering
restrictions requirements of Regulation S under the Act (including, without
limitation, provisions regarding directed selling efforts (within the meaning
of Regulation S)) in connection with any offering of the Series A Debentures
outside the United States.
(ah) Assuming the accuracy of the Initial Purchasers' representations,
warranties and agreements set forth in Section 7 hereof, prior to the
effectiveness of any Registration Statement, the Indenture is not required to
be qualified under the TIA.
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<PAGE> 18
(ai) Upon filing of the registration statement with respect to the
Exchange Offer, the Company will have established a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(aj) No Tax liens have been filed on the assets to be acquired pursuant
to the Asset Purchase Agreements and no claims are being asserted that could
reasonably result in a Tax lien on such assets, except as would not, singly or
in the aggregate, have a Material Adverse Effect. For purposes of this
Agreement, "Taxes" (including, with correlative meaning, the term "Tax") shall
mean all Taxes, charges, fees, levies, penalties or other assessments imposed
by any federal, state, local or foreign taxing authority, including, but not
limited to, income, gross receipts, excise, property, sales, transfer,
franchise, payroll, withholding, social security and other Taxes, and shall
include any interest, penalties or additions attributable thereto.
(ak) Immediately after and after giving effect to the offering of the
Series A Debentures as contemplated hereby and the consummation of the
Transactions, (i) the present fair salable value of the Company's assets shall
be more than the amount that will be required to pay its debts (including
contingent and unliquidated debts) as they become absolute and matured, (ii)
the Company's assets, at a fair valuation, shall be greater than the sum of its
debts (including contingent and unliquidated debts), (iii) the Company shall
not be engaged in a business or transaction for which its remaining assets are
unreasonably small in relation to such business or transaction, and (iv) the
Company shall not intend to incur or believe that it will incur debts beyond
its ability to pay such debts as they become absolute and matured. The Company
disclaims any intent to hinder, defraud or delay its creditors, or to prefer
some creditors over creditors over others, and believes that the Debentures are
being incurred for proper purposes in good faith.
(al) Each certificate signed by any officer of the Company and
delivered to the Initial Purchasers or counsel for the Initial Purchasers in
connection with this Agreement on or prior to the Closing Date shall be deemed
to be a representation and warranty of the Company to the Initial Purchasers as
to the matters covered thereby.
The Company acknowledges that the Initial Purchasers and, for purposes of
the opinions to be delivered to the Initial Purchasers pursuant to Section 9
hereof, counsel to the Company and counsel to the Initial Purchasers, will rely
upon the accuracy and truth of the foregoing representations and hereby
consents to such reliance.
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<PAGE> 19
7. Initial Purchasers' Representations and Warranties. Each of the Initial
Purchasers, severally and not jointly, represents and warrants to the Company
and agrees that:
(a) Such Initial Purchaser is a QIB with such knowledge and experience
in financial and business matters as is necessary in order to evaluate the
merits and risks of an investment in the Series A Debentures.
(b) Such Initial Purchaser (A) is not acquiring the Series A Debentures
with a view to any distribution thereof or with any present intention of
offering or selling any of the Series A Debentures in a transaction 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 Debentures only to (x) QIB's in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A and (y) in offshore
transactions in reliance upon Regulation S under the Act.
(c) Such Initial Purchaser represents and warrants that (i) 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 the Series A
Debentures pursuant hereto, and (ii) it has not and will not solicit offers for
or offer to sell Series A Debentures in any manner involving a public offering
within the meaning of Section 4(2) of the Act.
(d) Such Initial Purchaser agrees that, in connection with Exempt
Resales, such Initial Purchaser will solicit offers to buy the Series A
Debentures only from, and will offer to sell the Series A Debentures only to,
Eligible Purchasers, and will make available copies of the Preliminary Offering
Memorandum (as then amended or supplemented through the respective dates of
such offers ) in connection with such offers and (assuming the Company's
compliance with Section 5(b) hereof) will deliver a copy of the Offering
Memorandum (as then amended or supplemented) to each purchaser of Series A
Debentures from it contemporaneously with or prior to the delivery of any
Debenture to each such Purchaser. Each Initial Purchaser further agrees that it
will offer to sell the Series A Debentures only to, and will solicit offers to
buy the Series A Debentures only from (1)(A) QIBs who, in purchasing the Series
A Debentures will be deemed to have represented and agreed that (x) they are
purchasing the Series A Debentures for their own accounts or accounts with
respect to which they exercise sole investment discretion and that they or such
accounts are QIBs and (y) they acknowledge that the seller of such Series A
Debentures may be relying on the exemption from the provisions of Section 5 of
the Act provided by Rule 144A thereunder and that such Series A Debentures will
not have been registered under the Act and (B) Regulation S Purchasers who, in
purchasing the Series A Debentures will be deemed to have represented and
agreed that their purchase of Series A Debentures pursuant to Regulation S is
not part of a plan or a scheme to evade the registration provisions of the Act
and (2) Eligible Purchasers that agree that (x) Series A Debentures purchased
by them
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<PAGE> 20
may be offered, resold, pledged or otherwise transferred within the time period
referred to under Rule 144(k) (taking into account the provisions of Rule
144(d) under the Act, if applicable) under the Act, as in effect on the date of
the transfer of such Series A Debentures, only (I) to a person whom the seller
reasonably believes is a QIB in a transaction meeting the requirements of Rule
144A, (II) in an offshore transaction complying with Rule 903 or Rule 904 of
Regulation S, (III) pursuant to an exemption from registration under the Act
provided by Rule 144 thereunder (if available), (IV) to the Company, (V)
pursuant to an effective registration statement under the Act or (VI) in
accordance with another exemption from the registration requirements of the Act
(and based upon an opinion of counsel if the Company so requests), and, in each
case, in accordance with any applicable securities laws of any State of the
United States or any other applicable jurisdiction and (y) they will deliver to
each person to whom such Series A Debentures or an interest therein is
transferred a notice substantially to the effect of the foregoing.
The Initial Purchasers acknowledge that the Company and, for purposes of
the opinions to be delivered to each Initial Purchaser pursuant to Section 9
hereof, counsel to the Company and counsel to the Initial Purchasers will rely
upon the accuracy and truth of the foregoing representations and the Initial
Purchasers hereby consent to such reliance.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Initial
Purchasers, their directors, their officers and each person, if any, who
controls an Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and judgments (including, without limitation, any
reasonable legal or other expenses incurred in connection with defending or
investigating any matter, including any action that could give rise to any such
losses, claims, damages, liabilities or judgments) caused by any untrue
statement of a material fact contained in the Offering Memorandum (or any
amendment or supplement thereto), the Preliminary Offering Memorandum or any
Rule 144A Information or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission (i) based upon information
relating to an Initial Purchaser furnished in writing to the Company by such
Initial Purchaser expressly for use in the Preliminary Offering Memorandum or
the Offering Memorandum, or (ii) contained in the Preliminary Offering
Memorandum or the Offering Memorandum, as the case may be, if a copy of the
Offering Memorandum (as then amended or supplemented) was not sent or given by
or on behalf of the Initial Purchasers to the person asserting such loss,
claim, damage or liability, at or prior to the written confirmation of the sale
of the Series A Debentures and the untrue statement or omission or alleged
untrue statement or omission was corrected in the Offering Memorandum (as then
amended or supplemented).
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<PAGE> 21
(b) Each Initial Purchaser severally and not jointly agrees to
indemnify and hold harmless the Company, its directors and officers and each
person who controls (within the meaning of Section 15 of the Act or Section 20
of the Exchange Act) the Company to the same extent as the foregoing indemnity
from the Company but only with reference to information relating to such
Initial Purchaser furnished in writing to the Company by such Initial Purchaser
expressly for use in the Preliminary Offering Memorandum or the Offering
Memorandum.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
(provided that the failure to give such notice shall not relieve the
indemnifying party of its obligations under this Section 8 unless and only to
the extent the that indemnifying party is materially prejudiced by the failure
to notify) and the indemnifying party shall assume promptly the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all reasonable fees and expenses of such
counsel, as incurred (except that in the case of any action in respect of which
indemnity may be sought pursuant to both Sections 8(a) and 8(b), the Company
shall assume promptly the defense of such action as provided in this Section
8(c) and an Initial Purchaser shall not be required to assume the defense of
such action pursuant to this Section 8(c), but may employ separate counsel and
participate in the defense thereof; provided the fees and expenses of such
separate counsel, if any, retained by an Initial Purchaser (except as provided
below) shall be at the expense of such Initial Purchaser). Any indemnified
party shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the indemnified party unless (i) the employment of
such counsel shall have been specifically authorized in writing by the
indemnifying party, (ii) the indemnifying party shall have failed promptly to
assume the defense of such action or employ counsel reasonably satisfactory to
the indemnified party or (iii) the named parties to any such action (including
any impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
representation of such indemnified party and any such indemnifying party by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the indemnifying party shall not have the right to assume the defense of
such action on behalf of the indemnified party). In any such case, the
indemnifying party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) for all indemnified parties and all such reasonable fees and
expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by DLJ, in the case of the parties indemnified pursuant
to Section 8(a), and by the Company, in the case of
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<PAGE> 22
parties indemnified pursuant to Section 8(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action (i) effected with its written consent or (ii) effected without
its written consent if the settlement is entered into more than 60 days after
such indemnifying party shall have received a written request from the
indemnified for reimbursement for the fees and expenses of counsels (in any
case where such fees and expenses are at the expense of the indemnifying party,
and except with respect to fees and expenses the amount of which is being
contested in good faith by the indemnifying party, with respect to which this
clause (ii) shall not apply) and, prior to the date of such settlement, the
indemnifying party shall have failed to comply with such reimbursement request.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement or compromise of, or consent to the
entry of judgment with respect to, any pending or threatened action in respect
of which the indemnified party is an actual or potential party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or failure to
act by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 8 is
unavailable to an indemnified party (other than due to the failure of the
indemnified party to provide notice as required by Section 8(c)), or is
insufficient in respect of any losses, claims, damages, liabilities or
judgments referred to herein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities and judgments (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company, on the one hand, and any of the
Initial Purchasers, on the other than, from the offering of the Series A
Debentures or (ii) if the allocation provided by clause 8(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause 8(d)(i) above but also the
relative fault of the Company, on the one hand, and any Initial Purchaser, and
on the other hand, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or judgments, as well as
any other relevant equitable considerations. The relative benefits received by
the Company, on the one hand, and any of the Initial Purchasers, on the other
hand, shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Series A Debentures (before deducting expenses but
after deducting discounts and commissions received by the Initial Purchasers)
received by the Company, and total discounts and commission received by such
Initial Purchaser bear to the total price to investors of the Series A
Debentures, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault of the Company, on the one hand, and
any of the Initial Purchasers, 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
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<PAGE> 23
alleged omission to state a material fact relates to information supplied by
the Company, on the one hand, or an Initial Purchaser, on the other hand, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company and the Initial Purchasers agree 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
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any reasonable legal or other expenses incurred by
such indemnified party in connection with investigating or defending any matter
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, no Initial
Purchaser (and its related indemnified parties) shall be required to contribute
any amount in excess of the amount by which the total discounts and fees
received by such Initial Purchaser in connection with the sale of Series A
Debentures pursuant to this Agreement exceeds the amount of any damages which
such Initial Purchaser (and any related indemnified party) has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Purchasers' obligations to contribute pursuant
to this Section 8(d) are several in proportion to the respective principal
amount of Series A Debentures purchased by each of the Initial Purchasers
hereunder, and not joint.
(e) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
9. Conditions of Initial Purchasers' Obligations. The obligations of the
Initial Purchasers to purchase the Series A Debentures under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the date hereof and on the Closing
Date with the same force and effect as if made on and as of the Closing Date.
(b) On or after the date hereof, (i) there shall not have occurred any
downgrading, suspension or withdrawal of, nor shall any notice have been given
of any potential or intended downgrading, suspension or withdrawal of, or of
any review (or any potential or intended review) for a possible change that
does not indicate the direction of the possible change in, any rating of the
Company or any securities of the Company (including,
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<PAGE> 24
without limitation, the placing of any of the foregoing ratings on credit watch
with negative or developing implications or under review with an uncertain
direction) by any "nationally recognized statistical rating organization," as
such term is defined for purposes of Rule 436(g)(2) under the Act, (ii) there
shall not have occurred any change, nor shall any notice have been given of any
potential or intended change, in the outlook for any rating of the Company or
any securities of the Company by any such rating organization and (iii) no such
rating organization shall have given notice that it has assigned (or is
considering assigning) a lower rating to the Debentures than that on which the
Debentures were marketed.
(c) The Initial Purchasers shall have received on the Closing Date a
certificate dated the Closing Date, signed by the President and another
executive officer of the Company, confirming, as of the Closing Date, the
matters set forth in paragraphs (a), (b), (e) (the first clause of which may be
limited to the Company's knowledge) and (l) of this Section 9.
(d) Since the respective dates as of which information is given in the
Offering Memorandum, other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there shall not have occurred any change or any
development involving a prospective change in the condition, financial or
otherwise, or the earnings, business, management or operations of the Company,
(ii) there shall not have been any change or any development involving a
prospective change in the capital stock or increase in the long-term debt of
the Company and (iii) the Company shall not have incurred any material
liability or obligation, direct or contingent, the effect of which, in any such
case described in clause 9(d)(i), 9(d)(ii) or 9(d)(iii), in your good faith
judgment, is material and adverse and, in your good faith judgment, makes it
impracticable to market the Series A Debentures on the terms and in the manner
contemplated in the Offering Memorandum.
(e) No action shall have been taken and no statute, rule, regulation or
order shall have been enacted, adopted or issue by any governmental agency
which would, as of the Closing Date, prevent the issuance or sale of any of the
Series A Debentures, prevent the consummation of the Transactions or otherwise
have a Material Adverse Effect; no action, suit or proceeding shall be pending
against or, to the knowledge of the Company, threatened against, the Company or
Liberty Group Operating before any court or arbitrator or any governmental
body, agency or official which would reasonably be expected to prohibit,
interfere with or adversely affect the issuance or sale of the Debentures, the
consummation of the Acquisition or otherwise have a Material Adverse Effect;
and no stop order, injunction, restraining order, or order of any nature
preventing the use of 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 shall
have been issued.
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<PAGE> 25
(f) On the Closing Date, the Initial Purchasers shall have
received an opinion, dated the Closing Date, of Mayer, Brown & Platt, counsel
for the Company, substantially to the effect that:
(1) The Company has been duly organized, is validly existing
as a corporation in good standing under the laws of the State of
Delaware and has full corporate power and authority to carry on
its business and to own, lease and operate its properties as
described in the Preliminary Offering Memorandum and the Offering
Memorandum. The Company has the requisite corporate power and
authority to authorize the offering of the Debentures and to
execute, deliver and perform its obligations under each Operative
Document to which it is a party.
(2) The Company is duly qualified and is in good standing as
a foreign corporation authorized to do business in each
jurisdiction in which such qualification is required, except where
the failure to be so qualified or in good standing would not be
reasonably expected to have a Material Adverse Effect.
(3) All of the outstanding capital stock of the Company (i)
has been duly authorized and validly issued and (ii) is fully
paid, nonassessable and, to such counsel's knowledge, not subject
to any preemptive or similar rights.
(4) This Agreement has been duly authorized, executed and
delivered by the Company.
(5) The Indenture has been duly authorized, executed and
delivered by the Company, and assuming the due authorization,
execution and delivery of the Indenture by the Trustee, the
Indenture is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms,
except (i) as the enforceability thereof may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally, (ii) for general principles of equity (regardless of
whether enforcement is brought in a proceeding at law or in
equity) and (iii) the waiver as to stay, extension or usury laws
may not be enforceable.
(6) The Series A Debentures have been duly authorized by the
Company, and when executed and authenticated in accordance with
the provisions of the Indenture and delivered to and paid for by
the Initial Purchasers in accordance with the terms of this
Agreement, the Series A Debentures will be valid and binding
obligations of the Company, entitled to
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<PAGE> 26
the benefits of the Indenture and enforceable against the Company
in accordance with their terms, except (i) as the enforceability
thereof may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally, (ii) for general principles
of equity (regardless of whether enforcement is brought in a
proceeding at law or in equity) and (iii) the waiver as to stay,
extension or usury laws may not be enforceable.
(7) The Series B Debentures have been duly authorized by the
Company, and when executed and authenticated in accordance with
the provisions of the Indenture and delivered in exchange for
Series A Debentures in accordance with the Indenture and the
Exchange Offer, the Series B Debentures will be valid and binding
obligations of the Company, entitled to the benefits of the
Indenture and enforceable against the Company in accordance with
their terms, except (i) as the enforceability thereof may be
limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar laws affecting
creditors' rights generally, (ii) for general principles of equity
(regardless of whether enforcement is brought in a proceeding at
law or in equity) and (iii) the waiver as to stay, extension or
usury laws may not be enforceable.
(8) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company, and assuming
the due authorization, execution and delivery of the Registration
Rights Agreement by the Initial Purchasers, the Registration
Rights Agreement is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms,
except (i) as the enforceability thereof may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally, (ii) for general principles of equity (regardless of
whether enforcement is brought in a proceeding at law or in
equity) and (iii) no opinion need be expressed as to the validity,
binding nature or enforceability of any rights to contribution or
indemnification contained in the Registration Rights Agreement.
(9) The Asset Purchase Agreements have been duly authorized
by the Company and Liberty Group Operating and, on the Closing
Date, will have been duly executed and delivered by the Company
and Liberty Group Operating and will be valid and binding
agreements of the Company and Liberty Group Operating, enforceable
against the Company and Liberty Group Operating in accordance with
their terms (assuming the due execution and delivery of the Asset
Purchase Agreements by each other party thereto) except (i) as the
enforceability thereof may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium or other
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<PAGE> 27
similar laws affecting creditors' rights generally and (ii) for
general principles of equity (regardless of whether enforcement is
brought in a proceeding at law or in equity).
(10) The statements in the Offering Memorandum under the
captions "Summary--The Acquisition," "Certain Relationships and
Related Transactions," "The Acquisition," "Description of
Debentures," "Description of Other Indebtedness" and "Description
of Holdings' Capital Stock," insofar as such statements constitute
a summary of the legal matters, documents or proceedings referred
to therein, fairly summarize in all material respects the
information called for with respect to such legal matters,
documents and proceedings.
(11) The execution and delivery of and performance by the
Company and Liberty Group Operating of each Operative Document to
which either of them is a party, the issuance and sale of the
Series A Debentures as contemplated by this Agreement and the
Offering Memorandum and the consummation of the transactions
contemplated by this Agreement, each other Operative Document and
the Offering Memorandum do not (i) require any consent, approval,
authorization or other order of, or qualification with, any court
or governmental body or agency (except such as may be required
under the securities or Blue Sky laws of the various states or as
previously have been made or obtained, or, in the case of the
Registration Rights Agreement, will be obtained and made, and
assuming the accuracy of the representations and warranties of the
Initial Purchasers in Section 7 hereof), or (ii) violate the
certificate of incorporation or by-laws of the Company or Liberty
Group Operating, or (iii) constitute a breach of any of the terms
or provisions of, or a default under, or cause an acceleration of
any obligation under, or result in the imposition or creation of
(or the obligation to create or impose) a Lien with respect to,
any Operative Document (other than Liens created under the
Revolving Credit Facility) or (iv) violate or conflict with any
applicable law, rule or regulation which in such counsel's
experience is customarily applicable to transactions of the type
provided for in the Operative Documents or any judgment, order or
decree of any court or any governmental body or agency having
jurisdiction over the Company, Liberty Group Operating or their
respective property and known to such counsel (assuming the
accuracy of the representations, warranties and agreements of the
Initial Purchasers in Section 7 hereof, compliance with all
applicable state securities and Blue Sky laws, and, in the case of
the Registration Rights Agreement, compliance with the Act, the
Exchange Act and the TIA), except, in the case of clauses (i),
(iii) and (iv) above, for such conflicts or violations as would
not, singly or in the aggregate, have a Material Adverse Effect.
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<PAGE> 28
(12) After due inquiry, such counsel does not know of any
legal or governmental proceeding pending or threatened which would
be required to be described in the Offering Memorandum if the
Offering Memorandum were a prospectus included in a registration
statement on Form S-1 and is not so described.
(13) The Company is not and, after giving effect to the
consummation of the Transactions, will not be, an "investment
company," as such term is defined in the Investment Company Act of
1940, as amended.
(14) Each of the Preliminary Offering Memorandum and the
Offering Memorandum (except for the financial statements,
including the notes thereto, and supporting schedules and other
financial, statistical and accounting data included therein or
omitted therefrom, as to which no opinion is expressed), as of its
date and as amended or supplemented through the date hereof,
appear on its face to comply with the requirements of Rule
144A(d)(4) under the Act.
(15) No registration under the Act of the Series A Debentures
or qualification of the Indenture under the TIA is required for
the sale of the Series A Debentures to the Initial Purchasers as
contemplated by this Agreement or for the Exempt Resales, assuming
(i) the accuracy of, and compliance with, the Initial Purchasers'
representations and agreements contained in Section 7 of this
Agreement and (ii) the accuracy of the representations and
agreements of the Company set forth in this Agreement and (iii)
that the offer, sale and delivery of the Series A Debentures have
been made as contemplated by this Agreement and the Offering
Memorandum.
In addition, Mayer, Brown & Platt shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, representatives of the independent accountants of the Company, and the
Initial Purchasers at which the contents of the Offering Memorandum and related
matters were discussed and, although such counsel is not passing upon, and does
not assume any responsibility for, the accuracy, completeness or fairness of
the statements contained in the Offering Memorandum and has made no independent
check or verification thereof, on the basis of the foregoing, no facts have
come to such counsel's attention (relying to the extent such counsel deems
appropriate as to materiality upon the opinions of officers and other
representatives of the Company) that have led such counsel to believe that the
Offering Memorandum, as of its date and as of the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that such
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<PAGE> 29
counsel need not express any opinion or belief with respect to the financial
statements and schedules and other financial and statistical data included
therein or excluded therefrom.
(g) The Initial Purchasers shall have received on the Closing Date an
opinion, dated the Closing Date, of Sullivan & Cromwell, counsel for the
Initial Purchasers, in form and substance reasonably satisfactory to the
Initial Purchasers.
(h) The Initial Purchasers shall have received, at the time this
Agreement is executed and at the Closing Date, letters dated the date hereof in
form and substance satisfactory to the Initial Purchasers from KPMG Peat
Marwick LLP, independent public accountants, in each case containing the
information and statements of the type ordinarily included in accountants'
"comfort letters" to the Initial Purchasers with respect to the financial
statements and certain financial information contained in the Offering
Memorandum.
(i) The Series A Debentures shall have been approved by the NASD for
trading and duly listed in PORTAL.
(j) The Company shall have executed the Registration Rights Agreement
and the Initial Purchasers shall have received an original copy thereof, duly
executed by the Company.
(k) The Company and the Trustee shall have executed the Indenture and
the Initial Purchasers shall have received an original copy thereof, duly
executed by the Company.
(l) The Company shall not have failed at or prior to the Closing Date
to perform or comply in all material respects with any of the agreements herein
contained and required to be performed or complied with by the Company at or
prior to the Closing Date.
10. Effectiveness of Agreement and Termination. This Agreement shall
become effective upon the delivery of this Agreement by the parties hereto.
This Agreement may be terminated at any time prior to the Closing Date by
the Initial Purchasers by written notice to the Company if any of the following
has occurred: (i) any outbreak or escalation of hostilities or other national
or international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in the Initial
Purchasers' good faith judgment, is material and adverse and would, in the
Initial Purchasers' good faith judgment, make it impracticable to market the
Series A Debentures on the terms and in the manner contemplated in the Offering
Memorandum, (ii) the suspension or material limitation of trading in securities
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options
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<PAGE> 30
Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade or the
Nasdaq National Market, (iii) the suspension of trading of any securities of
the Company on any exchange or in the over-the-counter market, (iv) the
enactment, publication, decree or other promulgation of any federal or state
statute, regulation, rule or order of any court or other governmental authority
which in your good faith opinion materially and adversely affects, or will
materially and adversely affect, the business, prospects, financial condition
or results of operations of the Company and its subsidiaries, taken as a whole,
(v) the declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in your
good faith opinion has a material adverse effect on the financial markets in
the United States and would, in the Initial Purchasers' good faith judgment,
make it impracticable to market the Series A Debentures on the terms and in the
manner contemplated in the Offering Memorandum.
If on the Closing Date any of the Initial Purchasers shall fail or refuse
to purchase the Series A Debentures which it has agreed to purchase hereunder
on such date and the aggregate principal amount of the Series A Debentures
which such defaulting Initial Purchaser agreed but failed or refused to
purchase is not more than one-tenth of the aggregate principal amount of the
Series A Debentures to be purchased on such date by all Initial Purchasers,
each non-defaulting Initial Purchaser shall be obligated to purchase the Series
A Debentures which such defaulting Initial Purchaser or Initial Purchasers, as
the case may be, agreed but failed or refused to purchase on such date;
provided that in no event shall the aggregate principal amount of the Series A
Debentures which any Initial Purchaser has agreed to purchase pursuant to
Section 2 hereof be increased pursuant to this Section 10 by an amount in
excess of one-ninth of such principal amount of the Series A Debentures without
the written consent of such Initial Purchaser. If on the Closing Date any
Initial Purchaser or Initial Purchasers shall fail or refuse to purchase Series
A Debentures and the aggregate principal amount of the Series A Debentures with
respect to which such default occurs is more than one-tenth of the aggregate
principal amount of the Series A Debentures to be purchased by all Initial
Purchasers and arrangements satisfactory to the Initial Purchasers and the
Company for purchase of such Series A Debentures are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Initial Purchaser and the Company. In any such case
which does not result in termination of this Agreement, either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, to the
Offering Memorandum or any other documents or arrangements may be effected.
Any action taken under this paragraph shall not relieve any defaulting Initial
Purchaser from liability in respect of any default of any such Initial
Purchaser under this Agreement. Any notice of termination pursuant to this
Section 10 shall be by telephone, telex, facsimile or telegraph, confirmed in
writing by letter sent within three days thereof.
11. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company, to the Liberty
Group
-30-
<PAGE> 31
Publishing, Inc., 3000 Dundee Road, Northbrook, Illinois 60062, Attention:
Kenneth L. Serota, with a copy to Leonard Green & Partners, L.P., 11111 Santa
Monica Boulevard, Suite 2000, Los Angeles, California 90025, Attention: Peter
J. Nolan, and with a copy to Mayer, Brown & Platt, 190 South La Salle Street,
Chicago, Illinois 60603-3441, Attention: Scott J. Davis, (ii) if to any
Initial Purchasers, c/o Donaldson, Lufkin & Jenrette Securities Corporation,
227 Park Avenue, New York, New York 10172, Attention: Syndicate Department,
with a copy to Sullivan & Cromwell, 444 South Flower Street, Los Angeles,
California 90071-2901, Attention: Alison S. Ressler, Esq. or (iii) in any
case to such other address as the person to be notified may have requested in
writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements and agreements of the Company and the Initial
Purchasers set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive delivery of and
payment for the Series A Debentures, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of an Initial
Purchaser, the officers or directors of an Initial Purchaser, any person
controlling an Initial Purchaser, the Company, the officers or directors of the
Company, or any person controlling the Company, (ii) acceptance of the Series A
Debentures and payment for them hereunder and (iii) termination of this
Agreement.
If for any reason the Series A Debentures are not delivered by or on
behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10), the Company agrees to
reimburse the Initial Purchasers for all out-of-pocket expenses (including the
fees and disbursements of counsel) reasonably incurred by them.
Notwithstanding any termination of this Agreement, the Company shall be liable
for all expenses which it has agreed to pay pursuant to Section 5(h) hereof.
The Company also agrees to reimburse the Initial Purchasers, their respective
directors and officers and any person controlling an Initial Purchaser for any
and all fees and expenses (including, without limitation, the fees and
disbursements of counsel) reasonably incurred by them in connection with
enforcing their rights hereunder.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the parties hereto and their
respective successors and the officers and directors and other persons referred
to in Section 8, all as and to the extent provided in this Agreement, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Series A Debentures from the Initial Purchasers merely because of
such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
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<PAGE> 32
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
-32-
<PAGE> 33
Please confirm that the foregoing correctly sets forth the agreement among
the Company and the Initial Purchasers.
Very truly yours,
LIBERTY GROUP PUBLISHING, INC.
By: /s/ Kenneth L. Serota
___________________________
Name: Kenneth L. Serota
Title: President
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<PAGE> 34
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Donald S. Kinsey
______________________________________
Name: Donald S.Kinsey
Title: Senior Vice President
CITICORP SECURITIES, INC.
By: /s/ Robert Hornstein
______________________________________
Name: Robert Hornstein
Title: Vice President
BT ALEX. BROWN
By: /s/ Anthony Hass
______________________________________
Name: Anthony Hass
Title: Managing Director
CHASE SECURITIES INC.
By: /s/ James P. Casey
_________________________________
Name: James P. Casey
Title: Managing Director
-34-
<PAGE> 35
SCHEDULE A
<TABLE>
<CAPTION>
Principal Amount
at Maturity
Initial Purchasers of Debentures
- -------------------------------------------------------- ----------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation................................. $44,500,000
Citicorp Securities, Inc................................ 17,800,000
BT Alex. Brown.......................................... 13,350,000
Chase Securities Inc.................................... 13,350,000
================
Total.................................................. $89,000,000
</TABLE>
-35-
<PAGE> 1
EXHIBIT 1.2
LIBERTY GROUP PUBLISHING, INC.
1,800,000 Shares
Series A 14 3/4% Senior Redeemable Exchangeable Cumulative Preferred Stock
(Liquidation Preference of $25 per Share)
PURCHASE AGREEMENT
January 20, 1998
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
<PAGE> 2
1,800,000 Shares
Series A 14 3/4% Senior Redeemable Exchangeable Cumulative Preferred Stock
(Liquidation Preference of $25 per Share)
of
LIBERTY GROUP PUBLISHING, INC.
PURCHASE AGREEMENT
January 20, 1998
Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
Liberty Group Publishing, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial Purchaser"), subject to the terms and
conditions set forth herein, an aggregate of 1,800,000 shares of Series A
14 3/4% Senior Redeemable Exchangeable Cumulative Preferred Stock, par value
$0.01 per share, with a liquidation preference of $25 per share (the "Series A
Senior Preferred Stock") of the Company, exchangeable, at the option of the
Company, for the Company's 14 3/4% Senior Subordinated Debentures due 2010 (the
"Series A Exchange Debentures"). The Series A Senior Preferred Stock is to be
issued pursuant to a Certificate of Designations of the Company (the
"Certificate of Designations"), to be filed with the Secretary of State of the
State of Delaware on or prior to the Closing Date (as defined below). The
Exchange Debentures will be issued pursuant to an indenture between the Company
and State Street Bank and Trust Company, as trustee (the "Exchange Indenture").
The Series A Senior Preferred Stock and the Exchange Senior Preferred Stock (as
defined below) issuable in exchange therefor are collectively referred to herein
as the "Senior Preferred Stock." The Series A Exchange Debentures and the
Series B Exchange Debentures (as defined below) issuable in exchange therefor
are collectively referred to herein as the "Exchange Debentures." Capitalized
terms used but not defined herein shall have the meanings given to such terms in
the Offering Memorandum (as defined herein).
1. Offering Memorandum. The Series A Senior Preferred Stock
will be offered and sold to the Initial Purchaser pursuant to one or more
exemptions from the
-2-
<PAGE> 3
registration requirements under the Securities Act of 1933, as amended (the
"Act"). The Company has prepared an offering memorandum, dated January 15,
1998 as supplemented by the Supplement To Offering Memorandum dated January 20,
1998, including a supplement describing the Senior Preferred Stock, dated
January 20, 1998 (the "Offering Memorandum").
Upon original issuance thereof, and until such time as the same
is no longer required by the Company, the Series A Senior Preferred Stock and
the Series A Exchange Debentures (and all securities (other than the Exchange
Senior Preferred Stock and the Series B Exchange Debentures) issued in exchange
therefor or in substitution thereof) shall bear the following legend:
"THE SECURITIES EVIDENCED HEREBY WERE 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 SECURITIES EVIDENCED HEREBY MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITIES 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. THE
HOLDER OF THE SECURITIES EVIDENCED HEREBY AGREES FOR THE BENEFIT
OF THE COMPANY THAT (A) SUCH SECURITIES MAY BE OFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (a) INSIDE THE UNITED
STATES TO A PERSON WHOM 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) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (c) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT,
(d) TO THE COMPANY, (e) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR (f) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON
AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS) 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
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<PAGE> 4
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITIES EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
2. Agreements to Sell and Purchase. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company, an aggregate of 1,800,000 shares of Series A Senior
Preferred Stock at a purchase price equal to $25.00 per share (the "Purchase
Price") and the Company will pay the Initial Purchaser a fee equal to $1.25 per
share.
3. Terms of Offering. The Initial Purchaser has advised the
Company that the Initial Purchaser will make offers (the "Exempt Resales") of
the Series A Senior Preferred Stock purchased hereunder on the terms set forth
in the Offering Memorandum, as amended or supplemented, solely to (i) persons
whom the Initial Purchaser reasonably believe to be "qualified institutional
buyers" as defined in Rule 144A under the Act ("QIBs") and (ii) to persons
permitted to purchase the Series A Senior Preferred Stock in offshore
transactions in reliance upon Regulation S under the Act (each, a "Regulation S
Purchaser") (such persons specified in clauses (i) and (ii) being referred to
herein as the "Eligible Purchasers"). The Initial Purchaser will offer the
Series A Senior Preferred Stock to Eligible Purchasers initially at the
offering price set forth in the Offering Memorandum. Such price may be changed
at any time without notice.
Holders (including subsequent transferees of the Series A Senior
Preferred Stock) will have the registration rights set forth in the
registration rights agreement (the "Registration Rights Agreement"), to be
dated the Closing Date, substantially as described in the Offering Memorandum
and containing other customary and reasonable provisions. Pursuant to the
Registration Rights Agreement, the Company 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 Company's Series A 14 3/4%
Senior Redeemable Exchangeable Cumulative Preferred Stock, par value $0.01 per
share, with a liquidation preference of $25 per share (the "Exchange Senior
Preferred Stock"), to be offered in exchange for the Series A Senior Preferred
Stock (such offer to exchange being referred to as the "Exchange Offer") and/or
(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 Senior Preferred Stock and use its
reasonable best efforts to cause such Registration Statements to be declared
and remain effective and usable for the periods specified in the Registration
Rights Agreement and to consummate the Exchange Offer. This Agreement, the
Certificate of Designations, the Senior Preferred Stock, the Exchange Indenture
and the Registration
-4-
<PAGE> 5
Rights Agreement (each as defined herein) and the Revolving Credit Facility,
the Management Agreement and the Asset Purchase Agreements (each as defined in
the Offering Memorandum) are hereinafter sometimes referred to collectively as
the "Operative Documents."
4. Delivery and Payment.
(a) Delivery of, and payment of the Purchase Price for,
the Series A Senior Preferred Stock shall be made at such locations as may be
mutually acceptable to the parties hereto. Such delivery and payment shall be
made at 9:00 a.m., New York City time, on the fifth business day following the
date of this Agreement (January 27, 1998), or at such other time as shall be
agreed upon by the Initial Purchaser and the Company. The time and date of such
delivery and the payment are herein called the "Closing Date."
(b) One or more of the certificates in definitive form
representing all of the Series A Senior Preferred Stock to be purchased
hereunder, registered in the name of Cede & Co., as nominee of the Depository
Trust Company ("DTC"), (collectively, the "Senior Preferred Stock
Certificate"), shall be delivered by the Company to the Initial Purchaser (or
as the Initial Purchaser directs), in each case with any transfer taxes thereon
duly paid by the Company against payment by the Initial Purchaser of the
Purchase Price thereof by wire transfer in same day funds to an account
designated by order of the Company. The Senior Preferred Stock Certificate
shall be made available to the Initial Purchaser for inspection not later than
9:30 a.m., New York City time, on the business day immediately preceding the
Closing Date.
5. Agreements of the Company. The Company hereby agrees with
the Initial Purchaser as follows:
(a) To advise the Initial Purchaser promptly and, if
requested by the Initial Purchaser, 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 Series A Senior Preferred
Stock for offering or sale in any jurisdiction designated by the Initial
Purchaser pursuant to Section 5(e) hereof, or the initiation of any proceeding
by any state securities commission or any other federal or state regulatory
authority for such purpose and (ii) of the happening of any event during the
period referred to in Section 5(d) below that makes any statement of a material
fact made in the Offering Memorandum, as then amended or supplemented, untrue
or that requires any additions to or changes in the Offering Memorandum, as
then amended or supplemented, in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. The Company
shall use its reasonable best efforts to prevent the issuance of any stop order
or order suspending the qualification or exemption of any Series A Senior
Preferred Stock under any state securities or Blue Sky laws and, if at any time
any state securities commission or other federal or state regulatory authority
shall issue an order
-5-
<PAGE> 6
suspending the qualification or exemption of any Series A Senior Preferred
Stock under any state securities or Blue Sky laws, the Company shall use its
reasonable best efforts to obtain the withdrawal or lifting of such order at
the earliest possible time.
(b) To furnish the Initial Purchaser and those persons
identified by the Initial Purchaser to the Company, without charge, as many
copies of the Offering Memorandum, and any amendments or supplements thereto,
as the Initial Purchaser may reasonably request. Subject to the Initial
Purchaser's compliance with its representations and warranties and agreements
set forth in Section 7 hereof, the Company consents to the use of the Offering
Memorandum, and any amendments and supplements thereto, by the Initial
Purchaser in connection with Exempt Resales.
(c) During the period referred to in Section 5(d)
below, (i) not to make any amendment or supplement to the Offering Memorandum
of which the Initial Purchaser shall not previously have been advised or to
which the Initial Purchaser shall reasonably object within a reasonable time
after being so advised and (ii) to prepare promptly upon the Initial
Purchaser's reasonable request, any amendment or supplement to the Offering
Memorandum which may be necessary or advisable in connection with Exempt
Resales.
(d) If, after the date hereof during such period as the
Initial Purchaser is required to deliver the Offering Memorandum in connection
with Exempt Resales by it, any event shall occur as a result of which it
becomes necessary to amend or supplement the Offering Memorandum in order to
make the statements therein, in the light of the circumstances as of the date
the Offering Memorandum is delivered to an Eligible Purchaser, not misleading,
or if it is necessary to amend or supplement the Offering Memorandum to comply
with any applicable law, promptly to prepare an appropriate amendment or
supplement to such 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 Offering Memorandum, as so amended
or supplemented, will comply with applicable law, and to furnish to the Initial
Purchaser and such other persons as the Initial Purchaser may designate such
number of copies thereof as the Initial Purchaser may reasonably request.
(e) Prior to the sale of all the Series A Senior
Preferred Stock pursuant to Exempt Resales as contemplated hereby, to cooperate
with the Initial Purchaser and counsel to the Initial Purchaser in connection
with the registration or qualification of the Series A Senior Preferred Stock
for offer and sale to the Initial Purchaser and pursuant to Exempt Resales
under the securities or Blue Sky laws of such jurisdictions as the Initial
Purchaser may reasonably request and to continue such qualification in effect
so long as required to consummate such Exempt Resales and to file such consents
to service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that the Company shall
not be required in connection therewith to
-6-
<PAGE> 7
register or qualify as a foreign corporation in any jurisdiction in which it is
not now so qualified or to take any action that would subject it to service of
process or taxation other than as to matters and transactions relating to
Exempt Resales, in any jurisdiction in which it is not now so subject.
(f) For a period of five (5) years after the Closing
Date and thereafter so long as the Initial Purchaser is making a market in the
Senior Preferred Stock, to furnish to the Initial Purchaser as soon as
available copies of all reports or other communications furnished by the
Company to its security holders or furnished to or filed with the Commission or
any national securities exchange on which any class of securities of the
Company is listed.
(g) For so long as any of the Series A Senior Preferred
Stock remain outstanding and during any period in which the Company is 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 of Series A
Senior Preferred Stock in connection with any sale thereof and any prospective
purchaser of such Series A Senior Preferred Stock designated by such holder,
upon request, the information ("Rule 144A Information") required by Rule
144A(d)(4) under the Act.
(h) Whether or not the transactions contemplated in
this Agreement are consummated or this Agreement is terminated, to pay or cause
to be paid all expenses incident to performance of the obligations of the
Company under this Agreement, including, without limitation: (i) all fees and
expenses in connection with the preparation, printing and distribution of the
Offering Memorandum and all amendments and supplements thereto (including
financial statements) prior to or during the period specified in Section 5(d),
including the mailing and delivering of copies thereof to the Initial Purchaser
and persons designated by them as specified herein, (ii) all costs and expenses
related to the issuance and delivery of the Series A Senior Preferred Stock to
the Initial Purchaser and pursuant to Exempt Resales, including any transfer or
other taxes payable thereon, (iii) all costs of printing or reproduction of any
agreements or documents in connection with the offering, purchase, sale or
delivery of the Series A Senior Preferred Stock, (iv) all expenses in
connection with the registration or qualification of the Series A Senior
Preferred Stock for offer and sale under the securities or Blue Sky laws of the
several states referred to in Section 5(e) hereof and all costs of printing or
producing any preliminary and supplemental Blue Sky memoranda in connection
therewith (including the filing fees and reasonable fees and disbursements of
counsel for the Initial Purchaser in connection with such registration or
qualification and memoranda relating thereto), (v) the cost of printing
certificates representing the Series A Senior Preferred Stock, (vi) all
expenses and listing fees in connection with the application for quotation of
the Series A Senior Preferred Stock in the National Association of Securities
Dealers, Inc. ("NASD") Automated Quotation System - PORTAL ("PORTAL"), (vii)
all costs and charges of any transfer agent, registrar and/or
-7-
<PAGE> 8
depositary (including DTC), and (viii) all costs and expenses of the Exchange
Offer and any Registration Statement.
(i) To use its reasonable best efforts to effect the
inclusion of the Series A Senior Preferred Stock in PORTAL and to maintain the
listing of the Series A Senior Preferred Stock on PORTAL for so long as the
Series A Senior Preferred Stock is outstanding.
(j) To use its reasonable best efforts to obtain the
approval of DTC for "book-entry" transfer of the Senior Preferred Stock, and to
comply with all of its agreements set forth in the representation letter of the
Company to DTC relating to the approval of the Senior Preferred Stock by DTC
for "book entry" transfer.
(k) During the period beginning on the date hereof and
continuing to and including the Closing Date, not to offer, sell, contract to
sell or otherwise transfer or dispose of any equity securities of the Company
or any warrants rights or options to purchase or otherwise acquire equity
securities of the Company substantially similar to the Senior Preferred Stock
(other than the Senior Preferred Stock and the Holdings Junior Preferred Stock
(as defined in the Offering Memorandum)) without the prior written consent of
the Initial Purchaser.
(l) Not to, and not to permit any of its affiliates (as
such term is defined in Rule 501(b) under the Act) 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 reasonably be expected to be integrated with the
sale of the Series A Senior Preferred Stock to the Initial Purchaser or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Series A Senior Preferred Stock under the Act.
(m) Except in connection with the Exchange Offer or the
filing of the Shelf Registration Statement, as the case may be, not to, and not
to authorize or knowingly permit any person acting on its behalf to, solicit
any offer to buy or offer to sell the Senior Preferred Stock by means of any
form of general solicitation or general advertising (as such terms are used in
Regulation D under the 1933 Act) or in any manner involving a public offering
within the meaning of Section 4(2) of the Act.
(n) To use its reasonable best efforts to do and
perform all things required or necessary to be done and performed under this
Agreement by it prior to the Closing Date and to satisfy all conditions
precedent to the delivery of the Series A Senior Preferred Stock.
6. Representations and Warranties of the Company. As of the
date hereof, the Company represents and warrants to the Initial Purchaser (it
being understood that all representations and warranties herein with respect to
the condition, financial or
-8-
<PAGE> 9
otherwise, or the earnings, business, management or operations of the Company
give effect to the Transactions as if they had occurred as of the date hereof)
that:
(a) The Offering Memorandum does not, and as
supplemented or amended will not, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties contained in this paragraph (a) shall not apply to statements in or
omissions from the Offering Memorandum (or any supplement or amendment thereto)
based solely upon information relating to the Initial Purchaser furnished to
the Company in writing by the Initial Purchaser expressly for use therein. The
Company acknowledges for all purposes of this Agreement that (i) the last
paragraph on the cover page of the Offering Memorandum, (ii) the information
contained in the first paragraph, the first two sentences of the third
paragraph, the fourth paragraph, the fifth sentence of the sixth paragraph, and
the eighth and ninth paragraphs under the caption "Plan of Distribution" in the
Offering Memorandum and the second paragraph of page 1 and "Plan of
Distribution" in the supplement describing the Senior Preferred Stock, and
(iii) the information regarding stabilization on page i of the Offering
Memorandum constitute the only information relating to the Initial Purchaser
furnished to the Company in writing by the Initial Purchaser expressly for use
in the Offering Memorandum and that the Initial Purchaser shall not be deemed
to have provided any other information (and therefore are not responsible for
any such statement or omission) pertaining to any arrangement or agreement with
respect to any party other than the Initial Purchaser. No contract or document
that would be required to be described in the Offering Memorandum if the
Offering Memorandum were a prospectus contained in a registration statement on
Form S-1 filed under the Act is not so described. No stop order preventing the
use of 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.
(b) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware. The Company has full corporate power and authority to carry on its
business and to own, lease and operate its properties as described in the
Offering Memorandum. The Company has the requisite corporate power and
authority to authorize the offering of the Senior Preferred Stock and to
execute, deliver and perform its obligations under each Operative Document to
which it is a party. The Company is duly qualified and is in good standing as
a foreign corporation authorized to do business in each jurisdiction in which
such qualification is required, except where the failure to be so qualified or
in good standing would not (i) have a material adverse effect on the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries taken as a whole, (ii) materially interfere with or materially
adversely affect the issuance or marketability of the Series A Senior Preferred
Stock pursuant hereto or (iii) adversely affect in any manner the validity of
this Agreement or any of the other
-9-
<PAGE> 10
Operative Documents (the events referred to in clauses (i) through (iii), a
"Material Adverse Effect").
(c) All of the outstanding capital stock of the Company
(i) has been duly authorized and validly issued and (ii) is fully paid,
nonassessable and not subject to any preemptive or similar rights and all of
the capital stock of the Company issued in the Transactions will be duly
authorized and validly issued and fully paid, non-assessable and not subject to
any preemptive or similar rights. On the Closing Date, the authorized capital
stock of the Company conforms as to legal matters to the description thereof
contained in the Offering Memorandum. The Company owns all the capital stock
of Liberty Group Operating, Inc. ("Liberty Group Operating").
(d) This Agreement has been duly authorized, executed
and delivered by the Company and, assuming the due execution and delivery by
the Initial Purchaser, is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except (i) as the
enforceability thereof may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally, (ii) for general principles of equity (regardless
of whether enforcement is brought in a proceeding at law or in equity) and
(iii) limitations of applicable law regarding the enforceability of any rights
to contribution or indemnification.
(e) On the Closing Date, the Series A Senior Preferred
Stock will have been duly authorized and validly issued and delivered by the
Company. When the Series A Senior Preferred Stock have been issued in
accordance with the provisions of the Certificate of Designations and delivered
to and paid for by the Initial Purchaser in accordance with the terms of this
Agreement, the Series A Senior Preferred Stock will be duly authorized and
validly issued and fully paid, nonassessable and not subject to any preemptive
or similar rights. The Series A Senior Preferred Stock, when issued and
delivered, will conform in all material respects to the description thereof
contained in the Offering Memorandum.
(f) On the Closing Date, the Exchange Senior Preferred
Stock will have been duly authorized by the Company. When the Exchange Senior
Preferred Stock are issued in accordance with the provisions of the Certificate
of Designations and delivered in exchange for Series A Senior Preferred Stock
in accordance with the Certificate of Designations and the Exchange Offer, the
Exchange Senior Preferred Stock will be duly authorized and validly issued and
fully paid, nonassessable and not subject to any preemptive or similar rights.
(g) On the Closing Date, the Exchange Indenture will
have been duly authorized and validly executed and delivered by the Company.
When the Exchange Indenture has been duly executed and delivered by the
Company, the Exchange Indenture
-10-
<PAGE> 11
will be a valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms (assuming the due execution and delivery
of the Exchange Indenture by the Trustee) except (i) as the enforceability
thereof may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, (ii) for general principles of equity (regardless of whether
enforcement is brought in a proceeding at law or in equity) and (iii) the
waiver as to stay, extension or usury laws may not be enforceable. On the
Closing Date, the Exchange Indenture will conform in all material respects to
the requirements of the Trust Indenture Act of 1939, as amended (the "TIA"),
and the rules and regulations of the Commission applicable to an indenture
which is qualified thereunder.
(h) Upon issuance of the Exchange Debentures, the
Exchange Debentures will be entitled to the benefits of the Exchange Indenture
and will be the valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except (i) as the
enforceability thereof may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' right generally, (ii) for general principles of equity (regardless
of whether enforcement is brought in a proceeding at law or in equity) and
(iii) the waiver as to stay, extension or usury laws may not be enforceable.
(i) On the Closing Date, the Registration Rights
Agreement will have been duly authorized and validly executed and delivered by
the Company. When the Registration Rights Agreement has been duly executed and
delivered by the Company, the Registration Rights Agreement will be a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms (assuming the due execution and delivery of the Registration
Rights Agreement by the Initial Purchaser) except (i) as the enforceability
thereof may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, (ii) for general principles of equity (regardless of whether
enforcement is brought in a proceeding at law or in equity) and (iii)
limitations of applicable law regarding the enforceability of any rights to
contribution or indemnification. The Registration Rights Agreement conforms in
all material respects to the description thereof in the Offering Memorandum.
(j) On the Closing Date, the Asset Purchase Agreements
will have been duly authorized and validly executed and delivered by the
Company and Liberty Group Operating and will be valid and binding agreements of
each respective entity, enforceable against each in accordance with their terms
(assuming the due execution and delivery of the Asset Purchase Agreements by
each other party thereto) except (i) as the enforceability thereof may be
limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and (ii)
for general principles of equity (regardless of whether enforcement is brought
in a proceeding at law or in equity). Each transaction comprising the
Acquisition conforms to the descriptions thereof in the Offering Memorandum.
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<PAGE> 12
(k) Neither the Company nor Liberty Group Operating (i)
is in violation of its certificate of incorporation or by-laws, or (ii)(a)
before giving effect to the Transactions is, or (b) assuming that the
Transactions are consummated as contemplated by the Offering Memorandum will
be, in default in the performance of any obligation, agreement, covenant or
condition contained in any indenture, loan agreement, mortgage, lease or other
agreement or instrument to which the Company or Liberty Group Operating is a
party or by which the Company, Liberty Group Operating or any of their
respective property is bound, except in the case of clause (ii) for any such
violation and defaults as would not, singly or in the aggregate, have a
Material Adverse Effect. There exists no condition that, with notice, the
passage of time or otherwise, would constitute a default under any such
document or instrument, except for any such defaults or violations as would
not, singly or in the aggregate, have a Material Adverse Effect.
(l) The execution, delivery and performance by the
Company and Liberty Group Operating of each Operative Agreement to which either
of them is a party, the issuance and sale of the Series A Senior Preferred
Stock as contemplated by this Agreement and the Offering Memorandum and the
consummation of the transactions contemplated by this Agreement, each other
Operative Document and the Offering Memorandum will not (i) require any
consent, approval, authorization or other order of, or qualification with, any
court or governmental body or agency (except such as may be required under the
securities or Blue Sky laws of the various states or as previously have been
made or obtained (or in the case of the Registration Rights Agreement, will be
obtained and made in accordance therewith) and assuming the accuracy of the
representations and warranties of the Initial Purchaser in Section 7 hereof),
or (ii) violate the certificate of incorporation or by-laws of the Company or
Liberty Group Operating, or (iii) constitute a breach of any of the terms or
provisions of, or a default under, or cause an acceleration of any obligation
under, or result in the imposition or creation of (or the obligation to create
or impose) a Lien (as defined below) with respect to, any indenture, loan
agreement, mortgage, lease or other agreement or instrument to which the
Company or Liberty Group Operating is a party or by which the Company or
Liberty Group Operating or their respective property is subject, or (iv)
violate or conflict with any applicable law or any rule, regulation, judgment,
order or decree of any court or any governmental body or agency having
jurisdiction over the Company, Liberty Group Operating or their respective
property (assuming the accuracy of the representations and warranties of the
Initial Purchaser in Section 7 hereof, compliance with all applicable state
securities and Blue Sky laws, and, in the case of the Registration Rights
Agreement, compliance with the Act, the Exchange Act and the TIA), or (v)
result in the termination or revocation of any permit (as defined below) of the
Company or Liberty Group Operating or result in any other impairment of the
rights of the holder of any such permit, except, in the case of clause (iii),
(iv) or (v) above, for such conflicts or violations as would not, singly or in
the aggregate, have a Material Adverse Effect.
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<PAGE> 13
(m) The Company has good and marketable title to, or
valid leasehold interests in, all its properties and assets, in each case free
and clear of all liens, encumbrances, pledges, claims, security interests,
mortgages, assessments, easements, rights of way, covenants, restrictions,
rights of first refusal, defects in title, encroachments and other burdens or
adverse claims (collectively, "Liens"), except for Liens under the Revolving
Credit Facility or such as do not, singly or in the aggregate, have a Material
Adverse Effect. Any real property and buildings held under lease by the
Company are held by the Company under valid, subsisting and enforceable leases
with such exceptions as do not, singly or in the aggregate, have a Material
Adverse Effect.
(n) There is no legal or governmental proceeding
pending or, to the Company's knowledge, threatened to which the Company or
Liberty Group Operating is bound or could reasonably be expected to be a party
or to which any of their respective property is or could reasonably be
expected to be subject, except for any such proceedings as would not, singly or
in the aggregate, be reasonably expected to have a Material Adverse Effect.
(o) To the Company's knowledge, no action has been
taken and no law, statute, rule or regulation or order has been enacted,
adopted or issued by any governmental agency or body which prevents the
execution, delivery or performance of any of the Operative Documents, the
consummation of any of the transactions contemplated thereunder or the issuance
of the Series A Senior Preferred Stock, or suspends the sale of the Series A
Senior Preferred Stock in any jurisdiction referred to in Section 5(e). No
injunction, restraining order or other order or relief of any nature by a
federal or state court or other tribunal of competent jurisdiction has been
issued with respect to the Company or Liberty Group Operating which would
prevent or suspend the issuance or sale of the Series A Senior Preferred Stock
in any jurisdiction referred to in Section 5(e) or the consummation of any
transaction contemplated by the Operative Documents.
(p) Except as would not, singly or in the aggregate,
have a Material Adverse Effect, (i) the Company is not in violation of any
Federal, state or local laws or regulations relating to pollution or protection
of human health or the environment ("Environment Laws"), which violation
includes, but is not limited to, noncompliance with or lack of any permits (as
defined below) or other governmental authorizations; and (ii) (A) the Company
has not received any communication, whether from a governmental authority or
otherwise, alleging any such violation or noncompliance, and there are no
circumstances, either past, present or that are reasonably foreseeable, that
are reasonably likely to lead to such violation in the future, (B) there is no
pending or, to the Company's knowledge, threatened claim, action, investigation
or notice by any person or entity alleging potential liability for
investigatory, cleanup, or governmental response costs, or natural resources or
property damages, or personal injuries, attorney's fees or penalties relating
to any actual, alleged or, to the Company's knowledge, threatened pollution or
contamination, or, to the Company's knowledge, any circumstances forming the
basis of any violation, or
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<PAGE> 14
alleged violation, of any Environmental Law (collectively, "Environmental
Claims"), and (C) there are no past or present actions, activities,
circumstances, conditions, events or incidents that could reasonably be
expected to form the basis of any Environmental Claim against the Company or
against any person or entity whose liability for any Environmental Claim the
Company has retained or assumed either contractually or by operation of law.
(q) Except for the Initial Purchaser, there are no
contracts, agreements or understandings between the Company or Liberty Group
Operating and any person granting such person the right to require the Company
to include securities held by such person in the Registration Statement
contemplated by the Registration Rights Agreement.
(r) Except as would not be unlawful, neither the
Company nor Liberty Group Operating has (i) 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
Liberty Group Operating to facilitate the sale or resale of the Senior
Preferred Stock or (ii) except as set forth in the Offering Memorandum (A)
sold, bid for, purchased or paid any person any compensation for soliciting
purchases of the Senior Preferred Stock or (B) paid or agreed to pay to any
person any compensation for soliciting another to purchase any other securities
of the Company or Liberty Group Operating.
(s) Except for the Initial Purchaser, there are no
contracts, agreements or understandings between the Company or Liberty Group
Operating and any person that would give rise to a valid claim against the
Company, Liberty Group Operating or the Initial Purchaser for a brokerage
commission, finder's fee or like payment in connection with the issuance,
purchase and sale of the Senior Preferred Stock.
(t) The Company has no knowledge of any actionable
violation by the Company of any Federal, state or local law relating to
employment practices, discrimination in the hiring, promotion or pay of
employees or any applicable wage or hour laws, or of any provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA") or the rules and
regulations promulgated thereunder, except for any such violation as would not,
singly or in the aggregate, have a Material Adverse Effect. There is (A) no
material unfair labor practice complaint pending against the Company or, to the
best knowledge of the Company, threatened against it, before the National Labor
Relations Board or any state or local labor relations board, and no significant
grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is pending against the Company or, to the
knowledge of the Company, threatened against it, (B) no labor strike, dispute,
slowdown or stoppage ("Labor Dispute") in which the Company is involved nor, to
the best knowledge of the Company, is any Labor Dispute imminent, other than
routine disciplinary and grievance matters, except with respect to any matter
specified in clause (A) or (B) above as would not, singly or in the aggregate,
have a Material Adverse
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<PAGE> 15
Effect. Except as set forth in the Offering Memorandum, there exist no
material employment, consulting, severance or termination agreements or
arrangements between the Company or Liberty Group Operating and any current or
former officer or director of the Company or Liberty Group Operating, and there
are no collective bargaining or other labor union agreements to which the
Company or Liberty Group Operating is a party or by which either of them is
bound.
(u) The Company has such permits, licenses, consents,
exemptions, franchises, authorizations and other approvals ("permits") of, and
has made all filings with and notice to, all governmental or regulatory
authorities and self-regulatory organizations and all courts and other
tribunals, including, without limitation, under any applicable Environmental
Laws, as are necessary to own, lease, license and operate its properties and to
conduct its business, except where the failure to have any such permit or to
make any such filing or notice would not, singly or in the aggregate, have a
Material Adverse Effect. Each such permit is valid and in full force and
effect and the Company is in compliance with all the terms and conditions of
its permits and with the rules and regulations of the authorities and governing
bodies having jurisdiction with respect thereto; no event has occurred
(including the receipt of any notice from any authority or governing body)
which allows or, after notice or elapse of time or both, would allow
revocation, suspension or termination of any such permit, or results or, after
notice or lapse of time or both, would result in any other impairment of the
rights of the holder of any such permit; and such permits contain no
restrictions that are unduly burdensome to the Company, except, in each case,
where such failure to be valid and in full force and effect or to be in
compliance, the occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, have a Material Adverse
Effect.
(v) Except as would not, singly or in the aggregate,
have a Material Adverse Effect: (i) the Company owns or possesses, free and
clear of all Liens other than Liens under the Revolving Credit Facility, valid
rights to all patents, patent rights, copyrights, computer databases and
software, logos, slogans, inventions, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names and all
licenses, applications and registrations related to the foregoing used in the
business of the Company (collectively, the "Intellectual Property"); (ii) the
Company has not received any notice of infringement of or conflict with
asserted rights of others with respect to any Intellectual Property, and has no
knowledge of any infringement of the Intellectual Property by any person; and
(iii) the use of the Intellectual Property in connection with the business and
operations of the Company does not infringe on the rights of any person.
(w) The Company maintains reasonably adequate insurance
covering its properties, operations, personnel and businesses.
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<PAGE> 16
(x) The accountants, KPMG Peat Marwick LLP, that have
certified the financial statements and related notes included in the Offering
Memorandum are independent public accountants with respect to the Company as
would be required by the Act and the Exchange Act if the Offering Memorandum
were a prospectus included in a registration statement on Form S-1 filed with
the Commission under the Act. The historical financial statements, together
with the related notes, included in the Offering Memorandum comply as to form
in all material respects with the requirements applicable to registration
statements on Form S-1 under the Act.
(y) The historical financial statements, together with
related notes forming part of the Offering Memorandum (and any amendment or
supplement thereto), present fairly the financial position, results of
operations and changes in financial position of the Company on the basis stated
in the Offering Memorandum at the respective dates or for the respective
periods to which they apply; such statements and related notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; and the other financial and statistical information and data included
in the Offering Memorandum (and any amendment or supplement thereto) are
presented and prepared on a basis consistent with such financial statements and
the books and records of the Company.
(z) The pro forma financial statements and related
notes thereto included in the Offering Memorandum give effect to assumptions
made on a reasonable basis and in good faith and present fairly the historical
and proposed transactions contemplated by the Offering Memorandum; and such pro
forma financial statements and related notes 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. The other pro
forma financial and statistical information and data included in the Offering
Memorandum are, in all material respects, presented and prepared on a basis
consistent with such pro forma financial statements.
(aa) The Company is not and, after giving effect to the
consummation of the Transactions, will not be, an "investment company," as such
term is defined in the Investment Company Act of 1940, as amended.
(ab) Since the respective dates as of which information
is given in the Offering Memorandum, other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to
the date of this Agreement), (i) there has not occurred any material adverse
change or any development involving a prospective material adverse change in
the condition, financial or otherwise, or the earnings, business, management or
operations of the Company and its subsidiaries taken as a whole, (ii) there has
not been any material adverse change or any development involving a prospective
material adverse change in the capital stock or in the long-term debt of the
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<PAGE> 17
Company and its subsidiaries taken as a whole and (iii) the Company and its
subsidiaries taken as a whole has not incurred any material liability or
obligation, direct or contingent.
(ac) No "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under the
Act (i) has imposed (or has informed the Company that it is considering
imposing) any condition (financial or otherwise) on the Company's retaining any
rating assigned to the Company or any securities of the Company or (ii) has
indicated to the Company that it is considering (a) the downgrading,
suspension, or withdrawal of, or any review for a possible change in, any
rating so assigned or (b) any change in the outlook for any rating of the
Company or any securities of the Company.
(ad) The Offering Memorandum, as of its date, contains
all the information specified in, and meeting the requirements of, Rule
144A(d)(4) under the Act.
(ae) No form of general solicitation or general
advertising (within the meaning of Regulation D under the Act) was or will be
used by the Company, Liberty Group Operating or any of their respective
representatives (other than the Initial Purchaser, as to whom the Company makes
no representation) in connection with the offer and sale of the Series A Senior
Preferred Stock contemplated hereby. No securities of the same class as the
Series A Senior Preferred Stock have been issued and sold by the Company within
the six-month period immediately prior to the date hereof.
(af) No registration under the Act of the Series A
Senior Preferred Stock is required for the sale of the Series A Senior
Preferred Stock to the Initial Purchaser as contemplated hereby or for the
Exempt Resales, assuming the accuracy of the Initial Purchaser's
representations and warranties and agreements set forth in Section 7 hereof.
(ag) The Company, Liberty Group Operating and their
respective affiliates and all persons acting on their behalf (other than the
Initial Purchaser, as to whom the Company and Liberty Group Operating make no
representation) have complied with and will comply with the offering
restrictions requirements of Regulation S under the Act (including, without
limitation, provisions regarding directed selling efforts (within the meaning
of Regulation S)) in connection with any offering of the Series A Senior
Preferred Stock outside the United States.
(ah) Assuming the accuracy of the Initial Purchasers'
representations, warranties and agreements set forth in Section 7 hereof, prior
to the effectiveness of any Registration Statement, the Exchange Indenture is
not required to be qualified under the TIA.
(ai) Upon filing of the registration statement with
respect to the Exchange Offer, the Company will have established a system of
internal accounting controls
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<PAGE> 18
sufficient to provide reasonable assurance that (i) transactions are executed
in accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(aj) No Tax liens have been filed on the assets to be
acquired pursuant to the Asset Purchase Agreements and no claims are being
asserted that could reasonably result in a Tax lien on such assets, except as
would not, singly or in the aggregate, have a Material Adverse Effect. For
purposes of this Agreement, "Taxes" (including, with correlative meaning, the
term "Tax") shall mean all Taxes, charges, fees, levies, penalties or other
assessments imposed by any federal, state, local or foreign taxing authority,
including, but not limited to, income, gross receipts, excise, property, sales,
transfer, franchise, payroll, withholding, social security and other Taxes, and
shall include any interest, penalties or additions attributable thereto.
(ak) Immediately after and after giving effect to the
offering of the Series A Senior Preferred Stock as contemplated hereby and the
consummation of the Transactions, (i) the present fair salable value of the
Company's assets shall be more than the amount that will be required to pay its
debts (including contingent and unliquidated debts) as they become absolute and
matured, (ii) the Company's assets, at a fair valuation, shall be greater than
the sum of its debts (including contingent and unliquidated debts), (iii) the
Company shall not be engaged in a business or transaction for which its
remaining assets are unreasonably small in relation to such business or
transaction, and (iv) the Company shall not intend to incur or believe that it
will incur debts beyond its ability to pay such debts as they become absolute
and matured. The Company disclaims any intent to hinder, defraud or delay its
creditors, or to prefer some creditors over creditors over others, and believes
that the Senior Preferred Stock is being issued for proper purposes in good
faith.
(al) Each certificate signed by any officer of the
Company and delivered to the Initial Purchaser or counsel for the Initial
Purchaser in connection with this Agreement on or prior to the Closing Date
shall be deemed to be a representation and warranty of the Company to the
Initial Purchaser as to the matters covered thereby.
The Company acknowledges that the Initial Purchaser and, for
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 9 hereof, counsel to the Company and counsel to the Initial Purchaser,
will rely upon the accuracy and truth of the foregoing representations and
hereby consents to such reliance.
7. Initial Purchaser's Representations and Warranties. The
Initial Purchaser represents and warrants to the Company and agrees that:
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<PAGE> 19
(a) The Initial Purchaser is a QIB with such knowledge
and experience in financial and business matters as is necessary in order to
evaluate the merits and risks of an investment in the Series A Senior Preferred
Stock.
(b) The Initial Purchaser (A) is not acquiring the
Series A Senior Preferred Stock with a view to any distribution thereof or with
any present intention of offering or selling any of the Series A Senior
Preferred Stock in a transaction 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 Senior Preferred Stock only
to (x) QIB's in reliance on the exemption from the registration requirements of
the Act provided by Rule 144A and (y) in offshore transactions in reliance upon
Regulation S under the Act.
(c) The Initial Purchaser represents and warrants that
(i) no form of general solicitation or general advertising (within the meaning
of Regulation D under the Act) has been or will be used by the Initial
Purchaser or any of its representatives in connection with the offer and sale
of the Series A Senior Preferred Stock pursuant hereto, and (ii) it has not and
will not solicit offers for or offer to sell Series A Senior Preferred Stock in
any manner involving a public offering within the meaning of Section 4(2) of
the Act.
(d) The Initial Purchaser agrees that, in connection
with Exempt Resales, the Initial Purchaser will solicit offers to buy the
Series A Senior Preferred Stock only from, and will offer to sell the Series A
Senior Preferred Stock only to, Eligible Purchasers, and will make available
copies of the Offering Memorandum (as then amended or supplemented through the
respective dates of such offers ) in connection with such offers and (assuming
the Company's compliance with Section 5(b) hereof) will deliver a copy of the
Offering Memorandum (as then amended or supplemented) to each purchaser of
Series A Senior Preferred Stock from it contemporaneously with or prior to the
delivery of any Series A Senior Preferred Stock to each such Purchaser. The
Initial Purchaser further agrees that it will offer to sell the Series A Senior
Preferred Stock only to, and will solicit offers to buy the Series A Senior
Preferred Stock only from (1)(A) QIBs who, in purchasing the Series A Senior
Preferred Stock will be deemed to have represented and agreed that (x) they are
purchasing the Series A Senior Preferred Stock for their own accounts or
accounts with respect to which they exercise sole investment discretion and
that they or such accounts are QIBs and (y) they acknowledge that the seller of
such Series A Senior Preferred Stock may be relying on the exemption from the
provisions of Section 5 of the Act provided by Rule 144A thereunder and that
such Series A Senior Preferred Stock will not have been registered under the
Act and (B) Regulation S Purchaser who, in purchasing the Series A Senior
Preferred Stock will be deemed to have represented and agreed that their
purchase of Series A Senior Preferred Stock pursuant to Regulation S is not
part of a plan or a scheme to evade the registration provisions of the Act and
(2) Eligible Purchasers that agree that (x) Series
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<PAGE> 20
A Senior Preferred Stock purchased by them may be offered, resold, pledged or
otherwise transferred within the time period referred to under Rule 144(k)
(taking into account the provisions of Rule 144(d) under the Act, if
applicable) under the Act, as in effect on the date of the transfer of such
Series A Senior Preferred Stock, only (I) to a person whom the seller
reasonably believes is a QIB in a transaction meeting the requirements of Rule
144A, (II) in an offshore transaction complying with Rule 903 or Rule 904 of
Regulation S, (III) pursuant to an exemption from registration under the Act
provided by Rule 144 thereunder (if available), (IV) to the Company, (V)
pursuant to an effective registration statement under the Act or (VI) in
accordance with another exemption from the registration requirements of the Act
(and based upon an opinion of counsel if the Company so requests), and, in each
case, in accordance with any applicable securities laws of any State of the
United States or any other applicable jurisdiction and (y) they will deliver to
each person to whom such Series A Senior Preferred Stock or an interest therein
is transferred a notice substantially to the effect of the foregoing.
(e) The Initial Purchaser acknowledges that the Company
and, for purposes of the opinions to be delivered to each Initial Purchaser
pursuant to Section 9 hereof, counsel to the Company and counsel to the Initial
Purchaser will rely upon the accuracy and truth of the foregoing
representations and the Initial Purchaser hereby consent to such reliance.
8. Indemnification.
(a) The Company agrees to indemnify and hold harmless
the Initial Purchaser, its directors, its officers and each person, if any, who
controls the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and judgments (including, without limitation, any
reasonable legal or other expenses incurred in connection with defending or
investigating any matter, including any action that could give rise to any such
losses, claims, damages, liabilities or judgments) caused by any untrue
statement of a material fact contained in the Offering Memorandum (or any
amendment or supplement thereto) or any Rule 144A Information or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission (i) based upon information relating to the Initial Purchaser furnished
in writing to the Company by the Initial Purchaser expressly for use in the
Offering Memorandum, or (ii) contained in the Offering Memorandum, as the case
may be, if a copy of the Offering Memorandum (as then amended or supplemented)
was not sent or given by or on behalf of the Initial Purchaser to the person
asserting such loss, claim, damage or liability, at or prior to the written
confirmation of the sale of the Series A Senior Preferred Stock and the untrue
statement or omission or alleged untrue statement or omission was corrected in
the Offering Memorandum (as then amended or supplemented).
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<PAGE> 21
(b) The Initial Purchaser agrees to indemnify and hold
harmless the Company, its directors and officers and each person who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company to the same extent as the foregoing indemnity from the Company but
only with reference to information relating to the Initial Purchaser furnished
in writing to the Company by the Initial Purchaser expressly for use in the
Offering Memorandum.
(c) In case any action shall be commenced involving any
person in respect of which indemnity may be sought pursuant to Section 8(a) or
8(b) (the "indemnified party"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying party") in
writing (provided that the failure to give such notice shall not relieve the
indemnifying party of its obligations under this Section 8 unless and only to
the extent the that indemnifying party is materially prejudiced by the failure
to notify) and the indemnifying party shall assume promptly the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all reasonable fees and expenses of such
counsel, as incurred (except that in the case of any action in respect of which
indemnity may be sought pursuant to both Sections 8(a) and 8(b), the Company
shall assume promptly the defense of such action as provided in this Section
8(c) and the Initial Purchaser shall not be required to assume the defense of
such action pursuant to this Section 8(c), but may employ separate counsel and
participate in the defense thereof; provided the fees and expenses of such
separate counsel, if any, retained by the Initial Purchaser (except as provided
below) shall be at the expense of the Initial Purchaser). Any indemnified
party shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the indemnified party unless (i) the employment of
such counsel shall have been specifically authorized in writing by the
indemnifying party, (ii) the indemnifying party shall have failed promptly to
assume the defense of such action or employ counsel reasonably satisfactory to
the indemnified party or (iii) the named parties to any such action (including
any impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
representation of such indemnified party and any such indemnifying party by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the indemnifying party shall not have the right to assume the defense of
such action on behalf of the indemnified party). In any such case, the
indemnifying party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) for all indemnified parties and all such reasonable fees and
expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by the Initial Purchaser, in the case of the parties
indemnified pursuant to Section 8(a), and by the Company, in the case of
parties indemnified pursuant to Section 8(b). The indemnifying
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<PAGE> 22
party shall indemnify and hold harmless the indemnified party from and against
any and all losses, claims, damages, liabilities and judgments by reason of any
settlement of any action (i) effected with its written consent or (ii) effected
without its written consent if the settlement is entered into more than 60 days
after such indemnifying party shall have received a written request from the
indemnified for reimbursement for the fees and expenses of counsels (in any
case where such fees and expenses are at the expense of the indemnifying party,
and except with respect to fees and expenses the amount of which is being
contested in good faith by the indemnifying party, with respect to which this
clause (ii) shall not apply) and, prior to the date of such settlement, the
indemnifying party shall have failed to comply with such reimbursement request.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement or compromise of, or consent to the
entry of judgment with respect to, any pending or threatened action in respect
of which the indemnified party is an actual or potential party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or failure to
act by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in
this Section 8 is unavailable to an indemnified party (other than due to the
failure of the indemnified party to provide notice as required by Section
8(c)), or is insufficient in respect of any losses, claims, damages,
liabilities or judgments referred to herein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company, on the one hand, and the
Initial Purchaser, on the other than, from the offering of the Series A Senior
Preferred Stock or (ii) if the allocation provided by clause 8(d)(i) above is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause 8(d)(i) above but
also the relative fault of the Company, on the one hand, and the Initial
Purchaser, and on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The
relative benefits received by the Company, on the one hand, and the Initial
Purchaser, on the other hand, shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Series A Senior Preferred Stock
(before deducting expenses but after deducting fees payable to the Initial
Purchaser) received by the Company, and total fees payable received by the
Initial Purchaser bear to the total price to investors of the Series A Senior
Preferred Stock, in each case as set forth in the Offering Memorandum. The
relative fault of the Company, on the one hand, and the 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 Company, on the one hand, or the Initial Purchaser, on the
other
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<PAGE> 23
hand, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Initial Purchaser agree 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 account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any reasonable legal or other
expenses incurred by such indemnified party in connection with investigating or
defending any matter that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, the Initial Purchaser (and its related indemnified parties) shall
not be required to contribute any amount in excess of the amount by which the
total fees received by the Initial Purchaser in connection with the sale of
Series A Senior Preferred Stock pursuant to this Agreement exceeds the amount
of any damages which the Initial Purchaser (and any related indemnified party)
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
9. Conditions of Initial Purchaser's Obligations. The
obligations of the Initial Purchaser to purchase the Series A Senior Preferred
Stock under this Agreement are subject to the satisfaction of each of the
following conditions:
(a) All the representations and warranties of the
Company contained in this Agreement shall be true and correct on the date
hereof and on the Closing Date with the same force and effect as if made on and
as of the Closing Date.
(b) On or after the date hereof, (i) there shall not
have occurred any downgrading, suspension or withdrawal of, nor shall any
notice have been given of any potential or intended downgrading, suspension or
withdrawal of, or of any review (or any potential or intended review) for a
possible change that does not indicate the direction of the possible change in,
any rating of the Company or any securities of the Company (including, without
limitation, the placing of any of the foregoing ratings on credit watch with
negative or developing implications or under review with an uncertain
direction) by any "nationally recognized statistical rating organization," as
such term is defined for purposes of Rule 436(g)(2) under the Act and (ii)
there shall not have occurred any change, nor shall any
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<PAGE> 24
notice have been given of any potential or intended change, in the outlook for
any rating of the Company or any securities of the Company by any such rating
organization.
(c) The Initial Purchaser shall have received on the
Closing Date a certificate dated the Closing Date, signed by the President and
another executive officer of the Company, confirming, as of the Closing Date,
the matters set forth in paragraphs (a), (b), (e) (the first clause of which
may be limited to the Company's knowledge) and (k) of this Section 9.
(d) Since the respective dates as of which information
is given in the Offering Memorandum, other than as set forth in the Offering
Memorandum (exclusive of any amendments or supplements thereto subsequent to
the date of this Agreement), (i) there shall not have occurred any change or
any development involving a prospective change in the condition, financial or
otherwise, or the earnings, business, management or operations of the Company,
(ii) there shall not have been any change or any development involving a
prospective change in the capital stock or increase in the long-term debt of
the Company and (iii) the Company shall not have incurred any material
liability or obligation, direct or contingent, the effect of which, in any such
case described in clause 9(d)(i), 9(d)(ii) or 9(d)(iii), in your good faith
judgment, is material and adverse and, in your good faith judgment, makes it
impracticable to market the Series A Senior Preferred Stock on the terms and in
the manner contemplated in the Offering Memorandum.
(e) No action shall have been taken and no statute,
rule, regulation or order shall have been enacted, adopted or issue by any
governmental agency which would, as of the Closing Date, prevent the issuance
or sale of any of the Series A Senior Preferred Stock, prevent the consummation
of the Transactions or otherwise have a Material Adverse Effect; no action,
suit or proceeding shall be pending against or, to the knowledge of the
Company, threatened against, the Company or Liberty Group Operating before any
court or arbitrator or any governmental body, agency or official which would
reasonably be expected to prohibit, interfere with or adversely affect the
issuance or sale of the Senior Preferred Stock, the consummation of the
Acquisition or otherwise have a Material Adverse Effect; and no stop order,
injunction, restraining order, or order of any nature preventing the use of 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 shall have been issued.
(f) On the Closing Date, the Initial Purchaser shall
have received an opinion, dated the Closing Date, of Mayer, Brown & Platt,
counsel for the Company, substantially to the effect that:
(1) The Company has been duly organized, is validly
existing as a corporation in good standing under the laws of the
State of Delaware and has full corporate power and authority to
carry on its business and to own,
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<PAGE> 25
lease and operate its properties as described in the Offering
Memorandum. The Company has the requisite corporate power and
authority to authorize the offering of the Senior Preferred Stock
and to execute, deliver and perform its obligations under each
Operative Document to which it is a party.
(2) The Company is duly qualified and is in good
standing as a foreign corporation authorized to do business in
each jurisdiction in which such qualification is required, except
where the failure to be so qualified or in good standing would
not be reasonably expected to have a Material Adverse Effect.
(3) All of the outstanding capital stock of the Company
(i) has been duly authorized and validly issued and (ii) is fully
paid, nonassessable and, to such counsel's knowledge, not subject
to any preemptive or similar rights. The authorized capital
stock of the Company conforms as to legal matters to the
description thereof contained in the Offering Memorandum.
(4) This Agreement has been duly authorized, executed
and delivered by the Company.
(5) The Series A Senior Preferred Stock has been duly
authorized by the Company, and when issued in accordance with the
provisions of the Certificate of Designations and delivered to
and paid for by the Initial Purchaser in accordance with the
terms of this Agreement, the Series A Senior Preferred Stock will
be duly authorized and validly issued, fully paid, nonassessable
and, to such counsel's knowledge, not subject to any preemptive
or similar rights.
(6) The Exchange Senior Preferred Stock has been duly
authorized by the Company, and when executed and authenticated in
accordance with the provisions of the Certificate of Designations
and delivered in exchange for Series A Senior Preferred Stock in
accordance with the Certificate of Designations and the Exchange
Offer, the Exchange Senior Preferred Stock will be duly
authorized and validly issued, fully paid, nonassessable and, to
such counsel's knowledge, not subject to any preemptive or
similar rights.
(7) The Exchange Indenture has been duly authorized,
executed and delivered by the Company, and assuming the due
authorization, execution and delivery of the Exchange Indenture
by the Trustee, the Exchange Indenture is a valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except (i) as the enforceability
thereof may be limited by bankruptcy, fraudulent
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<PAGE> 26
conveyance, insolvency, reorganization, moratorium or other
similar laws affecting creditor's rights generally, (ii) for
general principles of equity (regardless of whether enforcement
is brought in a proceeding at law or equity) and (iii) the waiver
as to stay, extension or usury laws may not be enforceable.
(8) Upon issuance of the Exchange Debentures, the
Exchange Debentures will be valid and binding obligations of the
Company, entitled to the benefits of the Exchange Indenture and
enforceable against the Company in accordance with their terms,
except (i) as the enforceability thereof may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally, (ii) for general principles of equity (regardless of
whether enforcement is brought in a proceeding at law or in
equity) and (iii) the waiver as to stay, extension or usury laws
may not be enforceable.
(9) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company, and assuming
the due authorization, execution and delivery of the Registration
Rights Agreement by the Initial Purchaser, the Registration
Rights Agreement is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms,
except (i) as the enforceability thereof may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally, (ii) for general principles of equity (regardless of
whether enforcement is brought in a proceeding at law or in
equity) and (iii) no opinion need be expressed as to the
validity, binding nature or enforceability of any rights to
contribution or indemnification contained in the Registration
Rights Agreement.
(10) The Asset Purchase Agreements have been duly
authorized by the Company and Liberty Group Operating and, on the
Closing Date, will have been duly executed and delivered by the
Company and Liberty Group Operating and will be valid and binding
agreements of the Company and Liberty Group Operating,
enforceable against the Company and Liberty Group Operating in
accordance with their terms (assuming the due execution and
delivery of the Asset Purchase Agreements by each other party
thereto) except (i) as the enforceability thereof may be limited
by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally and (ii) for general principles of equity (regardless
of whether enforcement is brought in a proceeding at law or in
equity).
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<PAGE> 27
(11) The statements in the Offering Memorandum under the
captions "Summary--The Acquisition," "Certain Relationships and
Related Transactions," "The Acquisition," "Description of
Debentures," "Description of Other Indebtedness" and "Description
of Holdings' Capital Stock" and under the caption "The Offering"
in the supplement describing the Senior Preferred Stock, insofar
as such statements constitute a summary of the legal matters,
documents or proceedings referred to therein, fairly summarize in
all material respects the information called for with respect to
such legal matters, documents and proceedings.
(12) The execution and delivery of and performance by
the Company and Liberty Group Operating of each Operative
Document to which either of them is a party, the issuance and
sale of the Series A Senior Preferred Stock as contemplated by
this Agreement and the Offering Memorandum and the consummation
of the transactions contemplated by this Agreement, each other
Operative Document and the Offering Memorandum do not (i) require
any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency
(except such as may be required under the securities or Blue Sky
laws of the various states or as previously have been made or
obtained, or, in the case of the Registration Rights Agreement,
will be obtained and made, and assuming the accuracy of the
representations and warranties of the Initial Purchaser in
Section 7 hereof), or (ii) violate the certificate of
incorporation or by-laws of the Company or Liberty Group
Operating, or (iii) constitute a breach of any of the terms or
provisions of, or a default under, or cause an acceleration of
any obligation under, or result in the imposition or creation of
(or the obligation to create or impose) a Lien with respect to,
any Operative Document (other than Liens created under the
Revolving Credit Facility) or (iv) violate or conflict with any
applicable law, rule or regulation which in such counsel's
experience is customarily applicable to transactions of the type
provided for in the Operative Documents or any judgment, order or
decree of any court or any governmental body or agency having
jurisdiction over the Company, Liberty Group Operating or their
respective property and known to such counsel (assuming the
accuracy of the representations, warranties and agreements of the
Initial Purchaser in Section 7 hereof, compliance with all
applicable state securities and Blue Sky laws, and, in the case
of the Registration Rights Agreement, compliance with the Act,
the Exchange Act and the TIA), except, in the case of clauses
(i), (iii) and (iv) above, for such conflicts or violations as
would not, singly or in the aggregate, have a Material Adverse
Effect.
(13) After due inquiry, such counsel does not know of
any legal or governmental proceeding pending or threatened which
would be required to
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<PAGE> 28
be described in the Offering Memorandum if the Offering
Memorandum were a prospectus included in a registration statement
on Form S-1 and is not so described.
(14) The Company is not and, after giving effect to the
consummation of the Transactions, will not be, an "investment
company," as such term is defined in the Investment Company Act
of 1940, as amended.
(15) The Offering Memorandum (except for the financial
statements, including the notes thereto, and supporting schedules
and other financial, statistical and accounting data included
therein or omitted therefrom, as to which no opinion is
expressed), as of its date and as amended or supplemented through
the date hereof, appear on its face to comply with the
requirements of Rule 144A(d)(4) under the Act.
(16) No registration under the Act of the Series A
Senior Preferred Stock is required for the sale of the Series A
Senior Preferred Stock to the Initial Purchaser as contemplated
by this Agreement or for the Exempt Resales, assuming (i) the
accuracy of, and compliance with, the Initial Purchaser's
representations and agreements contained in Section 7 of this
Agreement and (ii) the accuracy of the representations and
agreements of the Company set forth in this Agreement and (iii)
that the offer, sale and delivery of the Series A Senior
Preferred Stock have been made as contemplated by this Agreement
and the Offering Memorandum.
In addition, Mayer, Brown & Platt shall state that such counsel
has participated in conferences with officers and other representatives of the
Company, representatives of the independent accountants of the Company, and the
Initial Purchaser at which the contents of the Offering Memorandum and related
matters were discussed and, although such counsel is not passing upon, and does
not assume any responsibility for, the accuracy, completeness or fairness of
the statements contained in the Offering Memorandum and has made no independent
check or verification thereof, on the basis of the foregoing, no facts have
come to such counsel's attention (relying to the extent such counsel deems
appropriate as to materiality upon the opinions of officers and other
representatives of the Company) that have led such counsel to believe that the
Offering Memorandum, as of its date and as of the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that such
counsel need not express any opinion or belief with respect to the financial
statements and schedules and other financial and statistical data included
therein or excluded therefrom.
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<PAGE> 29
(g) The Initial Purchaser shall have received on the
Closing Date an opinion, dated the Closing Date, of Sullivan & Cromwell,
counsel for the Initial Purchaser, in form and substance reasonably
satisfactory to the Initial Purchaser.
(h) The Initial Purchaser shall have received, at the
time this Agreement is executed and at the Closing Date, letters dated the date
hereof in form and substance satisfactory to the Initial Purchaser from KPMG
Peat Marwick LLP, independent public accountants, in each case containing the
information and statements of the type ordinarily included in accountants'
"comfort letters" to the Initial Purchaser with respect to the financial
statements and certain financial information contained in the Offering
Memorandum.
(i) The Series A Senior Preferred Stock shall have been
approved by the NASD for trading and duly listed in PORTAL.
(j) The Company shall have executed the Registration
Rights Agreement and the Initial Purchaser shall have received an original copy
thereof, duly executed by the Company.
(k) The Company shall have filed the Certificate of
Designations with the Secretary of State of the State of Delaware and the
Company and the Trustee shall have executed the Exchange Indenture and the
Initial Purchasers shall have received an original copy thereof, duly executed
by the Company. The Company shall not have failed at or prior to the Closing
Date to perform or comply in all material respects with any of the agreements
herein contained and required to be performed or complied with by the Company
at or prior to the Closing Date.
10. Effectiveness of Agreement and Termination. This
Agreement shall become effective upon the delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time prior to the Closing
Date by the Initial Purchaser by written notice to the Company if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
national or international calamity or crisis or change in economic conditions
or in the financial markets of the United States or elsewhere that, in the
Initial Purchaser's good faith judgment, is material and adverse and would, in
the Initial Purchaser's good faith judgment, make it impracticable to market
the Series A Senior Preferred Stock on the terms and in the manner contemplated
in the Offering Memorandum, (ii) the suspension or material limitation of
trading in securities on the New York Stock Exchange, the American Stock
Exchange, the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange, the Chicago Board of Trade or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in
the over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other
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<PAGE> 30
governmental authority which in your good faith opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action
by any federal, state or local government or agency in respect of its monetary
or fiscal affairs which in your good faith opinion has a material adverse
effect on the financial markets in the United States and would, in the Initial
Purchaser's good faith judgment, make it impracticable to market the Series A
Senior Preferred Stock on the terms and in the manner contemplated in the
Offering Memorandum.
11. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company, to the
Liberty Group Publishing, Inc., 3000 Dundee Road, Northbrook, Illinois 60062,
Attention: Kenneth L. Serota, with a copy to Leonard Green & Partners, L.P.,
11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025,
Attention: Peter J. Nolan, and with a copy to Mayer, Brown & Platt, 190 South
La Salle Street, Chicago, Illinois 60603-3441, Attention: Scott J. Davis,
(ii) if to the Initial Purchaser, Donaldson, Lufkin & Jenrette Securities
Corporation, 227 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, with a copy to Sullivan & Cromwell, 444 South Flower Street, Los
Angeles, California 90071-2901, Attention: Alison S. Ressler, Esq. or (iii)
in any case to such other address as the person to be notified may have
requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements and agreements of the Company
and the Initial Purchaser set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for the Series A Senior Preferred Stock, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
the Initial Purchaser, the officers or directors of the Initial Purchaser, any
person controlling the Initial Purchaser, the Company, the officers or
directors of the Company, or any person controlling the Company, (ii)
acceptance of the Series A Senior Preferred Stock and payment for them
hereunder and (iii) termination of this Agreement.
If for any reason the Series A Senior Preferred Stock are not
delivered by or on behalf of the Company as provided herein (other than as a
result of any termination of this Agreement pursuant to Section 10), the
Company agrees to reimburse the Initial Purchaser for all out-of-pocket
expenses (including the fees and disbursements of counsel) reasonably incurred
by them. Notwithstanding any termination of this Agreement, the Company shall
be liable for all expenses which it has agreed to pay pursuant to Section 5(h)
hereof. The Company also agrees to reimburse the Initial Purchaser, its
respective directors and officers and any person controlling the Initial
Purchaser for any and all fees and expenses (including, without limitation, the
fees and disbursements of counsel) reasonably incurred by them in connection
with enforcing their rights hereunder.
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<PAGE> 31
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the parties hereto and
their respective successors and the officers and directors and other persons
referred to in Section 8, all as and to the extent provided in this Agreement,
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Series A Senior Preferred Stock from the Initial Purchaser merely
because of such purchase.
This Agreement shall be governed and construed in accordance with
the laws of the State of New York.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
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<PAGE> 32
Please confirm that the foregoing correctly sets forth the
agreement among the Company and the Initial Purchaser.
Very truly yours,
LIBERTY GROUP PUBLISHING, INC.
By: /s/ Kenneth L. Serota
------------------------------
Name: Kenneth L. Serota
Title: President
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Donald S. Kinsey
-----------------------------------
Name: Donald S. Kinsey
Title: Senior Vice President
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<PAGE> 1
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
LIBERTY GROUP PUBLISHING, INC.,
GREEN EQUITY INVESTORS II, L.P.
(FOR THE LIMITED PURPOSES DESCRIBED HEREIN),
LIBERTY GROUP OPERATING, INC.,
HOLLINGER INTERNATIONAL INC.,
APAC-90, INC.,
AMERICAN PUBLISHING (1991) INC. AND
APAC-95, INC.
DATED AS OF NOVEMBER 21, 1997
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
TRANSFER OF ASSETS AND CONSIDERATION
1.1 Transfer of Assets........................................2
1.2 Assumption of Liabilities.................................5
1.3 Consideration.............................................8
ARTICLE II
CLOSING
2.1 Closing..................................................11
2.2 Payments.................................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Organization; Capitalization; Ownership; Charter and
Bylaws, Etc............................................11
3.2 Corporate Authority and Approval.........................12
3.3 Consents.................................................12
3.4 No Conflicts.............................................12
3.5 Compliance with Laws.....................................13
3.6 Financial Statements.....................................14
3.7 Absence of Certain Changes or Events.....................14
3.8 Title to and Sufficiency of Assets.......................15
3.9 Patents, Trademarks, Subscriber Lists....................15
3.10 Commitments..............................................16
3.11 Litigation...............................................17
3.12 [Reserved]...............................................17
3.13 U.S. Employee Benefit Plans..............................17
3.14 Taxes....................................................17
3.15 Undisclosed Liabilities..................................18
3.16 Fees.....................................................18
3.17 Labor Matters............................................18
3.18 Real Property............................................18
3.19 Leases...................................................19
3.20 Environmental Matters....................................19
3.21 Pre-Closing Liabilities..................................20
i
<PAGE> 3
3.22 Agreements with Affiliates...............................20
3.23 Bulk Sales; Transfer Taxes...............................20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTOR
4.1 Organization and Good Standing...........................20
4.2 Corporate Authority and Approval.........................20
4.3 Consents.................................................20
4.4 No Conflicts.............................................21
4.5 Financing................................................21
4.6 Litigation...............................................21
ARTICLE V
COVENANTS OF THE COMPANY
5.1 Cooperation by the Company...............................21
5.2 Conduct of the Business..................................22
5.3 Access...................................................23
5.4 Permits..................................................24
5.5 Further Assurances.......................................24
5.6 Associated Agreements....................................24
5.7 No Default...............................................24
5.8 Compliance with Laws.....................................24
5.9 Supplemental Information.................................24
5.10 [Reserved]...............................................25
5.11 [Reserved]...............................................25
5.12 Transitional Services....................................25
5.13 [Reserved]...............................................25
5.14 Employees................................................25
5.15 Amended Disclosure Schedule..............................25
5.16 Insurance................................................26
5.17 Lenders' Consent.........................................26
5.18 Vehicular Titles.........................................26
5.19 UCC Termination Statements...............................26
5.20 Real Estate Conveyance Documents and Lease Assignments...26
ii
<PAGE> 4
ARTICLE VI
COVENANTS OF INVESTOR
6.1 Cooperation by Investor..................................26
6.2 Preservation of Books and Records........................27
6.3 Employees................................................27
ARTICLE VII
CONDITIONS TO INVESTOR'S OBLIGATIONS
7.1 Representations, Warranties and Covenants of the Company
and the Associated Subsidiaries.........................28
7.2 Consents.................................................28
7.3 No Prohibitions..........................................28
7.4 Closing Documents........................................28
7.5 Opinion of Counsel.......................................29
7.6 Financing................................................29
7.7 [Reserved]...............................................30
7.8 Like Kind Exchange.......................................30
7.9 Lender...................................................30
ARTICLE VIII
CONDITIONS TO THE COMPANY'S OBLIGATIONS
8.1 Representations, Warranties and Covenants of Investor....31
8.2 Consents.................................................31
8.3 No Prohibitions..........................................31
8.4 Closing Documents........................................31
8.5 Opinion of Counsel.......................................32
8.6 Lenders' Consent.........................................32
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination..............................................32
9.2 Effect on Obligations....................................32
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<PAGE> 5
ARTICLE X
EMPLOYEE MATTERS
10.1 Transferred Employees....................................33
10.2 Employee Benefits........................................33
10.3 Severance Claims.........................................34
10.4 WARN Act Liability.......................................34
10.5 Undue Hardship to the Investor...........................34
ARTICLE XI
SURVIVAL AND INDEMNIFICATION
11.1 Survival.................................................35
11.2 Indemnification by the Company and the Associated
Subsidiaries...........................................35
11.3 Indemnification by CNCO and the Investor.................36
11.4 Matters Involving Third Parties..........................36
11.5 Environmental Remedies...................................38
ARTICLE XII
MISCELLANEOUS
12.1 Expenses.................................................38
12.2 Exclusive Agreement; No Third-Party Beneficiaries........39
12.3 Governing Law; Consent to Jurisdiction...................39
12.4 Successors and Assigns...................................39
12.5 Publicity................................................40
12.6 Severability.............................................40
12.7 Refunds..................................................40
12.8 Notices..................................................40
12.9 Counterparts.............................................41
12.10 Interpretation...........................................41
12.11 Amendment................................................42
12.12 Extension; Waiver........................................42
12.13 Captions.................................................42
12.14 Further Assurances.......................................42
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<PAGE> 6
ARTICLE XIII
LIMITED GUARANTEE OF GREEN EQUITY INVESTORS II, L.P.
13.1 Limited Guarantee........................................43
EXHIBITS
Exhibit A List of Community Newspapers
Exhibit 1.1(b) Retained Assets
Exhibit 3.6 Financial Statements
Exhibit 4.5-1 Commitment and Highly Confident Letters
Exhibit 4.5-2 Alternative Commitment Letter
Exhibit 5.12 Transitional Services Agreement
Exhibit 5.14 Employees
Exhibit 7.4(a) Form of Bill of Sale, Assignment and Assumption
Exhibit 7.4(b) Form of Trademark and Trade Name Assignment
Exhibit 7.4(c) Non-Competition Agreement between the Company and CNCO
Exhibit 7.5-1 Form of Opinion of Cravath, Swaine & Moore
Exhibit 7.5-2 Form of Opinion of General Counsel of Hollinger
Exhibit 7.8 Like Kind Exchange Agreement
Exhibit 8.5 Form of Opinion of Mayer, Brown & Platt
v
<PAGE> 7
DISCLOSURE SCHEDULE
Schedule 3.1(a) Jurisdictional Qualification
Schedule 3.3 Consents
Schedule 3.4 Conflicts
Schedule 3.5 Noncompliance with Laws
Schedule 3.7 Certain Changes or Events
Schedule 3.8(a) Encumbrances on Title to Assets
Schedule 3.8(b) Exceptions to Sufficiency of Assets
Schedule 3.9 Patents and Trademark Rights
Schedule 3.10(a) Commitments Future Payments in Excess of $250,000
Schedule 3.10(b) Commitments for Restricting Business Practices
Schedule 3.10(c) Commitments for the Borrowing of Money
Schedule 3.10(d) Collective Bargaining Agreements
Schedule 3.10(e) Commitments for the Use of Patent and Trademark Rights
Schedule 3.10(f) Joint Ventures, Partnerships and Similar Agreements
Schedule 3.10(g) Commitments Relating to Employment or with Employees,
Officers, Directors or Shareholders
Schedule 3.10(h) Brokerage or Finder's Agreements
Schedule 3.10(i) Acquisition or Divestiture Agreements
Schedule 3.10(j) Other Material Commitments
Schedule 3.11 Litigation
Schedule 3.13 Benefit Plans
Schedule 3.15 Undisclosed Liabilities
Schedule 3.17 Labor Matters
Schedule 3.18 Real Property
Schedule 3.19 Real Property Leases
Schedule 3.20(a) Environmental Permits, Licenses or Authorizations
Schedule 3.20(b) Environmental Material Non-Compliance
Schedule 3.20(c) Environmental Actions
Schedule 3.20(d) Hazardous Materials
Schedule 3.22 Agreements with Affiliates Since September 30, 1997
vi
<PAGE> 8
INDEX OF TERMS
1998 Cash Disbursements.....................................................8
1998 Cash Position Adjustment...............................................8
1998 Final Cash Position....................................................8
1998 Gross Cash ..........................................................8
1998 Net Cash Position......................................................8
1998 Period ..........................................................8
Accountant's Certificate....................................................9
Adjustment ..........................................................9
Agreement ..........................................................1
AP-91 ..........................................................1
APAC-90 ..........................................................1
APAC-95 ..........................................................1
APC-Illinois .........................................................30
Asset Purchase Agreement....................................................1
Assets ..........................................................2
Associated Agreements......................................................25
Associated Subsidiaries.....................................................1
Assumed Contracts ..........................................................3
Assumed Liabilities.........................................................5
Benefit Plans .........................................................17
Books and Records .........................................................27
Bulk Sales Laws .........................................................20
Business ..........................................................1
Claim Notice .........................................................37
Closing .........................................................11
Closing Date .........................................................11
CNCO ..........................................................1
CNCO Damages .........................................................35
CNCO Indemnitees .........................................................35
COBRA .........................................................33
Commitments .........................................................16
Company ..........................................................1
Company Damages .........................................................36
Company Indemnitees........................................................36
Consents .........................................................22
Current Asset Calculation...................................................9
Deductible .........................................................36
Direct Claim .........................................................37
Disclosure Schedule........................................................11
Effective Date ..........................................................8
Employees .........................................................33
Encumbrances ..........................................................4
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<PAGE> 9
Environmental Law ..........................................................7
Environmental Tests........................................................38
ERISA .........................................................17
Estimated 1998 net Cash Position............................................8
Exchangor .........................................................30
Financial Statements.......................................................14
GAAP ..........................................................9
GEI II .........................................................43
Government Authority........................................................3
Greater than 120-Day Receivables............................................9
Guarantor ..........................................................1
Hazardous Materials........................................................19
HSR Act .........................................................12
Improvements ..........................................................2
Indemnifying Party.........................................................36
Investor ..........................................................1
Leased Real Property........................................................2
Lenders Consent .........................................................26
Like Kind Exchange.........................................................30
Like Kind Exchange Agreement...............................................30
Litigation .........................................................17
Marks ..........................................................1
Material .........................................................15
Material Adverse Effect....................................................12
Net Current Assets..........................................................9
Net Liabilities ..........................................................9
Owned Real Property.........................................................2
Patent and Trademark Rights................................................15
Permits .........................................................13
Permitted Encumbrances......................................................4
Receivables Notice..........................................................9
Retained Assets ..........................................................4
Retained Business ..........................................................4
Retained Liabilities........................................................6
Supplemental Commitment Letter.............................................30
Tax .........................................................17
Taxes .........................................................17
Third Party Claim .........................................................36
Trade Names ..........................................................1
Trademark and Trade Name Assignments.......................................28
Transfer Date .........................................................33
Transitional Service Agreement.............................................25
Transitional Services......................................................25
WARN Act .........................................................18
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<PAGE> 10
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of
November 21, 1997, is by and among Liberty Group Publishing, Inc., a Delaware
corporation (the "Investor"), Liberty Group Operating, Inc., a Delaware
corporation and a wholly owned subsidiary of the Investor, ("CNCO"; the term
CNCO shall include subsidiaries of CNCO unless the context otherwise provides),
Hollinger International Inc., a Delaware corporation (the "Company"), APAC- 90
INC., a Delaware corporation and an indirect wholly owned subsidiary of the
Company ("APAC- 90"; the term APAC-90 shall include subsidiaries of APAC-90
unless the context otherwise provides), American Publishing (1991) Inc., a
Delaware corporation and an indirect wholly owned subsidiary of the Company
("AP-91"; the term AP-91 shall include subsidiaries of AP-91 unless the context
otherwise provides), and APAC-95 INC., a Delaware corporation and an indirect
wholly owned subsidiary of the Company ("APAC-95"; the term APAC-95 shall
include subsidiaries of APAC-95 unless the context otherwise provides) (APAC-90
and each of its subsidiaries, AP-91 and each of its subsidiaries, and APAC-95
and each of its subsidiaries are collectively referred to herein as the
"Associated Subsidiaries", as such term is further explained in Section 3.1)
and, for the limited purposes described herein, Green Equity Investors II, L.P.,
a Delaware limited partnership (the "Guarantor").
W I T N E S S E T H:
WHEREAS, the Associated Subsidiaries are in the business of
publishing, marketing and distributing certain community newspapers as further
identified in Exhibit A hereto and operating printing plants associated
therewith (the "Business"; the term Business expressly excludes the assets which
the Investor or an Affiliate (as defined in Section 3.22) of the Investor will
receive pursuant to the Like Kind Exchange (as defined in Section 7.8);
WHEREAS, the Investor wishes to cause CNCO to purchase the
assets constituting the business.
NOW, THEREFORE, in consideration of the promises and of the
respective representations, warranties, covenants and agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
<PAGE> 11
ARTICLE I
TRANSFER OF ASSETS AND CONSIDERATION
1.1 Transfer of Assets.
(a) Acquired Assets. Subject to the terms and conditions
hereof, the Company and the Associated Subsidiaries agree to sell to CNCO, and
the Investor agrees to cause CNCO to purchase from the Company and the
Associated Subsidiaries, at the Closing (as defined in Section 2.1) all of the
right, title and interest of the Company and the Associated Subsidiaries in and
to the Business and all properties, assets and rights of every nature, kind and
description of the Company and the Associated Subsidiaries used or held for use
primarily in connection with the Business wherever located (collectively, other
than the Retained Assets (as defined in Section 1.1(b) hereof), the "Assets"),
including the following:
(i) all of the rights of the Company or any Associated
Subsidiary to prepare, produce, publish, print, sell and/or distribute,
as the case may be, the community newspapers and other publications
which constitute the Business, together with the goodwill of or
relating to the Business;
(ii) all of the real property owned by the Company or any
Associated Subsidiary and primarily used in the operation of the
Business (the "Owned Real Property"), which Owned Real Property is
listed on Schedule 3.18 to the Disclosure Schedule (as defined in
Section 3.1(a)), and all of the buildings, fixtures and improvements
(the "Improvements") located in, on and under the Owned Real Property;
(iii) all of the rights of the Company or any Associated
Subsidiary in any real property leased or subleased by the Company or
the Associated Subsidiaries and used primarily in the operation of the
Business (the "Leased Real Property"), which Leased Real Property is
listed on Schedule 3.19 to the Disclosure Schedule, and all of the
Improvements located in, on and under the Leased Real Property to the
extent provided in the lease or sublease;
(iv) all of the materials, raw materials (including paper),
supplies, work in progress and other inventory owned by the Company or
any Associated Subsidiary and to the extent used or held for use in the
operation of the Business;
(v) all rights of the Company or any Associated Subsidiary to
fixed and other tangible personal property, whether owned or leased,
including furniture, equipment, computers and related items, fixtures,
machinery and tools owned by the Company or any Associated Subsidiary
and primarily used in the operation of the Business;
(vi) all rights, subscription rights, obligations and benefits
of contracts, licenses (whether the Company or any Associated
Subsidiary is a licensee or licensor) or
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<PAGE> 12
arrangements of the Company or any Associated Subsidiary primarily
relating to the Business and the Assets (collectively, the "Assumed
Contracts"), including the items listed on Schedules 3.10(a) through
(j) of the Disclosure Schedule;
(vii) all files, books and records of the Company or any
Associated Subsidiary dating back at least five full fiscal years from
the date of the Closing primarily relating to the Business (but not
minute books and corporate governance records of the Company and the
Associated Subsidiaries) which are not physically located at the Owned
Real Property or the Leased Real Property and all files, books and
records of the Business which are physically located at the Owned Real
Property or the Leased Real Property, including financial statements
and records, advertising space reservations, advertising insertion
orders, promotional materials, all available records of current and
former advertisers in the newspapers and other publications which
comprise the Business or relating to the Business; provided that the
Company shall retain copies of all such files, books and records;
(viii) all credits, prepaid costs and expenses, deposits and
retentions held by third parties under leases, licenses, contracts and
other arrangements, in each case to the extent relating to the
Business;
(ix) all current assets (except for cash and cash
equivalents), but specifically including accounts receivable; provided
that following the Effective Date (as defined in Section 2.1) CNCO
shall have the right to assign certain accounts receivable to the
Company in accordance with the terms of Section 1.3(g) of this
Agreement;
(x) all subscription, distribution, circulation and mailing
lists relating primarily to the Business and all records and data
relating to such lists;
(xi) any available editorial and photographic morgues and any
available back issues of the newspapers and other publications which
comprise the Business;
(xii) all registered United States and foreign patents,
trademarks, service marks, trade names, mastheads, copyrights and
applications therefore set forth on Schedule 3.9 of the Disclosure
Schedule (including rights to sue for and remedies against present and
future infringements thereof and rights of priority and protection of
interests) and the goodwill and going concern value related thereto;
(xiii) all licenses and permits of any government or state (or
any subdivision thereof), whether domestic or foreign, or any agency,
authority, bureau, commission, department or similar body or
instrumentality thereof, or any governmental court or tribunal,
federal, state and local ("Government Authority"), to the extent they
are transferable, relating primarily to the Business or the Assets;
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<PAGE> 13
(xiv) all guaranties, warranties, indemnities and similar
rights in favor of the Company or any Associated Subsidiary to the
extent related to the Assets or the Business; and
(xv) all rights of the Company or any Associated Subsidiary
under any provision or covenant of any contract, agreement or
understanding in favor of the Company or any Associated Subsidiary or
their Affiliates to the extent relating to the Business limiting the
ability of any party to sell any products or services, engage in any
line of business or compete with or to obtain products or services from
any person and any causes of action, lawsuits, claims and demands
available to the Company or any Associated Subsidiary in respect of the
foregoing whether arising before or after the Closing.
The Assets shall be transferred free and clear of all liens,
easements, licenses, possessory rights, sales contracts, building and use
restrictions, reservations and limitations, encumbrances, security interests,
charges, pledges, mortgages, deeds of trust, deed to secure debt, liabilities,
debts, options or, to the best knowledge of the Company and the Associated
Subsidiaries, any other adverse claims, restrictions or third party rights of
any kind and nature whatsoever (the "Encumbrances"), except for the following
(the "Permitted Encumbrances"): (i) liens for current Taxes not yet due and
payable, (ii) the encumbrances disclosed on Schedule 3.8(a) of the Disclosure
Schedule, (iii) mechanics', carriers', workmen's, repairmen's or other like
liens arising or incurred in the ordinary course of business, liens arising
under original purchase price conditional sales contracts and equipment leases
with third parties entered into in the ordinary course of business, and which
are routinely and regularly extinguished by payment of the charges to which they
relate and which do not, individually or in the aggregate, materially impair the
continued use and operation of the assets to which they relate in the Business,
taken as a whole, as presently conducted or (iv) other imperfections of title or
encumbrances, if any, which do not, individually or in the aggregate, materially
impair the continued use and operation of the assets to which they relate in the
Business, taken as a whole, as presently conducted.
(b) Retained Assets. Except as set forth in Section 1.2(a),
the Associated Subsidiaries shall retain the real and personal property and
other assets of the Associated Subsidiaries or any of their Affiliates (as
defined in Section 3.22) that relate primarily to the businesses of the
Associated Subsidiaries or any of their Affiliates other than the Business (the
"Retained Business") and not primarily related to the Business or that relate
primarily to the Retained Liabilities (collectively, the "Retained Assets"),
including:
(i) all bank accounts and cash and cash equivalents of the
Associated Subsidiaries;
(ii) all rights, claims and credits of the Associated
Subsidiaries to the extent relating to any other Retained Asset or any
Retained Liability (as defined in Section 1.2(b)), including any such
items arising under insurance policies, and all guarantees, warranties,
indemnities and similar rights in favor of the Associated Subsidiaries
or any of their Affiliates in respect of any other Retained Asset or
any Retained Liability;
4
<PAGE> 14
(iii) [Reserved]
(iv) all rights of the Company and the Associated Subsidiaries
and their Affiliates under this Agreement, the Transitional Services
Agreement (as defined in Section 5.12 ), the Non-Competition Agreement
(as defined in Section 7.4) and the other agreements and instruments
executed and delivered in connection with this Agreement;
(v) all documents prepared in connection with the sale of the
Business and the Assets to CNCO, exclusive of documents prepared in the
ordinary course of business in connection with the operation of the
Business;
(vi) all financial and Tax records relating to the Business
that form part of the Company's or the Associated Subsidiaries' (or any
of their Affiliates') general ledger and all other files, books and
records not referred to in Section 1.1(a)(vii) which the Company or the
Associated Subsidiaries or any of their respective Affiliates have in
their possession; provided that upon reasonable request by CNCO, CNCO
shall be provided with copies of the portions of such records that
reasonably relate to the Business (other than copies of the Company's
consolidated, combined or unitary income Tax returns, provided that
copies of back up for such returns may reasonably be requested by
CNCO); and
(vii) the Retained Assets described in Exhibit 1.1(b).
1.2 Assumption of Liabilities.
(a) Liabilities Assumed. On the Closing Date, CNCO will assume and
agree to pay, perform and discharge as and when due the liabilities and
obligations, whether fixed, absolute or contingent, matured or unmatured, (the
"Assumed Liabilities") relating to the Business as the same exist on the Closing
Date which are specified below (provided, that in no event shall the Assumed
Liabilities include any Retained Liabilities, and CNCO shall assume no other
liabilities whatsoever of the Associated Subsidiaries or their Affiliates):
(i) all accounts payable and trade obligations to the extent
relating to the Business, including those which are owed to the
Associated Subsidiaries or their Affiliates which were incurred in the
ordinary course of business;
(ii) all prepaid subscription and advertising obligations to
the extent relating to the Business;
(iii) all liabilities and obligations arising from commitments
(in the form of issued purchase orders or otherwise) to purchase or
acquire inventory, supplies or services to the extent relating to the
Business and reflected on a balance sheet of the Business as of the
Closing Date as accounts payable or accrued expenses;
5
<PAGE> 15
(iv) all liabilities and obligations under existing licenses,
permits, authorizations, leases or contracts which are to be assigned
to CNCO hereunder other than liabilities or obligations for breaches or
defaults that occurred prior to the Closing;
(v) all liabilities or obligations for accrued but unpaid
vacation pay, sick pay and holiday pay for Employees (as defined in
Section 10.1) to the extent such pay is reflected in the Net
Liabilities (as defined in Section 1.3(f)) of the Business as of the
Effective Date; and
(vi) [Reserved]
(vii) all liabilities, other than Retained Liabilities
(including Tax (as defined in Section 3.14) liabilities), which are
reflected in the balance sheet included in the Financial Statements
dated as of September 30, 1997 provided pursuant to Section 3.6 (except
to the extent discharged prior to the Closing Date) or incurred by the
Business since the date of such balance sheet not in breach of any
representation or covenant in this Agreement and in the ordinary course
of business which are of the type that would be reflected in a balance
sheet prepared in conformity with GAAP and consistent with the
Financial Statements.
(b) No Other Liabilities Assumed. Notwithstanding anything to the
contrary contained herein, except as provided in Section 1.2(a), the parties
agree that CNCO has not agreed to pay, shall not assume and shall not have any
liability or obligation with respect to, the following liabilities and
obligations (collectively, the "Retained Liabilities"):
(i) any liability or obligation for any Tax of any kind
(including income, payroll, personnel, property, bulk transfer, sales,
use, ad valorem or franchise Taxes or assessments) owed prior to or at
Closing, or which may thereafter become due, to any foreign, federal,
state, local or other taxing authority which liability relates to any
transaction or period prior to or upon the Closing (including as a
result of Treasury Regulation Section 1.1502-6(a) or any similar
provision under state or local law);
(ii) any liability or obligation relating to, resulting from
or arising out of workers' compensation claims resulting from any
injury, disease or disability which injury, disease or disability
occurred prior to Closing (whether or not any such claim was filed
prior to the Closing);
(iii) any liability or obligation relating to, resulting from
or arising out of any violation of law (whether known or unknown) or
license, which violation occurred on or prior to the Closing Date;
(iv) any liability relating to the Owned Real Property or
Leased Real Property, or relating to discharges of hazardous substances
in violation of or giving rise to liability pursuant to any
Environmental Law (as defined below) by the Business, the basis for
which liability occurred or existed prior to the Closing, including any
investigation and remediation
6
<PAGE> 16
liabilities to the extent arising under standards established by any
and all foreign, federal, state or local laws, rules, orders,
regulations, consent decrees, settlement agreements, injunctions,
statutes or requirements imposed by any governmental authority relating
to or concerning protection of the environment and natural resource
damages, including surface water, soil, air and ground water
("Environmental Law") as enacted or enforced on or prior to the Closing
Date;
(v) any liability or obligation for severance, redundancy,
termination, payment in lieu of notice, indemnity or other payments
resulting from the transactions contemplated by this Agreement or
arising prior to the Transfer Date and any liability or obligation
arising prior to the Transfer Date to or with respect to any employee
or any employee matters, including any employee benefit plan, other
than those which are expressly assumed by CNCO, pursuant to Section
10.1;
(vi) any liability or obligation of or incurred by the Company
or its Affiliates to the extent related to the Retained Assets or not
arising from the Business;
(vii) any liability or obligation under licenses, permits,
authorizations, leases or contracts which are not assigned to CNCO
hereunder;
(viii) any liability or obligation for medical, dental and
disability benefits and any other welfare benefit, whether insured or
self-insured, incurred or existing at any time on or prior to the
Transfer Date, for current or past employees of the Business;
(ix) all liability of the Associated Subsidiaries and their
Affiliates or former Affiliates arising from indebtedness, including
guaranty and similar obligations, for borrowed money or long-term debt,
except as provided in Section 1.2(a);
(x) any liability or obligation relating to or resulting from
breach of contract or tort claims where the event giving rise to such
claim occurred prior to the Closing Date;
(xi) any other liability or obligation of the Company or the
Associated Subsidiaries whatsoever not expressly assumed by CNCO
hereunder;
(xii) liabilities for officers and directors of the Company
and the Associated Subsidiaries with respect to pre-Closing conduct;
(xiii) any liability or obligation for any intercompany notes
of the Company or any Associated Subsidiaries; and
(xiv) liability for travel vouchers or cash of $4,000 for each
publisher who exceeded budgeted gross operating profits for 1997 by
10%.
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<PAGE> 17
1.3 Consideration. The consideration for the transfer of the Assets
described in Section 1.1(a) from the Associated Subsidiaries to CNCO shall be as
follows:
(a) Cash Purchase Price. The Investor will cause CNCO to pay a cash
purchase price of $233,765,884 for the Assets payable to the Associated
Subsidiaries.
(b) Assumption of Assumed Liabilities. CNCO shall assume and agree to
pay as they shall become due or discharge the Assumed Liabilities as described
in Section 1.2(a) hereof.
(c) [Reserved].
(d) Interest. At the Closing the Investor or CNCO will pay the Company
interest on $233,765,884 for the period from January 1, 1998 through the Closing
Date at a rate equal to (i) the 30-day Treasury bill rate in effect on December
31, 1997 multiplied by (ii) a fraction the numerator of which shall be the
number of days from January 1, 1998 through the Closing Date and the denominator
of which shall be 365.
(e) Determination of 1998 Net Cash Position; Payment of 1998 Estimated
Net Cash.
(i) During the period from December 31, 1997 (the "Effective
Date") through the Closing Date (the "1998 Period"), the Company shall
cause the Associated Subsidiaries to maintain financial records showing
all cash and cash equivalents received by or on behalf of the Business
during the 1998 Period (the "1998 Gross Cash") and all amounts of cash
or cash equivalents used to discharge accounts payable and other
obligations of the Business in the ordinary course consistent with past
practice, but excluding (w) interest on indebtedness for borrowed
money, (x) intercompany payments, but excluding management fees charged
at 1.6% of revenue for the 1998 Period, (y) fees and expense relating
to the transactions contemplated by this Agreement and the Associated
Agreements, and (z) income Taxes, but excluding income Taxes for the
1998 Period (the "1998 Cash Disbursements"). The excess, if any, of the
1998 Gross Cash over the 1998 Cash Disbursements shall be the "1998 Net
Cash Position."
(ii) At the Closing, the Company shall pay or cause to be paid
to CNCO, by wire transfer of immediately available funds (or by
intrabank transfer, if practicable), an amount equal to an estimate
determined in good faith by the Company of the 1998 Net Cash Position
(the "Estimated 1998 Net Cash Position").
(iii) Within 60 days following the Closing, the Accounting
Firm (as defined in Section 1.3(f)) shall (x) determine (1) the amount
of the 1998 Net Cash Position (as so determined, the "1998 Final Cash
Position") and (2) the 1998 Final Cash Position minus the 1998
Estimated Cash Position (the "1998 Cash Position Adjustment", which may
be positive or negative) and (y) deliver a letter (the "1998 Cash
Certification") (1) setting forth the calculation of the 1998 Cash
Position Adjustment and its components and (2) certifying that such
calculations were made in compliance with this Section 1.3(e). Such
determinations
8
<PAGE> 18
and calculations will be conclusive absent manifest error. If the 1998
Cash Position Adjustment is a positive number, the Company shall pay
such amount to CNCO within three (3) business days of delivery of the
1998 Cash Certification. If the 1998 Cash Position Adjustment is a
negative number, CNCO shall pay an amount equal to the absolute value
of such number to the Company within three (3) business days of
delivery of the 1998 Cash Certification. All payments pursuant to this
Section 1.3(e) shall be made by wire transfer of immediately available
funds (or by interbank transfer, if practicable).
(f) Working Capital Adjustment. Within 60 days following the Closing,
KPMG Peat Marwick LLP or such other firm of independent public accountants
mutually agreed by the Investor and the Company (the "Accounting Firm") shall
(i) on a basis consistent with U.S. generally accepted accounting principles as
applied in the Financial Statements (as defined in Section 3.6) ("GAAP") (x)
determine the Net Current Assets (as defined below) and the Net Liabilities (as
defined below) of the Business as of the Effective Date (the "Current Asset
Calculation") and (y) determine the amount of the Adjustment (as defined below),
if any, and (ii) deliver a letter (the "Accountant's Certificate") (x) setting
forth the calculation of the Adjustment and its components and (y) certifying
that each of such calculations was made in compliance with this Section 1.3(f)
Such determinations and calculations shall be conclusive absent manifest error.
If the Adjustment is a positive number in excess of $1,000,000, CNCO shall pay
such excess to the Company within three (3) business days following delivery of
the Accountant's Certificate. If the Adjustment is a negative number, the
absolute value of which is greater than $1,000,000, the Company shall pay such
excess to CNCO within three (3) business days following delivery of the
Accountant's Certificate. All payments pursuant to this Section 1.3(f) shall be
by wire transfer of immediately available funds (or by interbank transfer, if
applicable).
For purposes of this Section 1.3(f),
(1) "Net Current Assets" shall mean current assets
determined in a manner consistent with GAAP, but excluding (i)
cash and cash equivalents, (ii) current and deferred Taxes and
(iii) any other Retained Assets.
(2) "Net Liabilities" shall mean liabilities
determined in a manner consistent with GAAP, but excluding (i)
current and deferred Tax liabilities and (ii) any other
Retained Liabilities.
(3) The "Adjustment" means the amount (whether
positive or negative) equal to Net Current Assets minus Net
Liabilities.
(g) Uncollected Accounts Receivable. Within 135 days after the
Effective Date, CNCO shall have the right to (i) notify the Company in writing
(the "Receivables Notice") of the dollar amounts of the accounts receivable of
the Business existing on the Effective Date that have not been collected by CNCO
by the date of such notice and which are more than 120 days past due as of the
date of such notice (the "Greater than 120-Day Receivables") and (ii) at its
option, assign to the Company 100% of the then-outstanding Greater than 120-Day
Receivables. If so assigned, the
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Company shall purchase the Greater than 120-Day Receivables for a price equal to
(x) the face amount of the Greater than 120-Day Receivables less (y) the full
amount of the reserve for receivables reflected in the Net Current Assets, plus
(z) interest on (x) minus (y) accrued from the Effective Date at a rate equal to
the 30-day Treasury bill rate in effect on the Effective Date, payable by wire
transfer of immediately available funds to (or by interbank transfer, if
applicable) CNCO within 3 business days following receipt of the Receivables
Notice. In determining the amount collected with regard to any account
receivable, all amounts received from any obligor shall be allocated to the
receivable specified by such obligor, or if not specified, to the receivables of
such obligor in the order in which such receivables arose. From and after the
Closing, CNCO shall continue collecting accounts receivable in all material
respects in accordance with the past practice of the Business prior to the
Closing Date and shall provide the Company reasonable access to review all
information relating to the foregoing, including all write-offs. From and after
the date CNCO exercises its option to assign the Greater than 120-Day
Receivables to the Company, CNCO shall continue collecting such Greater than
120-Day Receivables on behalf of the Company for a reasonable fee to be agreed
upon by the parties in proportion to the services rendered.
(h) Pro Forma Calculation. Notwithstanding anything to the contrary
contained in this Agreement or the Transfer Agreement (as defined in Section
7.8), no payments shall be made under Sections 1.3(e), 1.3(f) or 1.3(g) of this
Agreement unless such payment would be required to be made if the determinations
and calculations required by such sections are made on a pro forma basis as if
the Business as defined in this Agreement and the Business as defined in the
Transfer Agreement were treated as a single business (subject to a single
$1,000,000 threshold for the purposes of calculating the Adjustment pursuant to
Section 1.3(f) of this Agreement and the comparable provision of the Transfer
Agreement), and in such event the portion of such payment to be made pursuant to
this Agreement shall be equal to 265/309ths of such payment, and the balance of
such payment shall be made pursuant to the Transfer Agreement.
(i) Purchase Price Allocation. The purchase price for the Assets
(including the Assumed Liabilities) shall be allocated among the Assets in
accordance with Schedule 1.3(i), to be prepared by the Investor and delivered to
the Company within 180 days after the Closing Date. Such allocation shall be
subject to the Company's consent, such consent not to be unreasonably withheld.
Following the Closing, the Investor and the Company, in connection with their
respective U.S. federal, state and local income Tax returns and other filings
(including, without limitation Internal Revenue Service Form 8594), shall not
take any position inconsistent with such allocation. Any adjustment to the
purchase price shall be allocated as provided by Temp. Treas. Reg. Section
1.1060-1T(f). For purposes of this Section 1.3(i), the withholding by the
Company of its consent to a proposed allocation of purchase price to an asset or
class of assets shall be deemed to be reasonable if, within 30 days after
receiving a copy of Schedule 1.3(i), the Company provides to the Investor a
written notice setting forth its proposed allocation of purchase price to such
asset or class of assets, and such proposed allocation differs by more than 25%
from the amount allocated on Schedule 1.3(i) to such asset or class of assets,
but compliance with this sentence shall not be necessary for such withholding of
consent by the Company to be deemed reasonable. The parties shall negotiate in
good faith to timely resolve any differences regarding such allocation.
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(j) Proration of Taxes. All real estate, personal property and ad
valorem Taxes relating to the Assets which shall have accrued and become payable
prior to the Closing Date shall be paid by the Company. All such Taxes which
shall be accrued but unpaid shall be prorated to the Closing Date. In connection
with such proration of Taxes, in the event that actual Tax figures are not
available at the Closing Date, proration of Taxes shall be based upon the actual
Taxes for the preceding year for which actual Tax figures are available, and
re-prorated when actual Tax figures become available. The amount due one party
as a result of such proration shall be paid to the other party at the Closing,
and the amount due one party as a result of a re-proration of Taxes for a taxing
jurisdiction shall be paid to such party within 30 days after actual Tax figures
become available for such taxing jurisdiction.
ARTICLE II
CLOSING
2.1 Closing. The closing of the transactions contemplated hereby (the
"Closing") shall be held at the offices of Mayer, Brown & Platt, 190 South
LaSalle Street, Chicago, Illinois 60603 commencing at 9:00 a.m., Chicago time,
on January 30, 1998 or as soon as practicable thereafter after the satisfaction
or waiver of the conditions to closing set forth in Article VII and Article VIII
of this Agreement, or at such other place, time or date as the Investor and the
Company may agree (the "Closing Date").
2.2 Payments. All payments hereunder shall be in U.S. dollars, and
shall be made no later than 12:00 noon on the Closing Date by wire transfer of
immediately available funds (or interbank transfer, if applicable) to an account
or accounts of the Company, CNCO or the Investor, as applicable, at a bank or
banks specified by the Company, CNCO or the Investor, as applicable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and the Associated Subsidiaries represent and warrant to
the Investor and CNCO as follows:
3.1 Organization; Capitalization; Ownership; Charter and Bylaws, Etc..
(a) Organization and Good Standing. Section 3.1(a) of the disclosure schedule
delivered by the Company to the Investor herewith (the "Disclosure Schedule")
sets forth a complete list of the subsidiaries of the Company through which the
Business is conducted, together with the subsidiaries owning the stock of such
subsidiaries. All such subsidiaries are included in the term "Associated
Subsidiaries" as defined in the preamble. Each of the Company and each
Associated Subsidiary is a corporation or limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation. Each of the Company and each
Associated
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Subsidiary has ll requisite corporate or limited liability company power and
authority to own, operate and lease the properties and assets it currently owns,
operates or leases and to carry on its business as it is currently conducted.
Each of the Company and each Associated Subsidiary is duly licensed or qualified
to do business as a foreign corporation or limited liability company and is in
good standing in all jurisdictions in which the character of the properties and
assets owned or leased by it or the nature of the business conducted by it
requires it to be so licensed or qualified and except where the failure so to
qualify would not, individually or in the aggregate, have or would not
reasonably be expected to have a Material Adverse Effect. Section 3.1(a) of the
Disclosure Schedule contains a complete list of all jurisdictions in which the
Company and each Associated Subsidiary are so qualified. The Company is the
direct or indirect beneficial and record holder of 100% of the capital stock of
the Associated Subsidiaries. "Material Adverse Effect" shall mean any event,
condition or circumstance which has or would reasonably be expected to have a
material adverse effect on the Business or on the properties, assets,
liabilities, results of operations or financial condition of the Business taken
as a whole.
3.2 Corporate Authority and Approval. Each of the Company and each
Associated Subsidiary has all requisite corporate power and authority to
execute, deliver and perform this Agreement and the Associated Agreements (as
defined in Section 5.12) and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance of this Agreement and the
Associated Agreements by the Company and each Associated Subsidiary and the
consummation by the Company and each Associated Subsidiary of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate and action on the part of the Company and the Associated Subsidiaries.
Each of this Agreement and the Associated Agreements constitutes the valid and
binding obligation of each of the Company and each Associated Subsidiary, to the
extent they are parties thereto, enforceable against the Company and each
Associated Subsidiary, to the extent they are parties thereto, in accordance
with its terms, except to the extent such enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws relating to creditors' rights generally and to general
principles of equity (regardless of whether enforcement is considered in the
proceeding in equity or at law).
3.3 Consents. Except as set forth in Section 3.3 of the Disclosure
Schedule, no consent, approval or authorization of, or exemption by or with
respect to the Company or any of the Associated Subsidiaries, or filing with,
notice to or permit from any court or any federal, state, local, foreign or
other governmental authority or other person, other than pursuant to the
Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act"), is required in
connection with the execution, delivery and performance by the Company or each
Associated Subsidiary of this Agreement and the Associated Agreements or the
taking by them of any other action contemplated hereby, excluding, however,
consents, approvals, authorizations, exemptions and filings, if any, which the
Investor is required to obtain or make.
3.4 No Conflicts. Except as set forth in Section 3.4 of the Disclosure
Schedule, the execution, delivery and performance by the Company and each
Associated Subsidiary of this
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Agreement and the Associated Agreements and all other instruments, agreements,
certificates and documents contemplated hereby and the consummation by the
Company and each Associated Subsidiary of the transactions contemplated hereby
and thereby will not, with or without the giving of notice or the lapse of time,
or both, subject to obtaining any required consents referred to in Section 3.3,
(i) violate or conflict with any provision of the charter, by-laws or other
governing documents of the Company or any of the Associated Subsidiaries, (ii)
violate or conflict with any law, statute, rule, regulation, order, judgment or
decree applicable to or binding on the Company or any of the Associated
Subsidiaries, or any of their respective properties or assets, or by which any
of them is bound or (iii) conflict with or result in the breach of, or
constitute a default under, or result in their termination, cancellation or
acceleration (whether after the giving of notice or the lapse of time or both)
of any right or obligation of the Company or any of the Associated Subsidiaries
under, any commitment or agreement reflecting obligations of the Company or any
of the Associated Subsidiaries, or loss of a material benefit under or result in
the creation of any Encumbrance upon any of the assets of the Company or any of
the Associated Subsidiaries, except (in the case of (ii) and (iii) only) for
violations, conflicts, breaches, defaults, terminations, cancellations,
accelerations or Encumbrances which, individually or in the aggregate, would not
have, and would not reasonably be expected to have, a Material Adverse Effect or
a material adverse effect on the reasonably expected benefits to the Investor of
the transactions contemplated hereunder.
3.5 Compliance with Laws. Except as set forth in Section 3.5 of the
Disclosure Schedule, the Business as it is presently conducted and as it will be
conducted at the Closing is and will be in compliance with all applicable
federal, state local and foreign laws, rules and regulations currently in
effect, including, without limitation, those relating to equal employment
opportunity practices and exports and imports from or to any jurisdiction, and
all orders, judgments and decrees but excluding those relating to environmental
matters (which are covered in Section 3.20 below) and except for failures to
comply which, individually or in the aggregate, do not have and would reasonably
not be expected to have a Material Adverse Effect. Except as disclosed in
Section 3.5 of the Disclosure Schedule, neither the Company nor any of the
Associated Subsidiaries has received notice from any governmental regulatory or
law enforcement authority of any allegation that its business or operations, as
currently conducted or as it will be conducted on the Closing Date, are not in
compliance with applicable law and regulations, or of any investigation or
administrative proceeding to determine such compliance, except for any such
notice, investigation or proceeding as to which there is no reasonable
likelihood of a Material Adverse Effect. Except for those relating to
environmental matters (which are covered in Section 3.20 below) and except as
disclosed in Section 3.5 of the Disclosure Schedule, each of the Company and the
Associated Subsidiaries has all governmental permits, licenses and
authorizations, approvals, exemptions, certificates or similar instruments or
documents ("Permits") necessary for the conduct of the Business as presently
conducted and for the lawful operation of the Business except where the failure
to have such Permits does not individually or in the aggregate have and would
reasonably not be expected to have, a Material Adverse Effect. Other than as
disclosed in Section 3.5 of the Disclosure Schedule, all such Permits will be in
full force and effect at the time of the Closing and will not be subject to
forfeiture, revocation, limitation or restriction as a result of the
transactions contemplated hereby except where
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the failure to have such Permits at the time of the Closing does not
individually or in the aggregate have and would reasonably not be expected to
have a Material Adverse Effect.
3.6 Financial Statements. True and complete copies of the (i) audited
financial statements of the Business as at December 31, 1995, December 31, 1996
and September 30, 1997 and (ii) unaudited financial statements of the Business
(including for this purpose the business relating to the Relinquished Property)
as at September 30, 1996, (collectively, the "Financial Statements") are
attached hereto as Exhibit 3.6. The Financial Statements present fairly the
financial position and results of operations and cash flow of the Business
(including for this purpose the business relating to the Relinquished Property)
as of the respective dates indicated and for the respective periods then ended
in conformity with GAAP and regulations of the Securities and Exchange
Commission, except that the interim financial statements do not contain all of
the footnote disclosure required by GAAP. "Relinquished Property" means the
assets acquired by the Investor pursuant to the Transfer Agreement.
3.7 Absence of Certain Changes or Events. Except as set forth in
Section 3.7 of the Disclosure Schedule and except as set forth in the Financial
Statements, since September 30, 1997 there have been no events, and the Business
has not suffered any changes, damage, destruction or casualty loss, which
individually or in the aggregate have had or could reasonably be expected to
have a Material Adverse Effect. Except as listed on Section 3.7 of the
Disclosure Schedule, since September 30, 1997, the Business has been conducted
in the ordinary course consistent with past practice. Since September 30, 1997,
except as disclosed in Section 3.7 of the Disclosure Schedule, the Business has
not:
(i) changed its accounting methods, systems, policies,
principles or practices, except as required by law, GAAP or generally
accepted accounting principles applicable to the Company or any of the
Associated Subsidiaries;
(ii) established or increased any bonus, insurance, severance,
deferred compensation, pension, profit sharing or other employee
benefit plan or otherwise increased the compensation payable or to
become payable to any officer, director, employee, agent or consultant
of the Company or any of the Associated Subsidiaries, except as
permitted by Section 5.14 herein;
(iii) made any borrowings, incurred any debt (other than trade
payables in the ordinary course of business and consistent with past
practice), or assumed, guaranteed, endorsed (except for the negotiation
or collection of negotiable instruments in the ordinary course of
business and consistent with past practice) or otherwise become liable
(whether directly, contingently or otherwise) for the obligations of
any other person, or made any payment or repayment in respect of any
indebtedness (other than trade payables and accrued expenses in the
ordinary course of business and consistent with past practice); or
(iv) failed to pursue the collection of receivables in the
ordinary course of business or failed to discharge its payables in the
ordinary course of business.
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3.8 Title to and Sufficiency of Assets. (a) The Associated Subsidiaries
have, and upon Closing will transfer to CNCO, good and marketable title to all
of the assets and properties (real and personal) constituting the Business, free
and clear of all Encumbrances, except (i) as set forth in Section 3.8(a) of the
Disclosure Schedule, (ii) for liens for Taxes not yet due or being contested in
good faith by appropriate proceedings and for which appropriate reserves are
being maintained in accordance with GAAP, (iii) mechanics', carriers',
workmen's, repairmen's or other like liens arising or incurred in the ordinary
course of business, liens arising under original purchase price conditional
sales contracts and equipment leases with third parties entered into in the
ordinary course of business, and which are routinely and regularly extinguished
by payment of the charges to which they relate and which do not, individually or
in the aggregate, materially impair the continued use and operation of the
assets to which they relate in the Business, taken as a whole, as presently
conducted and (iv) other imperfections of title or encumbrances, if any, which
do not, individually or in the aggregate, materially impair the continued use
and operation of the assets to which they relate in the Business, taken as a
whole, as presently conducted.
(b) Except as disclosed in Section 3.8(b) of the Disclosure Schedule,
the assets and properties of the Business used to operate the Business in the
manner in which it is currently conducted have been taken as a whole, reasonably
maintained and are in good operating condition and repair (with the exception of
normal wear and tear), and, to the best of the Company's knowledge, are, taken
as a whole, free from defects other than such minor defects as do not interfere
with the intended use thereof in the conduct of normal operations or adversely
affect the resale value thereof. The Associated Subsidiaries own or have a right
to use the assets, properties, rights, know-how, processes and ability which are
required for or currently used in connection with the operation of the Business
as it is presently conducted (the "Necessary Assets"), and, at the Closing the
Associate Subsidiaries shall transfer to CNCO the ownership or right to use the
Necessary Assets. Such assets, properties and rights, except for changes of
assets, properties and rights in the ordinary course of business, together with
the assets of the Company and the Associated Subsidiaries necessary for the
Transitional Services (as defined in Section 5.12), are sufficient to conduct
the Business substantially as it is currently being conducted.
3.9 Patents, Trademarks, Subscriber Lists. Section 3.9 of the
Disclosure Schedule sets forth a list, as of the date hereof, of all registered
United States and foreign patents, trademarks, service marks, trade names,
mastheads, copyrights and applications therefor which are used by the Company or
any of the Associated Subsidiaries in the conduct of the Business (the "Patent
and Trademark Rights") which are material as to the properties, assets,
liabilities, results of operations or financial condition of the Business as a
whole ("Material"). Except as set forth in Section 3.9 of the Disclosure
Schedule, (a) the Business owns or possesses adequate licenses or other valid
rights to use all Patent and Trademark Rights; (b) to the Company's knowledge,
the conduct of the Business as now being conducted does not conflict with any
valid patents, trademarks, trade names, mastheads or copyrights of others in any
way which, individually or in the aggregate, has or would reasonably be expected
to have a Material Adverse Effect; and (c) to the Company's knowledge, none of
the Patent and Trademark Rights is being infringed upon by others in any way
which, individually or in the aggregate, has or would reasonably be expected to
have a Material Adverse
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Effect. Except as set forth in Section 3.9 of the Disclosure Schedule, neither
the Company nor any of the Associated Subsidiaries has received any written
notice of infringement of any Patent or Trademark Right of any other person.
Except as set forth in Section 3.9 of the Disclosure Schedule, each of the
subscriber lists used in the Business is owned by the Company and the Associated
Subsidiaries and the Company and the Associated Subsidiaries have the exclusive
rights to use each of such subscriber lists.
3.10 Commitments. Section 3.10 of the Disclosure Schedule sets forth a
list of each contract, agreement (including, without limitation, non-compete
agreements) purchase or sale order, license, or other commitment or arrangement
(whether oral or in writing) with respect to the Business (other than solely
with respect to Retained Liabilities or Retained Assets) to which the Company or
any of the Associated Subsidiaries is a party or by which the Company or any of
the Associated Subsidiaries is bound (collectively, the "Commitments") (a) which
provides for future payments thereunder of more than $250,000 per year,
including, without limitation, all such Commitments which are (i) Commitments
for capital expenditures, (ii) distribution, dealer or sales agency Commitments,
(iii) Commitments for loans or advances or the incurrence of debt or guarantees
of third party obligations, and (iv) Commitments for the sale of any assets, but
excluding purchase orders or other Commitments for the purchase of raw
materials, components or supplies and sales orders or other Commitments for the
sale of finished goods entered into in the ordinary course of business; (b)
which restricts the kinds of businesses in which the Business may engage or the
geographical area in which the Business may be conducted; (c) which is an
indenture, mortgage, loan agreement or other Commitment for the borrowing of
money or a line of credit; (d) which is a collective bargaining agreement; (e)
which is a license (whether as licensor or licensee) or similar agreement
permitting the use of any Patent and Trademark Rights; (f) which is a joint
venture, partnership or similar agreement; (g) any Commitment which is an
employment agreement or severance agreement or bonus arrangement (either of an
ongoing or change of control nature) or Commitments of any kind with any
employee, officer or director of the Company or any Associated Subsidiary or any
of their respective Affiliates with respect to the Business, or any Commitment
of any kind with any shareholder of the Company or any Affiliate of any
shareholder of the Company; (h) which is a brokerage or finder's agreement; (i)
which is a stock purchase agreement, asset purchase agreement or other
acquisition or divestiture agreement other than the acquisition agreements
covering the acquisition of the Business by the Company so long as such
acquisition agreements do not provide for any current obligation or liability of
the Business that will be an Assumed Liability; or (j) which is not of the
foregoing type and is Material. Except as set forth in Section 3.10 of the
Disclosure Schedule, each of such Commitments, and each other Assumed Contract;
is a valid and binding obligation of the Company or the Associated Subsidiaries
and, to the knowledge of the Company, of the other parties to each of such
Commitments and each other Assumed Contract; each of such Commitments is
enforceable against the Company or an Associated Subsidiary, as applicable, in
accordance with its terms, except to the extent such enforceability may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws relating to creditors' rights generally and to
general principles of equity (regardless of whether enforcement is considered in
the proceeding in equity or at law); and neither the Company nor the applicable
Associated Subsidiary nor, to the knowledge of the Company, any other party is
in violation or breach of or default under any Commitment except where such
violation, breach or
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default, individually or in the aggregate, do not have and would reasonably not
be expected to have a Material Adverse Effect.
3.11 Litigation. Except as set forth in Section 3.11 of the Disclosure
Schedule and except as pertains to environmental matters which are the subject
of Section 3.20 below, as of the date of this Agreement, there is no action,
claim, suit, investigation or other litigation or proceeding in any court or
before any governmental authority ("Litigation") pending or, to the Company's
knowledge, threatened against the Company or any of the Associated Subsidiaries,
or relating to the transactions contemplated by this Agreement. Except as set
forth in Section 3.11 of the Disclosure Schedule, neither the Company, any of
the Associated Subsidiaries nor the Business is subject to any outstanding
orders, rulings, judgments or decrees which if adversely determined to the
Company, any of the Associated Subsidiaries or the Business would have or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
3.12 [Reserved].
3.13 U.S. Employee Benefit Plans. Section 3.13 of the Disclosure
Schedule lists (a) (i) all employee benefit plans (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), (ii) all other retirement or deferred compensation plans, incentive
compensation plans, stock plans, unemployment compensation plans, vacation pay,
severance pay, bonus or benefit arrangements, insurance or hospitalization
programs and (iii) all other fringe benefit arrangements, in the case of each of
(ii) and (iii), for any current or former employee, director, consultant or
agent, whether pursuant to contract, arrangement, custom or informal
understanding, which does not constitute an employee benefit plan and which
provides benefits to employees in the U.S. or which is subject to U.S. law and
(b) all employment (excluding offer letters to at-will employees) or consulting
agreements, which relate to or cover employees of the Business or with respect
to which the Business has any liability or contingent liability (the "Benefit
Plans"). The Investor has been supplied to the extent applicable true and
complete copies of all Benefit Plans and all contracts relating thereto, or to
the funding thereof, including, without limitation, all trust agreements,
insurance contracts, administration contracts, investment management agreements,
subscription and participation agreements, and recordkeeping agreements, each as
in effect on the date hereof. In the case of any Benefit Plan which is not in
written form, the Investor has been supplied with an accurate description of
such Benefit Plan as in effect on the date hereof.
3.14 Taxes. No material Tax liens have been filed on the Assets and no
material claims are being asserted that could reasonably result in a Tax lien on
the Assets. For purposes of this Agreement, (i) "Taxes" (including, with
correlative meaning, the term "Tax") shall mean all Taxes, charges, fees,
levies, penalties or other assessments imposed by any federal, state, local or
foreign taxing authority, including, but not limited to, income, gross receipts,
excise, property, sales, transfer, franchise, payroll, withholding, social
security and other Taxes, and shall include any interest, penalties or additions
attributable thereto.
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3.15 Undisclosed Liabilities. There are no liabilities of any nature,
whether accrued, absolute, contingent or otherwise, whether due or to become
due, with respect to the Business, other than (a) liabilities that are reflected
in the Financial Statements; (b) liabilities disclosed in Section 3.15 of the
Disclosure Schedule; (c) liabilities arising since September 30, 1997 in the
ordinary course of business; and (d) liabilities arising under this Agreement or
any of the Associated Agreements.
3.16 Fees. Except for the fees payable to Donaldson, Lufkin & Jenrette
Securities Corporation, which are the sole responsibility of the Company,
neither the Company nor any Associated Subsidiary has paid or become obligated
to pay any fee or commission to any broker, finder or intermediary in connection
with the transactions contemplated hereby.
3.17 Labor Matters. Except as disclosed on Section 3.17 of the
Disclosure Schedule, neither the Company nor any of the Associated Subsidiaries
is party to any collective bargaining agreement with respect to the Business nor
does any labor union or collective bargaining agent represent any employees of
the Company or any of the Associated Subsidiaries who are employed with respect
to the Business. Except as set forth in Section 3.17 of the Disclosure Schedule,
there is no labor strike, slow-down or stoppage pending, or to the Company's
knowledge, threatened by the employees of the Company or any of the Associated
Subsidiaries, nor are there any pending grievances (or arbitrations thereon),
nor have any unfair labor practice charges with respect to the Company or any of
the Associated Subsidiaries been filed with the National Labor Relations Board,
nor have any written or oral grievances had the result of varying the terms or
the effect of the terms of any collective bargaining agreement to which the
Company or any Associated Subsidiary is a party which individually or in the
aggregate have or would reasonably be expected to have a Material Adverse
Effect. Except as set forth in Section 3.17 of the Disclosure Schedule, neither
the Company nor any Associated Subsidiary has taken any action within the ninety
(90) day period prior to the date hereof, and will not take such action prior to
Closing, which resulted in or which will result in an "employment loss" as such
term is defined in the Worker Adjustment and Retraining Notification Act, 29
U.S.C. Sections 2101-2109 (the "WARN Act"), with respect to any employee of the
Business. Except as set forth in Section 3.17 of the Disclosure Schedule, since
September 30, 1997, the Company and the Associated Subsidiaries have not
increased the compensation of employees of the Business, except for increases
for merit based promotions in the ordinary course of business.
3.18 Real Property. Set forth on Section 3.18 of the Disclosure
Schedule is a list of all Owned Real Property and the name of the record title
holder thereof. Except as set forth in Section 3.18 of the Disclosure Schedule,
none of the Owned Real Property violates any laws, rules, regulations, codes or
ordinances of any governmental authority or subdivision thereof in any material
respect. Except as set forth in Section 3.18 of the Disclosure Schedule, all of
the buildings, structures and appurtenances situated on the Owned Real Property
are in operating condition and in a state of maintenance and repair adequate for
the purposes for which such buildings, structures and appurtenances are
presently being used.
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3.19 Leases. Set forth on Section 3.19 of the Disclosure Schedule is a
list of all real property leases to which the Company or any Associated
Subsidiary is a party primarily used with respect to the Business and of which
any real property leased by the Company or any Associated Subsidiary is a party
primarily used with respect to the Business is the subject. Except as set forth
in Section 3.19 of the Disclosure Schedule, each such lease and all leases of
personal property are valid, binding and in full force and effect, and all rent
and other sums and charges currently payable under each such lease have been
paid, except where the failure to make such payments individually and in the
aggregate has not and would reasonably not be expected to have a Material
Adverse Effect. Except as set forth in Section 3.19 of the Disclosure Schedule,
since September 30, 1997, neither the Company nor any Associated Subsidiary has
received any notice of default under any such lease and no termination event or
condition which, with the giving of notice or the passage of time, or both,
could reasonably be expected to constitute a default thereunder on the part of
the Company or any of the Associated Subsidiaries or, to the Company's
knowledge, the lessor, exists under any such lease which individually or in the
aggregate have or would reasonably be expected to have a Material Adverse
Effect.
3.20 Environmental Matters. (a) Except as set forth on Section 3.20(a)
of the Disclosure Schedule, the Company or the Associated Subsidiaries have
obtained, and disclosed to the Investor, all applicable permits, licenses and
other authorizations which are required under any and all Environmental Laws
with respect to all real property owned, leased or operated with respect to the
Business.
(b) Except as set forth on Section 3.20(b) of the Disclosure Schedule,
the Business is in Material compliance with all terms and conditions of any such
required permits, licenses and authorizations, and all applicable requirements
of Environmental Laws with respect to all real property owned, leased or
operated with respect to the Business.
(c) Except as set forth on Section 3.20(c) of the Disclosure Schedule,
there is no judicial or administrative proceeding, investigation or remedial
action pending or to the Company's knowledge threatened against the Company or
any of the Associated Subsidiaries (A) alleging the violation of, noncompliance
with, or liability imposed under any Environmental Law or (B) alleging that they
are or may be responsible for any response, cleanup or corrective action under
any Environmental Law.
(d) Except as set forth on Section 3.20(d) of the Disclosure Schedule,
no generation, manufacture, storage, treatment, transportation, disposal or
release of Hazardous Materials (as defined below) is occurring or has occurred
so as to lead to liability under any Environmental Law, on or from any real
property owned, leased or operated by the Business or otherwise used in
connection with the Business; nor have any Hazardous Materials migrated from or
threatened to migrate from other properties upon or beneath any real property
owned, leased or operated by the Business or used with respect to the Business.
"Hazardous Materials" means any substance, waste, pollutant or contaminant
denominated or regulated as hazardous or toxic under any Environmental Law.
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3.21 Pre-Closing Liabilities. Upon Closing, CNCO will not have
liabilities of any nature whether accrued, absolute, contingent or otherwise,
whether due or to become due, relating to the Business which arise from any act,
matter, circumstance or omission relating to the period prior to the Closing
Date except for the Assumed Liabilities and liabilities of CNCO arising pursuant
to this Agreement and the Associated Agreements which are expressly intended to
be liabilities of CNCO from and after the Closing.
3.22 Agreements with Affiliates. Section 3.22 of the Disclosure
Schedule identifies all agreements, contracts and commitments entered into since
September 30, 1997 primarily related to the Business between any Associated
Subsidiary, on the one hand, and any Affiliate of the Company or any shareholder
of the Company, on the other hand, other than the Transitional Services
Agreement (as defined in Section 5.12). (As used herein the term "Affiliate"
shall have the meaning set forth in Rule 12b-2 under the Securities Exchange Act
of 1934, as amended.)
3.23 Bulk Sales; Transfer Taxes. The Company and all Associated
Subsidiaries have complied with all applicable bulk sale statutes, other than
provisions of state or local Tax laws requiring notification of taxing
authorities regarding sales of assets ("Bulk Sales Laws") to, and has paid all
transfer Taxes with respect to the sale of the Business to, CNCO.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor and CNCO hereby represent and warrant to the Company as
follows:
4.1 Organization and Good Standing. Each of the Investor and CNCO is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation.
4.2 Corporate Authority and Approval. Each of the Investor and CNCO has
all requisite corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by the Investor and CNCO and the
consummation by the Investor and CNCO of the transactions contemplated hereby
have been duly authorized by all requisite corporate action on the part of each
of the Investor and CNCO. This Agreement constitutes the valid and binding
obligation of the Investor enforceable against the Investor and CNCO in
accordance with its terms, except to the extent such enforceability may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws relating to creditors' rights generally.
4.3 Consents. Except as set forth in Exhibit 4.3, no consent, approval
or authorization of, or exemption by, or filing with, notice to or permit from
any court or any federal, state, local, foreign or other governmental authority
or other person, other than pursuant to the HSR Act, is required in connection
with the execution, delivery and performance by the Investor and CNCO of
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this Agreement or the taking by it of any other action contemplated hereby,
excluding, however, consents, approvals, authorizations, exemptions and filings,
if any, which the Company is required to obtain or make.
4.4 No Conflicts. The execution, delivery and performance by the
Investor and CNCO of this Agreement and all other instruments, agreements,
certificates and documents contemplated hereby and the consummation by the
Investor and CNCO of the transactions contemplated hereby will not, with or
without the giving of notice or the lapse of time, or both, subject to obtaining
any required consents referred to in Section 4.3, (i) violate or conflict with
any provision of its charter or bylaws, (ii) violate or conflict with any law,
statute, rule, regulation, order, judgment or decree applicable to or binding on
the Investor or CNCO, or (iii) conflict with or result in the breach of any
agreement reflecting obligations of the Investor or CNCO for borrowed money, in
each case except for violations, conflicts or breaches which would not
individually or in the aggregate materially hinder or impair the consummation of
the transactions contemplated hereby.
4.5 Financing. The Investor has obtained commitment letters for bank
financing and a "highly confident" letter for Rule 144A financing in amounts
sufficient to complete the transactions. Copies of such letters are attached
hereto as Exhibit 4.5-1. However, if the financing as provided in Exhibit 4.5-1
is not available, the Investor has obtained commitment letters for alternative
financing in amounts sufficient to complete the transactions as set forth in
Exhibit 4.5-2. As of the date hereof, the Investor has no reason to believe that
any of the conditions to the financing will not be satisfied or that the
financing will not be available on a timely basis to complete the transactions
contemplated hereby.
4.6 Litigation. As of the date of this Agreement, there is no
Litigation pending or, to the Investor's or CNCO's knowledge, threatened against
the Investor or CNCO (a) with respect to which there is a reasonable likelihood
of a determination which, individually or in the aggregate, would materially
hinder or impair the consummation of the transactions contemplated hereby or (b)
which seeks to enjoin or obtain damages in respect of the consummation of the
transactions contemplated hereby.
ARTICLE V
COVENANTS OF THE COMPANY
The Company and the Associated Subsidiaries hereby covenant and agree
with the Investor as follows:
5.1 Cooperation by the Company.
(a) Consents and Authorizations. The Company shall, and shall cause its
Associated Subsidiaries to, use all commercially reasonable efforts and
cooperate with the Investor to secure all necessary consents, approvals,
authorizations, beneficial assignments, exemptions and waivers
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from third parties (collectively "Consents") as shall be required in order to
enable the Investor to effect the transactions contemplated hereby and to
prevent a breach of, a default under, or a termination, change in the terms or
conditions or modification of, any instrument, contract, lease, license or other
agreement to which the Company or any of the Associated Subsidiaries is a party
or by which any of them is bound, and shall otherwise use all commercially
reasonable efforts to cause the consummation of such transactions in accordance
with the terms and conditions hereof. Without limiting the provisions set forth
in this Section 5.1, the Company shall file, or cause to be filed, with the
Department of Justice and the Federal Trade Commission a Pre-Merger Notification
and Report Form pursuant to the HSR Act in respect of the transactions
contemplated hereby within ten business days of the date of this Agreement and
the Company shall use, and shall cause each of its Associated Subsidiaries and
Affiliates to use, all reasonable efforts to take or cause to be taken all
actions necessary, including to promptly and fully comply with any requests for
information from regulatory authorities, to obtain any consent, waiver, approval
or authorization relating to the HSR Act that is necessary to enable the parties
to consummate the transactions contemplated by this Agreement. Notwithstanding
the foregoing, no provision of this Agreement shall be construed as requiring
the Company or any of the Associated Subsidiaries to make payments of any kind
in order to obtain Consents.
(b) Nonassignable Contracts. Anything contained herein to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
Assumed Contract or other commitment or asset if an assignment or attempted
assignment of the same without the consent of the other party or parties thereto
would constitute a breach thereof or in any way impair the rights of the Company
or the Associated Subsidiaries thereunder. If any consent necessary to convey
any Asset is not obtained or if an attempted assignment would be ineffective or
would impair any party's rights under any such Assumed Contract or other Asset
so that CNCO would not receive all such rights, then (x) the Company shall use
commercially reasonable efforts (it being understood that such efforts shall not
include any requirement of the Company or the Associated Subsidiaries or CNCO or
the Investor to expend money or offer or grant any financial accommodation) to
provide or cause to be provided to CNCO, to the extent permitted by law, the
benefits of any such Assumed Contract or other Asset, and the Company shall
promptly pay or cause to be paid to CNCO, when received, all moneys received by
the Company or the Associated Subsidiaries with respect to any such Assumed
Contract or other Asset and (y) in consideration thereof CNCO shall pay, perform
and discharge on behalf of the Company and the Associated Subsidiaries debts,
liabilities, obligations and commitments thereunder in a timely manner and in
accordance with the terms thereof. In addition, the Company shall take such
other actions (at the expense of CNCO, as designated by the Investor) as may
reasonably be requested by the Investor in order to place CNCO, insofar as
reasonably possible, in the same position as if such Assumed Contract or other
Asset had been transferred as contemplated hereby and so all the benefits and
burdens relating thereto, including possession, use, risk of loss, potential for
gain and dominion, control and command are to inure to CNCO. If and when such
consents and approvals are obtained, the transfer of the applicable asset shall
be effected in accordance with the terms of this Agreement.
5.2 Conduct of the Business. (a) During the period from the date of
this Agreement to the Closing, except as otherwise contemplated by this
Agreement or as the Investor shall otherwise
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agree in writing in advance with respect to the Business, the Company covenants
and agrees to, and shall cause the Associated Subsidiaries to, (i) conduct the
Business in the ordinary and usual course in a manner consistent with past
practice, (ii) use their best efforts to preserve intact its present business
organization, (iii) make available to the Investor the services of the officers
and employees of the Business, (iv) preserve the good will and relationships
with customers, suppliers and others having business dealings with the Business
and (v) not take any action which would cause any of the representations and
warranties of the Company in Article III to be untrue or incorrect in any
material respect as of the Closing. From December 31, 1997 through the Closing
Date the Company will not, and will cause the Associated Subsidiaries not to (i)
declare, set aside or pay any dividends with respect to their respective capital
stock, or redeem or otherwise acquire any of their respective capital stock or
other securities (except for payments of cash dividends and redemptions for
cash) or (ii) pay any indebtedness or accounts payable except for indebtedness
or accounts payable of the Business to third parties in the ordinary course of
business (it being expressly understood that no payments will be made on any
intercompany notes).
(b) During the period from the date of this Agreement to the Closing,
except as otherwise provided for in this Agreement or Section 5.2 of the
Disclosure Schedule or as the Investor shall otherwise consent, the Company
covenants and agrees that, with respect to the Business, it shall not, and it
shall not permit its Associated Subsidiaries to:
(i) other than (a) sales of products in the ordinary course of
business, or (b) sales of obsolete plants and equipment in the ordinary
course of business, sell, transfer, convey, assign or otherwise dispose
of, or agree to sell, transfer, convey, assign or otherwise dispose of,
any of its assets or properties, or suffer or permit the creation of
any Encumbrance; other than in the ordinary course of business;
(ii) other than (a) Commitments to distributors in the
ordinary course of business consistent with past practice or (b) in the
ordinary course of business consistent with past practice (x) take any
action, or enter into or authorize any Commitment or transaction or (y)
terminate, modify, amend or otherwise alter any material terms or
provisions of any of its Commitments, except as expressly contemplated
by this Agreement;
(iii) abandon, sell, pledge, alter, amend or enter into any
licensing or contractual arrangements with respect to any Intellectual
Property Rights;
(iv) fail to pursue the collection of receivables in the
ordinary course of business, fail to discharge its payables in the
ordinary course of business or otherwise make any material change in
the course of dealing with customers or suppliers as a whole; or
(v) agree or commit to any of the foregoing.
5.3 Access. From the date hereof and prior to the Closing, the Company
shall provide the Investor with such information as the Investor may from time
to time reasonably request with respect to the Company and the Associated
Subsidiaries and the transactions contemplated by this
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Agreement, provide the Investor and its representatives reasonable access during
regular business hours and upon reasonable notice to the properties, books and
records of the Company, and the Associated Subsidiaries as the Investor may from
time to time reasonably request, provided that the Company shall not be
obligated to provide the Investor with any information which would violate (i)
any law, rule or regulation or term of any Commitment, or (ii) any
confidentiality provision of any contract, or if the provision thereof would
adversely affect the ability of the Company or the Associated Subsidiaries to
assert attorney client, attorney work product or other similar privilege.
Notwithstanding the foregoing, the Investor shall have the absolute right to
review any Commitment or other Assumed Contract.
5.4 Permits. The Company agrees to use commercially reasonable efforts
to assist the Investor in obtaining for CNCO all Permits required for the
Business to the extent they cannot be transferred to CNCO pursuant to this
Agreement. Notwithstanding the foregoing, the Investor shall have the right to
direct the Company to forego one or more applications for Permits. The Company
shall pay the costs of such Permits.
5.5 Further Assurances. At any time after the Closing Date, the Company
shall promptly execute, acknowledge and deliver any other assurances or
documents reasonably requested by the Investor and necessary for the Investor to
satisfy its obligations hereunder or obtain the benefits contemplated hereby.
5.6 Associated Agreements. The Company and the Associated Subsidiaries
covenant and agree that (i) they shall each enter into each of the Associated
Agreements (as defined in Section 5.12) in a timely matter, (ii) they shall each
perform their respective obligations pursuant to, and fully comply with the
terms of, the Associated Agreements; and (iii) that the Investor is a third
party beneficiary of the Associated Agreements; and (iv) that the Investor must
approve any and all changes to the forms of Associated Agreements that are
exhibits to this Agreement.
5.7 No Default. Neither the Company nor the Associated Subsidiaries
shall do any act or omit to do any act, or permit any act or omission to act,
which will cause a breach of any Commitment to which the Company or the
Associated Subsidiaries are a party or by which any of them or their assets are
bound or the Business are subject, the breach of which would have a Material
Adverse Effect.
5.8 Compliance with Laws. Through the close of business on the Closing
Date, the Company shall, and shall cause the Associated Subsidiaries to, comply
with all laws, statutes, regulations, rules and orders applicable to the
Business or the operation of the Company or the Associated Subsidiaries, except
where the failure to comply therewith, individually or in the aggregate, does
not have a Material Adverse Effect.
5.9 Supplemental Information. From time to time prior to the Closing,
the Company will promptly disclose in writing to the Investor any matter
hereafter arising which, if existing, occurring or known at the date of this
Agreement would have been required to be disclosed to the Investor or which
would render inaccurate any of the representations, warranties or statements set
forth in
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Article III hereof. No information provided to a party pursuant to this Section
shall be deemed to cure any breach of any representation, warranty or covenant
made in this Agreement.
5.10 [Reserved].
5.11 [Reserved].
5.12 Transitional Services. The Company agrees to provide transition
management and administrative services ("Transitional Services") to CNCO for a
period of up to 3 years pursuant to the Transitional Services Agreement
substantially in the form of Exhibit 5.12 (the "Transitional Service Agreement";
the Transitional Services Agreement, together with the Like Kind Exchange
Agreement (as defined in Section 7.8) and the Non-Competition Agreement (as
defined in Section 7.4), are collectively referred to as the "Associated
Agreements"). The Investor must approve any and all changes to the form of
Transitional Services Agreement that is an exhibit to this Agreement.
5.13 [Reserved]
5.14 Employees. The Company agrees to cooperate with the Investor with
respect to the Investor's making of employment offers to the employees of the
Business on behalf of CNCO pursuant to Section 10.1. Exhibit 5.14 sets forth a
list of employees of the Business. The Company will provide the Investor by
November 25, 1997 with a substituted Exhibit 5.14, setting forth a list of the
employees of the Business as of the date hereof. At the request of the Investor,
the Company will forward employment offers on behalf of the Investor to the
employees of the Business. The Company will permit the Investor to discuss
employment offers with employees of the Business during business hours and to
make presentations to the employees of the Business during business hours. The
Company agrees that beginning on the date of this Agreement until the second
anniversary of the Transfer Date (as defined in Section 10.1) neither it nor any
of its Affiliates or subsidiaries will directly or indirectly solicit any
employees of CNCO with respect to employment, without the prior written consent
of the Investor. However, nothing herein prevents the Company or its Affiliates
from placing any general advertisements for employees or from hiring any
employees of CNCO at any time who initiate employment discussions with the
Company or its Affiliates or who respond to any general advertisement for
employees placed by the Company or its Affiliates. During the period commencing
on the date hereof through the Closing Date, the Company and the Associated
Subsidiaries will not increase the compensation of employees of the Business,
except that any employee receiving a merit based promotion in the ordinary
course of business and resulting in increased responsibilities may receive a
raise appropriate to reflect such employee's new position. Bonuses paid to
employees of the Business for 1997 in amounts determined by the Company in the
ordinary course of business shall be reflected in Net Liabilities of the
Business for purposes of Section 1.3(f), and, unless CNCO consents otherwise,
CNCO will pay such bonuses after the Closing Date. CNCO consents to the payment
of such bonuses by the Company if the Closing Date is later than January 30,
1998.
5.15 Amended Disclosure Schedule. The Company may provide an amended
Disclosure Schedule, adding solely matters that have arisen since the date of
this Agreement, to the Investor
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48 hours prior to Closing; provided, however, that such amended Disclosure
Schedule shall not affect any representation or warranty of the Company or any
Associated Subsidiary or the obligation of the Company to satisfy the conditions
to Closing set forth in Section 7.1. The purpose of the additions to the
Disclosure Schedule shall solely be to provide the Investor with information for
purposes of Section 7.1 below about the extent, if any, to which the Company's
representations and warranties will not be true and correct as of the Closing,
and any failure of the Company's representations and warranties to be true and
correct as of the Closing disclosed by such additions shall not give rise to
liability after the Closing if the Closing occurs.
5.16 Insurance. The Company agrees to, and to cause the Associated
Subsidiaries to, maintain existing insurance on the Business for the benefit of
CNCO with respect to events happening on or prior to the Closing Date.
5.17 Lenders' Consent. The Company agrees to obtain by three weeks from
the date of execution hereof the consent of its lenders (the "Lenders' Consent")
to the extent necessary to effect the transactions contemplated by this
Agreement and the Associated Agreements.
5.18 Vehicular Titles. The Associated Subsidiaries agree to provide the
certificates transferring title to CNCO for all Assets which are motor vehicles
(the "Vehicular Titles") on the Closing Date.
5.19 UCC Termination Statements. The Associated Subsidiaries agree to
deliver to CNCO on the Closing Date UCC termination statements, releases of
mortgages and/or deeds of trust and any other documents as are necessary for the
discharge of all Encumbrances (other than Permitted Encumbrances) affecting the
Business or any other of the assets.
5.20 Real Estate Conveyance Documents and Lease Assignments. The
Associated Subsidiaries agree to deliver to CNCO on the Closing Date real estate
conveyance documents and lease assignments, as applicable, with respect to all
of the real property set forth on Sections 3.18 and 3.19, as applicable, of the
Disclosure Schedule, as amended as of the Closing Date.
ARTICLE VI
COVENANTS OF INVESTOR
The Investor hereby covenants and agrees with the Company:
6.1 Cooperation by Investor. From the date hereof and prior to the
Closing, the Investor shall use all reasonable efforts, and shall cooperate with
the Company, to secure all necessary consents, approvals, authorizations,
exemptions and waivers from third parties as shall be required in order to
enable the Company to effect the transactions contemplated hereby, and shall
otherwise use all reasonable efforts to cause the consummation of such
transactions in accordance with the terms and conditions hereof. Without
limiting the provisions set forth in this Section 6.1, the
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Investor shall file with the Department of Justice and the Federal Trade
Commission a Pre-Merger Notification and Report Form pursuant to the HSR Act in
respect of the transactions contemplated hereby within ten business days of the
date of this Agreement, and the Investor shall use, and shall cause each of its
Affiliates to use, all reasonable efforts to take or cause to be taken all
actions necessary, including to promptly and fully comply with any requests for
information from regulatory authorities, to obtain any consent, waiver, approval
or authorization relating to the HSR Act that is necessary to enable the parties
to consummate the transactions contemplated by this Agreement.
6.2 Preservation of Books and Records. For a period of (i) five years
from the Closing Date with respect to Books and Records (as defined below)
relating to litigation, Tax or environmental matters and (ii) three years from
the Closing Date with respect to Books and Records relating to all other
matters:
(i) The Investor shall not dispose of or destroy any of the
books and records of CNCO relating to periods prior to the Closing
("Books and Records") without first offering to turn over possession
thereof to the Company by written notice to the Company at least 90
days prior to the proposed date of such disposition or destruction.
(ii) The Investor shall allow the Company and its agents
access to all Books and Records on reasonable notice and at reasonable
times at the Investor's principal place of business or at any location
where any Books and Records are stored, and the Company shall have the
right, at their own expense, to make copies of any Books and Records;
provided, however, that any such access or copying shall be had or done
in such a manner so as not to unduly interfere with the normal conduct
of the Investor's business and provided that the Company shall maintain
the confidentiality of such Books and Records.
6.3 Employees. The Investor agrees that for the period beginning as of
the date hereof and ending on the second anniversary of the Transfer Date,
without the prior written consent of the Company, neither it nor CNCO shall
directly or indirectly solicit any employees of the Company with respect to
employment other than persons employed by the Business at the Transfer Date.
However, nothing herein prevents the Investor or CNCO from placing any general
advertisement for employees or from hiring any employees of the Company at any
time who initiate employment discussions with the Investor or CNCO or who
respond to any general advertisement for employees placed by CNCO or the
Investor.
ARTICLE VII
CONDITIONS TO INVESTOR'S OBLIGATIONS
The obligations of the Investor to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction (or waiver,
where permissible) at or prior to the Closing of all of the following
conditions:
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7.1 Representations, Warranties and Covenants of the Company and the
Associated Subsidiaries. The Company and the Associated Subsidiaries shall have
complied in all material respects with each of its agreements and covenants
contained herein to be complied with on or prior to the Closing Date. All the
representations and warranties of the Company and the Associated Subsidiaries
set forth in this Agreement that are qualified as to materiality shall be true
and correct, and the representations and warranties of the Company and the
Associated Subsidiaries set forth in this Agreement that are not so qualified
shall be true and correct in all material respects, in each case as of the date
of this Agreement, and as of the Closing Date (after giving effect to the
closings pursuant to each of the Associated Agreements) as though made on and as
of the Closing Date, with future tense references in Section 3.1 being deemed to
be present tense references as of the Closing Date, except that the accuracy of
representations and warranties that by their terms speak as of the date of this
Agreement or some other date shall be determined as of such date; provided that
this condition shall not be unsatisfied unless it would be unsatisfied if the
representations and warranties of the Company and the Associated Subsidiaries in
this Agreement were deemed to refer to the Business as defined in this Agreement
and the "Business" as defined in the Transfer Agreement constituting a part of
the Like Kind Exchange Agreement, taken as a whole, and the Disclosure Schedule
is read to apply to such combination of both such Businesses. The Investor shall
have received a certificate executed by or on behalf of the Company and the
Associated Subsidiaries, dated as of the Closing Date, certifying as to the
fulfillment of the conditions set forth in this Section 7.1.
7.2 Consents. The applicable waiting period under the HSR Act shall
have expired or been terminated and all other consents, approvals,
authorizations, exemptions and waivers by, or filing with, notice to or permit
from governmental agencies or other persons that shall be required in order to
enable the Investor to consummate the transactions contemplated hereby shall
have been obtained (except for such consents, approvals, authorizations,
exemptions and waivers, filings, notices or permits, the absence of which would
not prohibit consummation of such transactions or render such consummation
illegal).
7.3 No Prohibitions. No statute, rule or regulation or order or decree
of any court or governmental body shall be in effect which prohibits the
Investor from consummating the transactions contemplated by this Agreement.
7.4 Closing Documents. In addition to the other documents expressly
referenced in this Article VII, the Company or its Affiliates shall have
delivered or caused to be delivered the following closing documents or payments
in form and substance satisfactory to the Investor:
(a) the Associated Subsidiaries shall have executed and delivered (i)
Bill of Sale, Assignment and Assumption substantially in the form of Exhibit
7.4(a) hereto and (ii) Trademark and Trade Name Assignments substantially in the
form of Exhibit 7.4(b) hereto (the "Trademark and Trade Name Assignments").
(b) American Publishing Management Services Inc. shall have executed
and delivered the Transitional Services Agreement;
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(c) the Company shall have executed and delivered a non-competition
agreement with CNCO substantially in the form of Exhibit 7.4(c) hereto (the
"Non-Competition Agreement);
(d) [Reserved];
(e) simultaneously with the Closing, the Company shall have paid to
CNCO an amount equal to the Estimated Net Cash Position;
(f) [Reserved];
(g) a copy of the resolution or resolutions duly adopted by the board
of directors of the Company and each Associated Subsidiary authorizing the
execution, delivery and performance of this Agreement and the Associated
Agreements and the transactions contemplated hereby and thereby, certified by
the Secretary or an Assistant Secretary of such entity;
(h) a certificate of the Secretary or an Assistant Secretary of the
Company and each Associated Subsidiary as to the incumbency and signatures of
the officers of each such entity executing this Agreement and the Associated
Agreements;
(i) certificates issued by the Secretary of State of the State of
Delaware, as of a recent date, as to the good standing of each of the Company
and each Associated Subsidiary;
(j) certificates issued by the Secretary of State of each jurisdiction
in which the Company and each Associated Subsidiary is licensed or qualified to
do business as a foreign corporation, as of a recent date, as to the good
standing of each such entity;
(k) copies of all governmental consents, approvals and filings which
have been obtained by the Company pursuant hereto; and
(l) such other documents relating to the transactions contemplated
hereby and under the Associated Agreements as the Investor or its counsel may
reasonably request.
7.5 Opinion of Counsel. The Investor shall have received an opinion of
Cravath, Swaine & Moore, counsel for the Company, substantially in the form of
Exhibit 7.5-1 and the opinion of internal counsel of the Company in the form of
Exhibit 7.5-2.
7.6 Financing. The Investor shall have obtained (or the Company shall
have obtained for the benefit of the Investor) either (i) financing of $350
million to complete the transactions contemplated hereby and provide for working
capital for CNCO on substantially the terms set forth in the letters attached as
Exhibit 4.5-1 or terms which are more favorable to the Investor or (ii)
financing of $205 million to complete the transactions contemplated hereby and
provide for working capital for CNCO on substantially the terms set forth in the
letters attached as Exhibit 4.5-2 or terms which are more favorable to the
Investor (it being understood that (x) in the case of either (i) or (ii)
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the Investor may choose to finance a higher portion of the amounts needed to
complete the transactions contemplated hereby and provide for working capital
for CNCO than the amounts specified in (i) or (ii), as the case may be, but that
the inability to finance such higher amounts shall not cause a failure of the
condition to closing set forth in this Section 7.6 and (y) in any event, the
condition specified in this Section 7.6 will be satisfied if the financing
referred to in clause (ii) is available to the Investor). In connection with the
financing referred to in Exhibit 4.5-2, the Investor agrees (x) to cause the
notice required by paragraph 1 of the Supplemental Commitment Letter contained
in Exhibit 4.5-2 (the "Supplemental Commitment Letter") for that financing to be
given on a timely basis and (y) to cause the conditions specified in paragraph
3.b(2) of the Supplemental Commitment Letter to be satisfied, and further agrees
that the nonsatisfaction of the conditions specified in the foregoing clauses
(x) and (y) shall not be deemed to cause a failure of the condition specified in
this Section 7.6 to be satisfied. The Investor further agrees that, for purposes
of determining whether the condition in this Section 7.6 is satisfied, the
determination of whether paragraph 3b(1) of the Supplemental Commitment Letter
is satisfied shall take into account only (x) with respect to paragraph 3b(1)(i)
of the Supplemental Commitment Letter, the amounts required to be paid by the
Investor, CNCO or any Affiliate (at the Closing or at a later time in the
ordinary course) pursuant to the transactions contemplated by this Agreement and
the Associated Agreements, (y) with respect to paragraph 3b(1)(ii) of the
Supplemental Commitment Letter, indebtedness that is an Assumed Liability, and
(z) with respect to paragraph 3b(1)(iii) of the Supplemental Commitment Letter,
not more than $20 million of the fees, costs, expenses and other amounts payable
by the Investor, CNCO or any Affiliate in respect of the transactions
contemplated by this Agreement and the Associated Agreements or the financing
thereof or any services related thereto.
7.7 [Reserved].
7.8 Like Kind Exchange. Simultaneously with the Closing, the Investor
and a subsidiary of the Company will close a like kind exchange (the "Like Kind
Exchange") pursuant to a transfer agreement between American Publishing Company
of Illinois ("APC-Illinois") and the Investor (the "Transfer Agreement"), the
Exchange Agreement between APC-Illinois and Chicago Deferred Exchange
Corporation (the "Exchangor") and the Qualified Exchange Trust Agreement among
the Chicago Trust Company, the Exchangor and APC-Illinois substantially in the
form set forth in Exhibit 7.8 (collectively, the "Like Kind Exchange
Agreement"). The Investor must approve any and all changes to the form of any of
the components of the Like Kind Exchange Agreement that is an exhibit to this
Agreement.
7.9 Lenders' Consent. The Lenders' Consent shall have been received.
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ARTICLE VIII
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligation of the Company to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction (or waiver,
where permissible) at or prior to the Closing of all of the following
conditions:
8.1 Representations, Warranties and Covenants of Investor. The Investor
shall have complied in all material respects with each of its agreements and
covenants contained herein to be complied with on or prior to the Closing Date.
All the representations and warranties of the Investor set forth in this
Agreement that are qualified as to materiality shall be true and correct, and
the representations and warranties of the Investor set forth in this Agreement
that are not so qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement, and as of the Closing Date as though
made on and as of the Closing Date, except that the accuracy of representations
and warranties that by their terms speak as of the date of this Agreement or
some other date shall be determined as of such date. The Company shall have
received a certificate executed by or on behalf of the Investor, dated as of the
Closing Date, certifying as to the fulfillment of the conditions set forth in
this Section 8.1.
8.2 Consents. The applicable waiting period under the HSR Act shall
have expired or been terminated and all other consents, approvals,
authorizations, exemptions by, or filing with, notice to or permit from
governmental agencies or other persons that shall be required in order to enable
the Company to consummate the transactions contemplated hereby shall have been
obtained (except for such consents, approvals, authorizations, exemptions,
filings, notices or permits, the absence of which would not prohibit
consummation of such transactions or render such consummation illegal).
8.3 No Prohibitions. No statute, rule or regulation or order or decree
of any court or governmental body shall be in effect which prohibits the Company
from consummating the transactions contemplated by this Agreement.
8.4 Closing Documents. In addition to the other documents expressly
referenced in this Article VIII, the Investor or CNCO shall have delivered the
following payments or closing documents in form and substance satisfactory to
the Company:
(a) simultaneously with the Closing, the Investor or CNCO shall have
made the cash payments required under Sections 1.3(a) and (d) and shall have
assumed the Assumed Liabilities;
(b) a copy of the resolution or resolutions duly adopted by the board
of directors of the Investor authorizing the execution, delivery and performance
of this Agreement and the Associated Agreements and the transactions
contemplated hereby and thereby;
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(c) CNCO shall have executed and delivered the Transitional Services
Agreement and the Non-Competition Agreement;
(d) a certificate of the Secretary, or an Assistant Secretary of the
Investor as to the incumbency and signatures of the officers executing the
Agreement;
(e) certificates issued by the Secretary of State of Delaware as to the
good standing of the Investor; and
(f) such other documents relating to the transactions contemplated
hereby or under the Associated Agreements as the Company or its counsel may
reasonably request.
8.5 Opinion of Counsel. The Company shall have received an opinion of
Mayer, Brown & Platt, counsel for the Investor, substantially in the form of
Exhibit 8.5.
8.6 Lenders' Consent. The Lenders' Consent shall have been received.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated by either party, by a
written notice to the other parties, prior to Closing:
(a) by the mutual written consent of the Company and the Investor;
(b) by either the Investor or the Company if the Closing shall not have
occurred on or before February 28, 1998; provided that this right to terminate
shall not be available to any party whose breach of this Agreement has been the
cause of, or resulted in, the Closing not occurring;
(c) by the Investor if the Lenders' Consent has not been received by
three weeks from the date of execution hereof.
9.2 Effect on Obligations. (a) Termination of this Agreement pursuant
to this Article IX shall terminate all rights and obligations of the parties
hereunder and none of the parties shall have any liability to the other party
hereunder, except that Article XII shall remain in effect, and provided that
neither anything herein nor the termination of this Agreement shall relieve any
party from liability for any breach of this Agreement prior to such termination.
(b) In the event of a termination by the Company or the Investor
pursuant to Section 9.1, written notice thereof shall forthwith be given to the
other party. In addition, the Investor shall return all documents and other
material received from the Company or the Associated Subsidiaries relating to
the transactions contemplated hereby, whether obtained before or after the
execution
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hereof, to the Company and shall destroy all analyses, notes, reports, and other
documents prepared in connection with the transactions contemplated by this
Agreement and shall deliver to the Company a certificate signed by an officer of
the Investor certifying as to such destruction.
ARTICLE X
EMPLOYEE MATTERS
10.1 Transferred Employees. Prior to the date on which employees of the
Business are transferred to CNCO (the "Transfer Date", which date shall be the
Closing Date or such later date as the parties shall mutually agree in
accordance with Section 10.3), CNCO shall offer employment to each employee of
the Business set forth on Exhibit 5.14 (other than any such employees whose
employment has been terminated prior to the Transfer Date) and each other person
so employed on the Transfer Date whose employment primarily relates to the
Business (the "Employees") on such terms and conditions (including salary and
benefit level) that are not materially less favorable (exclusive of any equity
incentive compensation provided by the Company), when taken in the aggregate to
the terms and conditions of the employee's employment with the Company or the
Associated Subsidiaries, as the case may be, immediately prior to the Transfer
Date. CNCO will give Employees credit for accrued but unpaid vacation pay, sick
pay and holiday pay to the extent such pay is reflected in the Net Liabilities
of the Business as of the Effective Date.
10.2 Employee Benefits. CNCO shall recognize each Employee's prior
service with the Company, the Associated Subsidiaries and all members of the
Company's controlled group within the meaning of Section 414(b), (c), (m), and
(o) of the Internal Revenue Code of 1986, as amended (the "Code") for all
purposes (other than benefit accrual under a defined benefit plan) under each
employee benefit plan, policy or arrangement of CNCO. The Company and the
Associated Subsidiaries shall retain, and be solely responsible for, all
benefits and compensation payable to or with respect to Employees, or other
employees of the Associated Subsidiaries, with respect to services performed,
and claims incurred, in each case, prior to the Closing Date under any welfare
plan, pension plan, deferred compensation plan, stock based plans, employee
benefit pension plans (as defined in ERISA) or any other plans, agreements,
policies or arrangements related to compensation, severance or other employee
benefits and all liabilities with respect to such plans, agreements, policies or
arrangements prior to the Closing Date. For purposes of this Section, disability
claims are incurred on the date on which the disability was incurred or, in the
case of a disability which is not incurred on a single, identifiable date, the
date on which the disability was diagnosed; medical and dental services are
incurred when an individual is provided with medical or dental care; death
benefit claims are incurred at the time of death of the insured notwithstanding
any other provision of any welfare benefit plan to the contrary. The Company and
the Associated Subsidiaries shall be responsible for all qualifying events under
Part 6 of Title I of ERISA and Section 4980B of the Code ("COBRA") and COBRA
claims incurred under the welfare plans of the Company and the Subsidiaries on
or before the Transfer Date.
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10.3 Severance Claims. The Company and the Associated Subsidiaries
shall be responsible for any claim of severance by a person who refuses CNCO's
offer of employment made in accordance with Section 10.1 hereof pursuant hereto.
CNCO shall be responsible for any claim of severance made by any person who
accepts such offer of employment, who becomes an employee of CNCO and whose
employment is thereafter terminated. CNCO shall reimburse the Company and the
Associated Subsidiaries for any payments made in respect of severance to any
person who does not accept CNCO's offer of employment pursuant hereto but who is
employed by CNCO or a subsidiary or Affiliate within one year after the Transfer
Date.
10.4 WARN Act Liability. The Company and the Associated Subsidiaries
shall be responsible for any claims or liabilities relating to the Worker
Adjustment and Retraining Notification Act, 29 U.S.C. Sections 2101-2109 (the
"WARN Act") which arise in connection with the Business or the Employees prior
to the Closing Date (whether or not filed prior to the Closing Date) or arise as
a result of the transactions contemplated by this Agreement (exclusive of any
action taken by or on behalf of CNCO after the Closing).
10.5 Undue Hardship to the Investor. Notwithstanding anything to the
contrary herein, if taking the actions required pursuant to Section 10.1 prior
to the Closing Date, in the judgment of the Investor and the Company as mutually
and reasonably agreed, would be impracticable or would cause undue hardship to
CNCO, the Investor or any of their Affiliates or subsidiaries then (i)
compliance with Section 10.1 shall not be required on the Closing Date and (ii)
the Employees shall remain employees of the Company and its subsidiaries, as
applicable, until such date as it becomes practicable for CNCO to comply with
Section 10.1; provided that the Transfer Date may be no later than 90 days
following the Closing Date. Without duplication of any other provision of this
Agreement, if the Transfer Date is not the Closing Date, CNCO shall indemnify,
defend and hold harmless the Company and its subsidiaries, and their officers,
directors, employees, advisors, agents and representatives (except to the extent
any such person is an Employee, in which case this indemnification shall not
apply to such person) from and against any and all demands, claims, complaints,
actions or causes of action, suits, proceedings, investigations, arbitrations,
assessments, losses, settlements, Taxes, damages, liabilities, costs and
expenses, including interest, penalties and reasonable attorneys' and accounting
fees and disbursements (including, but not limited to, all administrative costs
and expenses incurred as a result of the Employees remaining employees of the
Company or its subsidiaries after the Closing Date) (including those relating to
the enforcement of this indemnity) related to Employees which arise between the
Closing Date and the Transfer Date as a result of the fact that the Transfer
Date was not the Closing Date; provided that CNCO shall not be required to make
any indemnification in connection with liabilities and obligations relating to
severance which arise prior to the Transfer Date or with respect to any Employee
to the extent he or she is not an employee of the Business between the Closing
Date and the Transfer Date. No deductible shall apply to CNCO's indemnification
obligation under this Section 10.5. Without limiting the foregoing, if the
Transfer Date is not the Closing Date, the Company shall deliver to CNCO as
promptly as practicable after the Transfer Date a statement itemizing all costs,
expenses and obligations of any kind whatsoever with respect to Employees,
including all compensation and benefits costs and Taxes related thereto but
specifically excluding severance costs and liabilities, incurred by the Company
and the Associated Subsidiaries between the Closing Date and the
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Transfer Date. CNCO shall pay the amount set forth in such statement, unless it
is disputed, to the Company in immediately available funds within three (3)
business days after receiving such statement. Disputes as to such amount shall
be resolved by the Accounting Firm.
ARTICLE XI
SURVIVAL AND INDEMNIFICATION
11.1 Survival. All of the representations and warranties contained in
this Agreement or in any certificates delivered pursuant to this Agreement will
survive the Closing (except for Section 3.14, which shall not survive the
Closing) and continue in full force and effect (i) in the case of the
representations and warranties contained in Sections 3.1, 3.2, 3.8(a), 3.21, 4.1
and 4.2, indefinitely, (ii) in the case of representations and warranties
contained in Section 3.20 until the third anniversary of the Closing Date, and
(iii) in the case of any other representation or warranty contained in this
Agreement or in any certificate delivered pursuant to this Agreement, until
eighteen months following the Closing Date; provided, however, that if a written
claim for a breach of any representation or warranty is made before the
expiration thereof, such representation or warranty shall be deemed to survive
indefinitely for purposes of that claim. The covenants and agreements contained
in this Agreement or in any certificates delivered pursuant to this Agreement
shall survive the Closing and continue in full force and effect indefinitely
except for the covenants contained in Sections 5.2, 5.7 and 5.8, which shall
survive the Closing and remain in full force and effect until eighteen months
following the Closing Date.
11.2 Indemnification by the Company and the Associated Subsidiaries.
Subject to the limitations of this Section 11.2 and the conditions and
provisions of Section 11.4, the Company and the Associated Subsidiaries agree to
indemnify, defend and hold harmless the Investor, CNCO and their respective
officers, directors, employees, agents, advisors, representatives and Affiliates
(collectively, "CNCO Indemnitees") from and against any and all demands,
complaints, actions or causes of action, suits, proceedings, investigations,
arbitrations, assessments, losses, settlements, Taxes, claims, judgments,
damages, liabilities, costs and expenses, including interest, penalties,
reasonable attorneys' and accounting fees and disbursements and costs of
investigation (including those relating to the enforcement of this indemnity)
("CNCO Damages"), asserted against, imposed upon or incurred by any CNCO
Indemnitee, directly or indirectly, by reason of, relating to or resulting from
(i) any Retained Assets or Retained Liabilities, (ii) any nonfulfillment of any
agreement on the part of the Company or the Associated Subsidiaries contained
herein, or (iii) any breach of representation or warranty on the part of the
Company or the Associated Subsidiaries contained herein. Breaches are to be
determined for these purposes without regard to any materiality, Material or
Material Adverse Effect standard or qualifier set forth in any representation or
warranty, covenant or certificate; provided that such materiality, Material and
Material Adverse Effect qualifiers shall apply to (i) any obligation to list
matters on the Disclosure Schedule where the representation or warranty
specifies that only Material matters are to be so listed and (ii) Sections 3.7,
5.7 and 5.8. Notwithstanding the foregoing, the Company will not have any
obligation to indemnify the Investor from and against any CNCO Damages with
respect to breaches of representations and warranties or of the covenant set
forth in Section 5.2 except to the extent that
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CNCO Damages arising from any breaches of representations and warranties of this
Agreement and the Like Kind Exchange Agreement or of the covenants set forth in
Section 5.2 of this Agreement or the corresponding section of the Like Kind
Exchange Agreement, taken together, are equal to or are greater than $1,000,000
(the "Deductible"), whereupon the Company shall pay the Investor for all such
CNCO Damages in excess of the Deductible. The Deductible shall not apply except
as specifically provided in the preceding sentence, and the circumstances under
which the Deductible shall not apply include (w) breaches of Section 3.8(a), (x)
breaches of covenants or obligations hereunder other than Section 5.2, (y)
Retained Assets or Retained Liabilities or (z) adjustments pursuant to Section
1.3. Recovery pursuant to indemnification for Retained Liabilities shall be for
any and all CNCO Damages even if (i) the facts giving rise to such
indemnification may also give rise for a claim of breach of the representation
and warranties of this Agreement or the Like Kind Exchange Agreement or (ii)
facts relating to such Retained Liability appear on the Disclosure Schedule. In
addition to any indemnification of any CNCO Indemnitee pursuant to this Section
11.2, such CNCO Indemnitee shall be entitled to its rights and remedies pursuant
to this Agreement, and otherwise at law or in equity.
11.3 Indemnification by CNCO and the Investor. Subject to the
limitations of this Section 11.3 and the conditions and provisions of Section
11.4, CNCO and the Investor agree to indemnify, defend and hold harmless the
Company and the Associated Subsidiaries, and their officers, directors,
employees, agents, advisors, representatives and Affiliates (collectively,
"Company Indemnitees") from and against any and all demands, complaints, actions
or causes of action, suits, proceedings, investigations, arbitrations,
assessments, losses, settlements, Taxes, claims, judgments, damages,
liabilities, costs and expenses, including, but not limited to, interest,
penalties and reasonable attorneys' and accounting fees and disbursements and
costs of investigation (including those relating to the enforcement of this
indemnity) ("Company Damages"), asserted against, imposed upon or incurred by
any Company Indemnitee, directly or indirectly, by reason of, relating to or
resulting from (i) all liabilities and obligations of CNCO relating to or
arising out of the conduct of the Business or the use of the Assets following
the Closing or the Assumed Liabilities following the Closing or (ii)
nonfulfillment of any agreement on the part of the Investor or CNCO contained
herein. In addition to any indemnification of any Company Indemnitee pursuant to
this Section 11.3, such Company Indemnitee shall be entitled to its rights and
remedies pursuant to this Agreement, and otherwise at law or in equity.
11.4 Matters Involving Third Parties. The party or parties making a
claim for indemnification under this Article XI shall be for the purposes of
this Agreement referred to as the "Indemnified Party" and the party or parties
against whom such claims are asserted under this Article XI shall be, for the
purposes of this Agreement, referred to as the "Indemnifying Party". All claims
by any Indemnified Party under this Article XI shall be asserted and resolved as
follows:
(i) In the event that (x) any claim, demand or action is
asserted or instituted by any person other than the parties to this
Agreement or their Affiliates which could give rise to CNCO Damages or
Company Damages, as applicable, for which an Indemnifying Party could
be liable to an Indemnified Party under this Agreement (such claim or
demand or action, a "Third Party Claim" or (y) any Indemnified Party
under this Agreement shall have
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a claim to be indemnified by any Indemnifying Party under this
Agreement which does not involve a Third Party Claim (such claim, a
"Direct Claim"), the Indemnified Party shall with reasonable promptness
send to the Indemnifying Party a written notice specifying the nature
of such claim, demand or action and the amount or estimated amount
thereof, provided that a delay in notifying the Indemnifying Party
shall not relieve the Indemnifying Party of its obligations under this
Agreement except to the extent that (and only to the extent that) such
failure shall have caused the CNCO Damages or Company Damages, as
applicable, for which the Indemnifying Party is obligated to be greater
than such CNCO Damages or Company Damages, as applicable, would have
been had the Indemnified Party given the Indemnifying Party prompt
notice (which amount or estimated amount shall not be conclusive of the
final amount, if any, of such claim, demand or action) (a "Claim
Notice").
(ii) Except as provided below, in the event of a Third Party
Claim, the Indemnifying Party shall be entitled to control the defense
of such Third Party Claim and to appoint counsel of the Indemnifying
Party's choice at the expense of the Indemnifying Party to represent
the Indemnified Party and any others the Indemnifying Party may
reasonably designate in connection with such claim, demand or action
(in which case the Indemnifying Party shall not thereafter be
responsible for the fees and expenses of any separate counsel retained
by any Indemnified Party except as set forth below); provided that such
counsel is reasonably acceptable to the Indemnified Party.
Notwithstanding an Indemnifying Party's election to appoint counsel to
represent an Indemnified Party in connection with a Third Party Claim,
an Indemnified Party shall have the right to participate in the defense
of such claim and to employ counsel of its choice for such purpose;
provided that the fees and expenses of such separate counsel shall be
borne by the Indemnified Party (except as provided below and except for
any fees and expenses of such separate counsel that are incurred prior
to the date the Indemnifying Party effectively assumes control of such
defense which, notwithstanding the foregoing, shall be borne by the
Indemnifying Party). If requested by the Indemnifying Party, the
Indemnified Party agrees to cooperate with the Indemnifying Party and
its counsel in contesting any claim, demand or action which the
Indemnifying Party defends, or, if appropriate and related to the
claim, demand or action in question, in making any counterclaim against
the person asserting the Third Party Claim, or any cross-complaint
against any person. The Indemnifying Party shall not be entitled to
assume control of the defense of a Third Party Claim and shall pay the
reasonable fees and expenses of counsel retained by the Indemnified
Party (provided that such counsel is reasonably acceptable to the
Indemnifying Party) if (i) the claim for indemnification relates to or
arises in connection with any criminal proceeding, action, indictment,
allegation or investigation, (ii) an adverse determination with respect
to the action, lawsuit, investigation, proceeding or other claim giving
rise to such claim for indemnification would reasonably be likely to be
materially detrimental to the Indemnified Party's reputation or
business, (iii) the claim seeks an injunction or equitable relief
against the Indemnified Party or (iv) the claim involves liabilities
under environmental laws that require remedial action at facilities
that were transferred pursuant to this Agreement, in which case the
Indemnified Party shall have control and management authority over the
resolution of such claims, including hiring environmental consultants
and conducting environmental investigations and cleanups;
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provided that the Indemnified Party shall keep the Indemnifying Party
apprised of any major developments relating to any such environmental
claim and provided further that, in the case of any of (i) through (iv)
above, (x) the Indemnified Party shall not agree to any stipulation to
or the entry of a court order that adversely affects the Indemnifying
Party without the Indemnifying Party's consent and (y) the Indemnifying
Party shall have the right to retain counsel of its choice at its own
expense and participate in the defense of the Third Party Claim, in
which case the third sentence of this Section 11.4(ii) shall be fully
applicable. No Third Party Claim (regardless of whether the
Indemnifying Party has assumed control of such Third Party Claim or
such Third Party Claim falls into any of the categories set forth in
(i) through (iv) above) may be settled or compromised (i) by the
Indemnified Party without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld or delayed or
(ii) by the Indemnifying Party without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld or
delayed. In the event any Indemnified Party settles or compromises or
consents to the entry of any judgment with respect to any Third Party
Claim without the prior written consent of the Indemnifying Party, each
Indemnified Party shall be deemed to have waived all rights against the
Indemnifying Party for indemnification under this Article XI.
11.5 Environmental Remedies. The Investor shall not be entitled to
indemnification for a breach of Section 3.20 if the condition, event or
circumstance that gave rise to such breach was discovered as a result of a Phase
II or other intrusive environmental sampling, testing or investigation
(collectively, "Environmental Tests") at any of the facilities of the Business
that are transferred to CNCO except for Environmental Tests undertaken (i) to
respond to, investigate, or otherwise remediate environmental conditions that
could reasonably be expected to create an imminent and substantial endangerment
to the health, safety and welfare of the employees of CNCO, the public or the
environment; (ii) in response to an inquiry, request, claim or demand by a
governmental entity or (iii) in connection with a possible sale of all or part
of CNCO or its assets. For purposes of this Section 11.5, the Business shall
include the Relinquished Property.
ARTICLE XII
MISCELLANEOUS
12.1 Expenses. The Company, on the one hand, and the Investor, on the
other hand, shall pay all costs and expenses incurred by such party or on its
behalf in connection with this Agreement and the transactions contemplated
hereby, including without limiting the generality of the foregoing, fees and
expenses of its financial consultants, accountants and counsel. All excise,
sales, use, transfer (including real property transfer or gains), stamp,
documentary, filing recordation or other Taxes, if any, incident to the transfer
of the Assets to CNCO or which may be imposed or assessed as a result of the
transactions contemplated hereby and all of the expenses relating to obtaining
any governmental permits, licenses and authorizations, approvals, exemptions,
certificates or similar instruments or documents which are necessary for the
conduct of the Business immediately after the Closing Date shall be paid by the
Company; provided that the Investor shall pay all of the expenses
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relating to the qualification of CNCO to do business in such foreign
jurisdictions as are necessary or desirable for the conduct of the Business
immediately after the Closing Date.
12.2 Exclusive Agreement; No Third-Party Beneficiaries. This Agreement
(including the Disclosure Schedule and all Exhibits hereto) constitute the sole
understanding of the parties with respect to the subject matter hereof. Any
disclosure in the Disclosure Schedule shall expressly not be deemed to
constitute an admission by the Company or to otherwise imply that any such
matter is Material for the purposes of this Agreement. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement, express
or implied, is intended to confer on any person other than the parties hereto or
their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
12.3 Governing Law; Consent to Jurisdiction. This Agreement shall be
construed in accordance with and governed by the laws of the State of Delaware
applicable to agreements made and to be performed wholly within such
jurisdiction. All disputes, litigation, proceedings or other legal actions by
any party to this Agreement in connection with or relating to this Agreement or
any matters described or contemplated in this Agreement shall be instituted in
the courts of the State of Delaware or of the United States sitting in the State
of Delaware. Each party to this Agreement irrevocably submits to the exclusive
jurisdiction of the courts of the State of Delaware and of the United States
sitting in the State of Delaware in connection with any such dispute,
litigation, action or proceeding arising out of or relating to this Agreement.
Each party to this Agreement will maintain at all times a duly appointed agent
in the State of Delaware for the service of any process or summons in connection
with any such dispute, litigation, action or proceeding brought in any such
court and, if its fails to maintain such an agent during any period, any such
process or summons may be served on it by mailing a copy of such process or
summons to it at its address set forth, and in the manner provided, in Section
12.8, with such service deemed effective on the fifteenth day after the date of
such mailing.
Each party to this Agreement irrevocably waives the right to a trial by
jury in connection with any matter arising out of this Agreement and, to the
fullest extent permitted by applicable law, any defense or objection it may now
or hereafter have to the laying of venue of any proceeding under this Agreement
brought in the courts of the State of Delaware or of the United States sitting
in the State of Delaware and any claim that any proceeding under this Agreement
brought in any such court has been brought in an inconvenient forum.
12.4 Successors and Assigns. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties hereto; provided, however, that this Agreement may not be
assigned by the Company and may not be assigned by the Investor without the
prior written consent of the Company and any such assignment in violation of
this provision shall be null and void, except that the Investor may, at its
election, assign this Agreement to an Affiliate so long as (a) the
representations and warranties of the Investor made herein are equally true of
such assignee and (b) such assignment does not have any adverse consequences to
the Company or any of its Affiliates (including, without limitation, any adverse
Tax
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consequences or any adverse effect on the ability of the Company to timely
consummate the transactions contemplated hereby), but no such assignment of this
Agreement or any of the rights or obligations hereunder shall relieve the
Investor of any of its obligations under this Agreement. Such assignee shall
execute a counterpart of this Agreement agreeing to be bound by the provisions
hereof as "Investor," and agreeing to be jointly and severally liable with the
Investor and any other assignee for all of the obligations of the assignor
hereunder.
12.5 Publicity. No public release or announcement concerning the
transactions contemplated hereby shall be issued by any party without the prior
consent of the other party (which consent shall not be unreasonably withheld),
except as such release or announcement may be required by law or the rules or
regulations of any United States or foreign securities exchange, in which case
the party required to make the release or announcement shall give the other
party notice in advance of such issuance.
12.6 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any adverse manner to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner so that the transactions
contemplated hereby are fulfilled to the greatest extent possible.
12.7 Refunds. The Company shall be entitled to any refunds or credits
of Taxes for any Taxable period (or portion thereof) ending on or prior to the
Closing Date. CNCO shall be entitled to any refunds or credits of Taxes for any
Taxable period (or portion thereof) beginning after the Closing Date.
12.8 Notices. Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party shall be in writing and
shall be given (and will be deemed to have been duly given upon receipt) by
delivery in person, by facsimile transmission, or by overnight courier or by
registered or certified mail, postage prepaid:
(a) If to the Company, to: Hollinger International Inc.
401 North Wabash Avenue
Chicago, IL 60611
Attention: Vice President and General Counsel
Telecopy: (312) 321-0629
40
<PAGE> 50
with a copy to: Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: William P. Rogers, Jr.
Telecopy: (212) 474-3700
and with a copy to: Hollinger Inc.
10 Toronto Street
Toronto, Ontario, Canada M5C 2B7
Attention: Vice President and General Counsel
Telecopy: (416) 364-2088
(b) If to the Investor, to: Liberty Group Publishing, Inc.
c/o Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard
Suite 2000
Los Angeles, California 90025
Attention: Kenneth L. Serota
Telecopy: (310) 954-0404
with a copy to: Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard
Suite 2000
Los Angeles, California 90025
Attention: Peter J. Nolan
Telecopy: (310) 954-0404
and with a copy to: Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Scott J. Davis
Telecopy: (312) 701-7711
or at such other address for a party as shall be specified by like
notice.
12.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same agreement. Copies of executed
counterparts transmitted by telecopy, telefax or other electronic transmission
service shall be considered original executed counterparts for purposes of this
Section, provided receipt of copies of such counterparts is confirmed.
12.10 Interpretation. For the purposes hereof: (i) words in the
singular shall be held to include the plural and vice versa and words of one
gender shall be held to include the other gender
41
<PAGE> 51
as the context requires; (ii) the terms "hereof," "herein," and "herewith" and
words of similar import shall, unless otherwise stated, be construed to refer to
this Agreement as a whole (including all of the Schedules and Exhibits hereto)
and not to any particular provision of this Agreement, and Section, paragraph,
Exhibit and Schedule references are to the Sections, paragraphs, Exhibits and
Schedules to this Agreement unless otherwise specified; (iii) the word
"including" and words of similar import when used in this Agreement shall mean
"including, without limitation," unless the context otherwise requires or unless
otherwise specified; (iv) the word "or" shall not be exclusive; and (v) this
Agreement shall be construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting or causing any
instrument to be drafted.
12.11 Amendment. This Agreement may not be modified or amended except
by an instrument or instruments in writing signed by all parties hereto. Any
party hereto may, only by an instrument in writing, waive compliance by the
other party hereto with any term or provision hereof on the part of such other
party hereto to be performed or complied with. The waiver by any party hereto of
a breach of any term or provision hereof shall not be construed as a waiver of
any subsequent breach.
12.12 Extension; Waiver. At any time the parties may extend the time
for the performance of any of the obligations or other acts of the other party,
waive any inaccuracies in the representations and warranties contained in this
Agreement and waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument signed on
behalf of such party. The waiver by any party hereto of a breach of any
provision hereunder shall not operate to be construed as a waiver of any prior
or subsequent breach of the same or any other provision hereunder.
12.13 Captions. The Section and other headings contained in this
Agreement are inserted for convenience of reference only and will not affect the
meaning or interpretation of this Agreement. All references to Sections
contained herein mean Sections of this Agreement unless otherwise stated. All
capitalized terms defined herein are equally applicable to both the singular and
plural forms of such terms
12.14 Further Assurances. Following the Closing, CNCO, the Company and
each Associated Subsidiary shall each from time to time at the other's
reasonable request and without further consideration execute and deliver to the
other such additional instruments of transfer and conveyance and take such
action as may be reasonably requested in order better to assure, convey and
confirm to CNCO all of the Associated Subsidiaries' right, title, interest in
and all benefits of and to the Assets to be assigned, conveyed and transferred
hereunder.
42
<PAGE> 52
ARTICLE XIII
LIMITED GUARANTEE OF GREEN EQUITY INVESTORS II, L.P.
13.1 Limited Guarantee. Green Equity Investors II, L.P. ("GEI II"),
which shall be a party to this Agreement solely for purposes of this Section
13.1 and Section 12.3, guarantees, subject to the limitations provided below,
the obligations of the Investor under this Agreement and the Associated
Agreements to the extent that such obligations are to be performed on the
Closing Date; provided that GEI II's obligations hereunder shall be limited to
the payment of money not to exceed $150 million and shall terminate at the
Closing and provided further that GEI II's obligations hereunder shall be
further reduced to the extent GEI II makes payments under Section 21 of the
Transfer Agreement (it being understood that GEI II shall in no event be
responsible for more than $150 million in the aggregate under this Article XIII
and Section 21 of the Transfer Agreement). GEI II agrees to be bound by the
provisions of Section 12.3 of this Agreement with respect solely to its promises
in this Section 13.1.
43
<PAGE> 53
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
INVESTOR:
LIBERTY GROUP PUBLISHING, INC.
By: /s/ Peter J. Nolan
-----------------------------------
Its:__________________________________
CNCO:
LIBERTY GROUP OPERATING, INC.
By: /s/ Gregory J. Annick
-----------------------------------
Its:__________________________________
COMPANY:
HOLLINGER INTERNATIONAL INC.
By: /s/ J. A. Boultbee
-----------------------------------
Its:__________________________________
APAC-90, INC.
By: /s/ J. A. Boultbee
-----------------------------------
Its:__________________________________
AMERICAN PUBLISHING (1991) INC.
By: /s/ J. A. Boultbee
-----------------------------------
Its:__________________________________
44
<PAGE> 54
APAC-95, INC.
By: /s/ J. A. Boultbee
----------------------------------
Its:_________________________________
45
<PAGE> 55
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date hereof solely for the purposes evidencing its obligations pursuant to
Section 12.3 and Article XIII hereof.
GUARANTOR:
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Capital Partners, L.P.
its sole general partner
By: Grand Avenue Capital Corporation
its sole general partner
By: /s/ Gregory J. Annick
------------------------------------
Name: Gregory J. Annick
----------------------------------
Title: Vice President
---------------------------------
46
<PAGE> 56
EXHIBIT A
ALL OF HOLLINGER'S PUBLICATIONS AND PRINTING PRESSES
IN THE FOLLOWING LOCATIONS (OTHER THAN THOSE OWNED
BY AMERICAN PUBLISHING COMPANY OF ILLINOIS
AND THE ASSETS SET FORTH IN EXHIBIT 1.1(B))
CALIFORNIA MISSOURI ILLINOIS
Yreka Camdentown Benton
Mt. Shasta Rolla Chester
Taft St. James Christopher
Waynesville Herrin
ARIZONA Greenfield Marion
Globe Neosho Murphysboro
Boonville West Frankfort
NEW YORK Brookfield Fairbury
Hornell Chillicothe Livingston
Bath Kirksville Norris City
Dansville Macon Pontiac
Penn Yan Marceline Gallatia
Tonawanda Mexico Ridgway
Canisteo Monroe City Shawneetown
Herkimer Osage Beach
Little Falls Carthage MICHIGAN
Catskill Malden Cheybogan
Saugerties Ionia
Wellsville MINNESOTA Sault Ste. Marie
Canajoharie Crookston
ARKANSAS
PENNSYLVANIA KANSAS Heber Springs
Honesdale Leavenworth Helena
Sayre Atchison Stuttgart
Kane Augusta Newport
Punxsutawney Derby
Ridgway El Dorado
St. Mary's McPherson
Corry
Milton IOWA
Titusville Charles City
Warren
Waynesboro
47
<PAGE> 57
EXHIBIT 1.1(B)
RETAINED ASSETS
1. 4 Goss Community Press units stored at Little Falls, New York.
2. Upper former for Goss folder located at Tonawanda, New York.
3. The right to refunds of all Taxes described in Section 1.2(b)(i).
4. The names "Hollinger" and "American Publishing Company" and all
derivatives thereof.
<PAGE> 1
EXHIBIT 2.2
================================================================================
ASSET PURCHASE AGREEMENT
by and among
LIBERTY GROUP PUBLISHING, INC.,
GREEN EQUITY INVESTORS II, L.P.
(for the limited purposes described herein),
LIBERTY GROUP OPERATING, INC.,
AMERICAN PUBLISHING COMPANY OF ILLINOIS,
HOLLINGER INTERNATIONAL INC.
APAC-90, INC.,
AMERICAN PUBLISHING (1991) INC. and
APAC-95, INC.
Dated as of
November 21, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Acquired Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Retained Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2. Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Liabilities Assumed . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) No Other Liabilities Assumed . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3. Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) Assumption of Assumed Liabilities . . . . . . . . . . . . . . . . . . . 9
(b) Transfer of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Working Capital Adjustment . . . . . . . . . . . . . . . . . . . . . . 9
(d) Determination of 1998 Net Cash Position; Payment of
1998 Estimated Net Cash . . . . . . . . . . . . . . . . . . . . . . 10
(e) Uncollected Accounts Receivable . . . . . . . . . . . . . . . . . . . 11
(f) Pro Forma Calculation . . . . . . . . . . . . . . . . . . . . . . . . 12
(g) Purchase Price Allocation . . . . . . . . . . . . . . . . . . . . . . 12
(h) Proration of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5. Representations and Warranties of Seller . . . . . . . . . . . . . . . 13
SECTION 6. Representations and Warranties of Buyer and Investor . . . . . . . . . 15
SECTION 7. Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(a) Transferred Employees . . . . . . . . . . . . . . . . . . . . . . . . 16
(b) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(c) Severance Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(d) WARN Act Liability . . . . . . . . . . . . . . . . . . . . . . . . . 17
(e) Undue Hardship to Buyer . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 8. Documents Delivered at the Closing . . . . . . . . . . . . . . . . . . 18
SECTION 9. Nonassignable Contracts . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 10. Covenants of the Seller . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Consents and Authorizations . . . . . . . . . . . . . . . . . . . . . 20
(b) Conduct of the Business . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
<PAGE> 3
2
<TABLE>
<S> <C>
(c) Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(d) Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(e) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 22
(f) No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(g) Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . 22
(h) Supplemental Information . . . . . . . . . . . . . . . . . . . . . . 22
(i) [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(j) Transitional Services . . . . . . . . . . . . . . . . . . . . . . . . 23
(k) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(l) Amended Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . 24
(m) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(n) Vehicular Titles . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(o) UCC Termination Statements . . . . . . . . . . . . . . . . . . . . . 24
(p) Real Estate Conveyance Documents and Lease Assignments . . . . . . . 24
SECTION 11. Covenants of Buyer and Investor . . . . . . . . . . . . . . . . . . . 24
(a) Cooperation by Buyer . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) Preservation of Books and Records . . . . . . . . . . . . . . . . . . 25
(c) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 12. Conditions to Buyer's Obligations . . . . . . . . . . . . . . . . . . 26
(a) Representations, Warranties and Covenants of Seller . . . . . . . . . 26
(b) Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(c) No Prohibitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(d) Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(e) Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 27
(f) Simultaneous Closings . . . . . . . . . . . . . . . . . . . . . . . . 28
(g) Additional Conditions . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 13. Conditions to Seller's Obligations . . . . . . . . . . . . . . . . . . 28
(a) Representations, Warranties and Covenants
of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) No Prohibitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(d) Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(e) Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 14. Termination, Amendment and Waiver . . . . . . . . . . . . . . . . . . 29
(a) Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Effect on Obligations . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 15. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(b) Indemnification by the Company, the Associated
Subsidiaries and Seller . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
<PAGE> 4
3
<TABLE>
<S> <C>
(c) Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . 32
(d) Matters Involving Third Parties . . . . . . . . . . . . . . . . . . . 32
SECTION 16. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 17. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 18. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 19. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(a) Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(b) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(c) Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(d) Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(e) Governing Law; Consent to Jurisdiction . . . . . . . . . . . . . . . 38
(f) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(g) Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(h) Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(i) Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 40
(j) Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 20. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 21. Limited Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
<PAGE> 5
ASSET PURCHASE AGREEMENT (the "Agreement") is
entered into this 21st day of November 1997, by and
among AMERICAN PUBLISHING COMPANY OF ILLINOIS, a
Delaware corporation ("Seller"), LIBERTY GROUP
PUBLISHING, INC., a Delaware corporation (the
"Investor"), LIBERTY GROUP OPERATING, INC., a
Delaware corporation ("Buyer"), HOLLINGER
INTERNATIONAL INC., a Delaware corporation (the
"Company"), APAC-90 INC., a Delaware corporation and
an indirect wholly owned subsidiary of the Company
("APAC-90"; the term APAC-90 shall include
subsidiaries of APAC-90 unless the context otherwise
provides), AMERICAN PUBLISHING (1991) INC., a
Delaware corporation and an indirect wholly owned
subsidiary of the Company ("AP-91"; the term AP-91
shall include subsidiaries of AP-91 unless the
context otherwise provides), APAC-95 INC., a Delaware
corporation and an indirect wholly owned subsidiary
of the Company ("APAC-95"; the term APAC- 95 shall
include subsidiaries of APAC-95 unless the context
otherwise provides)(APAC-90, AP-91 and APAC-95 are
collectively referred to herein as the "Associated
Subsidiaries") and, for the limited purposes
described herein, Green Equity Investors II, L.P., a
Delaware limited partnership (the "Guarantor").
W I T N E S S E T H:
WHEREAS, Seller is engaged in, among other things, the
business of publishing, marketing and distributing certain community newspapers
and other publications as identified in Schedule 1 and operating the printing
presses associated therewith (the "Business").
WHEREAS, Buyer wishes to purchase from Seller the right, title
and interest of Seller in and to the Business, including all assets of the
Seller relating to or used in connection with the Business, except as specified
herein, and to the liabilities related thereto which are specified
<PAGE> 6
2
herein, all as more fully described below, on the terms and conditions set
forth herein.
WHEREAS, Liberty Group Publishings, Inc., Buyer, the Company,
the Associated Subsidiaries and Green Equity Investors II, L.P. have entered
into an Asset Purchase Agreement, dated November 21, 1997 (the "Asset Purchase
Agreement").
NOW, THEREFORE, in consideration of the promises and of the
respective representations, warranties, covenants and agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. TRANSFER OF ASSETS.
(a) ACQUIRED ASSETS. Subject to the terms and conditions
hereof, Seller agrees to sell to Buyer, and Buyer agrees to purchase from
Seller, at the Closing (as defined in Section 4) all of the right, title and
interest of Seller in and to the Business and all properties, assets and rights
of every nature, kind and description of Seller used or held for use primarily
in connection with the Business wherever located (collectively, other than the
Retained Assets (as defined in Section 1(b) hereof), the "Assets"), including
the following:
(i) all of the rights of Seller to prepare, produce, publish,
print, sell and/or distribute, as the case may be, the community
newspapers and other publications which constitute the Business,
together with the goodwill of or relating to the Business;
(ii) all of the real property owned by Seller and primarily
used in the operation of the Business (the "Owned Real Property")
which Owned Real Property is listed on Schedule 3.18 of the Disclosure
Schedule to the Asset Purchase Agreement to the extent relating to the
Business, and all of the buildings, fixtures and improvements (the
"Improvements") located in, on and under the Owned Real Property;
(iii) all of the rights of Seller in any real property leased
or subleased by Seller and used primarily in the operation of the
Business (the "Leased
<PAGE> 7
3
Real Property"), which Leased Real Property is listed on Schedule 3.19
of the Disclosure Schedule to the Asset Purchase Agreement to the
extent relating to the Business, and all of the Improvements located
in, on and under the Leased Real Property to the extent provided in
the lease or sublease;
(iv) all of the materials, raw materials (including paper),
supplies, work in progress and other inventory owned by Seller and to
the extent used or held for use in the operation of the Business;
(v) all rights of Seller to fixed and other tangible personal
property, whether owned or leased, including furniture, equipment,
computers and related items, fixtures, machinery and tools owned by
Seller and primarily used in the operation of the Business;
(vi) all rights, subscription rights, obligations and benefits
of contracts, licenses (whether Seller is a licensee or licensor) or
arrangements of Seller primarily relating to the Business and the
Assets (collectively, the "Assumed Contracts"), including the items
listed on Schedules 3.10(a) through (j) of the Disclosure Schedule to
the Asset Purchase Agreement to the extent relating to the Business;
(vii) all files, books and records of Seller dating back at
least five full fiscal years from the date of the Closing primarily
relating to the Business (but not minute books and corporate
governance records of Seller) which are not physically located at the
Owned Real Property or the Leased Real Property and all files, books
and records of the Business which are physically located at the Owned
Real Property or the Leased Real Property, including financial
statements and records, advertising space reservations, advertising
insertion orders, promotional materials, all available records of
current and former advertisers in the newspapers and other
publications which comprise the Business or relating to the Business;
provided that the Seller shall retain copies of all such files, books
and records;
(viii) all credits, prepaid costs and expenses, deposits and
retentions held by third parties under
<PAGE> 8
4
leases, licenses, contracts and other arrangements, in each case to
the extent relating to the Business;
(ix) all current assets (except for cash and cash
equivalents), but specifically including accounts receivable; provided
that following the Effective Date (as defined in Section 3(c)) Buyer
shall have the right to assign certain accounts receivable to Seller
in accordance with the terms of Section 3(e) of this Agreement.
(x) all subscription, distribution, circulation and mailing
lists relating primarily to the Business and all records and data
relating to such lists;
(xi) any available editorial and photographic morgues and any
available back issues of the newspapers and other publications which
comprise the Business;
(xii) all registered United States and foreign patents,
trademarks, service marks, trade names, mastheads, copyrights and
applications set forth on Schedule 3.9 of the Disclosure Schedule to
the Asset Purchase Agreement to the extent relating to the Business
(including rights to sue for and remedies against present and future
infringements thereof and rights of priority and protection of
interests) and the goodwill and going concern value related thereto;
(xiii) all licenses and permits of any government or state (or
any subdivision thereof), whether domestic or foreign, or any agency,
authority, bureau, commission, department or similar body or
instrumentality thereof, or any governmental court or tribunal,
federal, state and local ("Government Authority"), to the extent they
are transferable, relating primarily to the Business or the Assets;
(xiv) all guaranties, warranties, indemnities and similar
rights in favor of Seller to the extent related to the Assets or the
Business; and
(xv) all rights of Seller under any provision or covenant of
any contract, agreement or understanding in favor of Seller or their
Affiliates to the extent relating to the Business limiting the ability
of any party to sell any products or services, engage in any
<PAGE> 9
5
line of business or compete with or to obtain products or services
from any person and any causes of action, lawsuits, claims and demands
available to Seller in respect of the foregoing whether arising before
or after the Closing.
The Assets shall be transferred free and clear of all liens,
easements, licenses, possessory rights, sales contracts, building and use
restrictions, reservations and limitations, encumbrances, security interests,
charges, pledges, mortgages, deeds of trust, deed to secure debt, liabilities,
debts, options or, to the best knowledge of Seller, any other adverse claims,
restrictions or third party rights of any kind and nature whatsoever (the
"Encumbrances"), except for the following (the "Permitted Encumbrances"): (i)
liens for current Taxes not yet due and payable, (ii) the encumbrances
disclosed on Schedule 3.8(a) of the Disclosure Schedule to the Asset Purchase
Agreement to the extent relating to the Business, (iii) mechanics', carriers',
workmen's, repairmen's or other like liens arising or incurred in the ordinary
course of business, liens arising under original purchase price conditional
sales contracts and equipment leases with third parties entered into in the
ordinary course of business, and which are routinely and regularly extinguished
by payment of the charges to which they relate and which do not, individually
or in the aggregate, materially impair the continued use and operation of the
assets to which they relate in the Business, taken as a whole, as presently
conducted or (iv) other imperfections of title or encumbrances, if any, which
do not, individually or in the aggregate, materially impair the continued use
and operation of the assets to which they relate in the Business, taken as a
whole, as presently conducted.
(b) RETAINED ASSETS. Except as set forth in Section
2(a), Seller shall retain the real and personal property and other assets of
Seller or any of its Affiliates (as used herein the term "Affiliate" shall have
the meaning set forth in Rule 12b-2 under the Security Exchange Act of 1934, as
amended) that relate primarily to the businesses of Seller or any of its
Affiliates other than the Business (the "Retained Business") and not primarily
related to the Business or that relate primarily to the Retained Liabilities
(collectively, the "Retained Assets"), including:
<PAGE> 10
6
(i) all bank accounts and cash and cash equivalents of Seller;
(ii) all rights, claims and credits of Seller to the extent
relating to any other Retained Asset or any Retained Liability (as
defined in Section 2(b)), including any such items arising under
insurance policies, and all guarantees, warranties, indemnities and
similar rights in favor of Seller or any of its Affiliates in respect
of any other Retained Asset or any Retained Liability;
(iii) [Reserved];
(iv) all rights of Seller and its Affiliates under this
Agreement, the Asset Purchase Agreement, the Transitional Services
Agreement (as defined in Section 10(j)) and the other agreements and
instruments executed and delivered in connection with this Agreement;
(v) all documents prepared in connection with the sale of the
Business and the Assets to Buyer, exclusive of documents prepared in
the ordinary course of business in connection with the operation of
the Business;
(vi) all financial and Tax records relating to the Business
that form part of Seller's (or any of its Affiliates') general ledger
and all other files, books and records not referred to in Section
1(a)(vii) which Seller or any of its Affiliates have in their
possession; provided that upon reasonable request by Buyer, Buyer
shall be provided with copies of the portions of such records that
reasonably relate to the Business (other than copies of the Seller's
consolidated, combined or unitary income Tax returns, provided that
copies of back up for such returns may reasonably be requested by
Buyer); and
(vii) the Retained Assets described in Exhibit 1.1(b) to the
Asset Purchase Agreement to the extent relating to the Business.
SECTION 2. ASSUMPTION OF LIABILITIES.
<PAGE> 11
7
(a) LIABILITIES ASSUMED. On the Closing Date, Buyer will
assume and agree to pay, perform and discharge as and when due the liabilities
and obligations, whether fixed, absolute or contingent, matured or unmatured,
(the "Assumed Liabilities") relating to the Business as the same exist on the
Closing Date which are specified below (provided, that in no event shall the
Assumed Liabilities include any Retained Liabilities, and Buyer shall assume no
other liabilities whatsoever of Seller or its Affiliates):
(i) all accounts payable and trade obligations to the extent
relating to the Business, including those which are owed to Seller or
its Affiliates which were incurred in the ordinary course of business;
(ii) all prepaid subscription and advertising obligations to
the extent relating to the Business;
(iii) all liabilities and obligations arising from commitments
(in the form of issued purchase orders or otherwise) to purchase or
acquire inventory, supplies or services to the extent relating to the
Business and reflected on a balance sheet of the Business as of the
Closing Date as accounts payable or accrued expenses;
(iv) all liabilities and obligations under existing licenses,
permits, authorizations, leases or contracts which are to be assigned
to Buyer hereunder other than liabilities or obligations for breaches
or default that occurred prior to the Closing;
(v) all liabilities or obligations for accrued but unpaid
vacation pay, sick pay and holiday pay for Employees (as defined in
Section 7(a)) to the extent such pay is reflected in the Net
Liabilities (as defined in Section 3(c)) of the Business as of the
Effective Date; and
(vi) all liabilities, other than Retained Liabilities
(including Tax (as defined in Section 3.14 of the Asset Purchase
Agreement) liabilities), which are reflected in the balance sheet
included in the Financial Statements (as defined in Section 3.6 of the
Asset Purchase Agreement) to the extent relating to the Business
(except to the extent discharged prior to the Closing Date) or
incurred by the Business since the date of such balance sheet not in
breach of any
<PAGE> 12
8
representation or covenant in this Agreement and in the ordinary
course of business which are of the type that would be reflected in a
balance sheet prepared in conformity with GAAP and consistent with the
Financial Statements.
(b) NO OTHER LIABILITIES ASSUMED. Notwithstanding anything
to the contrary contained herein, except as provided in Section 2(a), the
parties agree that Buyer has not agreed to pay, shall not assume and shall not
have any liability or obligation with respect to, the following liabilities and
obligations (collectively, the "Retained Liabilities"):
(i) any liability or obligation for any Tax of any kind
(including income, payroll, personnel, property, bulk transfer, sales,
use, ad valorem or franchise Taxes or assessments) owed prior to or at
Closing, or which may thereafter become due, to any foreign, federal,
state, local or other taxing authority which liability relates to any
transaction or period prior to or upon the Closing (including as a
result of Treasury Regulation Section 1.1502-6(a) or any similar
provision under state or local law);
(ii) any liability or obligation relating to, resulting from
or arising out of workers' compensation claims resulting from any
injury, disease or disability which injury, disease or disability
occurred prior to Closing (whether or not any such claim was filed
prior to the Closing);
(iii) any liability or obligation relating to, resulting from
or arising out of any violation of law (whether knownor unknown) or
license, which violation occurred on or prior to the Closing Date;
(iv) any liability relating to the Owned Real Property or
Leased Real Property, or relating to discharges of hazardous
substances in violation of or giving rise to liability pursuant to any
Environmental Law (as defined below) by the Business, the basis for
which liability occurred or existed prior to the Closing, including
any investigation and remediation liabilities to the extent arising
under standards established by any and all foreign, federal, state or
local laws, rules, orders, regulations, consent
<PAGE> 13
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decrees, settlement agreements, injunctions, statutes or requirements
imposed by any governmental authority relating to or concerning
protection of the environment and natural resource damages, including
surface water, soil, air and ground water ("Environmental Law") as
enacted or enforced on or prior to the Closing Date;
(v) any liability or obligation for severance, redundancy,
termination, payment in lieu of notice, indemnity or other payments
resulting from the transactions contemplated by this Agreement or
arising prior to the Transfer Date, and any liability or obligation
arising prior to the Transfer Date to or with respect to any employee
or any employee matters, including any employee benefit plan, other
than those which are expressly assumed by Buyer, pursuant to Section
7;
(vi) any liability or obligation of or incurred by Seller or
its Affiliates to the extent related to the Retained Assets or not
arising from the Business;
(vii) any liability or obligation under licenses, permits,
authorizations, leases or contracts, which are not assigned to Buyer
hereunder;
(viii) any liability or obligation for medical, dental and
disability benefits and any other welfare benefit, whether insured or
self-insured, incurred or existing at any time on or prior to the
Transfer Date, for current or past employees of the Business;
(ix) all liability of Seller and its Affiliates or former
Affiliates arising from indebtedness, including guaranty and similar
obligations, for borrowed money or long-term debt, except as provided
in Section 2(a);
(x) any liability or obligation relating to or resulting from
breach of contract or tort claims where the event giving rise to such
claim occurred prior to the Closing Date;
(xi) any other liability or obligation of Seller whatsoever
not expressly assumed by Buyer hereunder;
(xii) liabilities for officers and directors of Seller with
respect to pre-Closing conduct;
<PAGE> 14
10
(xiii) any liability or obligation for any intercompany notes
of Seller; and
(xii) liability for travel vouchers or cash of $4,000 for each
publisher who exceeded budgeted gross operating profits for 1997 by
10%.
SECTION 3. CONSIDERATION. The consideration for the transfer of
the Assets described in Section 1(a) from Seller to Buyer shall be as follows:
(a) ASSUMPTION OF ASSUMED LIABILITIES. Buyer shall assume
and agree to pay as they shall become due or discharge the Assumed Liabilities
as described in Section 2(a) hereof.
(b) TRANSFER OF FUNDS. Upon the Closing, Buyer shall deliver
to Seller immediately available funds in the amount of forty four million four
hundred nineteen thousand one hundred sixteen dollars ($44,419,116).
(c) WORKING CAPITAL ADJUSTMENT. Within sixty (60) days
following the Closing, KPMG Peat Marwick LLP or such other firm of independent
public accountants mutually agreed by Buyer and Seller (the "Accounting Firm")
shall (i) on a basis consistent with U.S. generally accepted accounting
principles as applied in the Financial Statements (as defined in Section 3.6 of
the Asset Purchase Agreement) ("GAAP") (x) determine the Net Current Assets (as
defined below) and the Net Liabilities (as defined below) of the Business as of
December 31, 1997 (the "Effective Date") (the "Current Asset Calculation") and
(y) determine the amount of the Adjustment (as defined below), if any, and (ii)
deliver a letter (the "Accountant's Certificate") (x) setting forth the
calculation of the Adjustment and its components and (y) certifying that each
of such calculations was made in compliance with this Section 3(c). Such
determinations and calculations shall be conclusive absent manifest error. If
the Adjustment is a positive number in excess of $1,000,000, Buyer shall pay
such excess to Seller within three (3) business days following delivery of the
Accountant's Certificate. If the Adjustment is a negative number, the absolute
value of which is greater than $1,000,000, Seller shall pay such excess to
Buyer within three (3) business days following delivery of the Accountant's
Certificate. All payments pursuant to this Section 3(c) shall be by wire
<PAGE> 15
11
transfer of immediately available funds (or by interbank transfer, if
applicable).
For purposes of this Section 3(c),
(1) "Net Current Assets" shall mean current assets determined
in a manner consistent with GAAP, but excluding (i) cash and cash equivalents,
(ii) current and deferred Taxes and (iii) any other Retained Assets.
(2) "Net Liabilities" shall mean liabilities determined in a
manner consistent with GAAP but excluding (i) current and deferred Tax
liabilities and (ii) any other Retained Liabilities.
(3) The "Adjustment" means the amount (whether positive or
negative) equal to Net Current Assets minus Net Liabilities.
(d) DETERMINATION OF 1998 NET CASH POSITION; PAYMENT OF 1998
ESTIMATED NET CASH.
(i) During the period from the Effective Date through the
Closing Date (the "1998 Period"), Seller shall maintain financial records
showing all cash and cash equivalents received by or on behalf of the Business
during the 1998 Period (the "1998 Gross Cash") and all amounts of cash or cash
equivalents used to discharge accounts payable and other obligations of the
Business in the ordinary course consistent with past practice, but excluding
(w) interest on indebtedness for borrowed money, (x) intercompany payments, but
excluding management fees charged at 1.6% of revenue for the 1998 Period, (y)
fees and expenses relating to the transactions contemplated by this Agreement
and (z) income Taxes, but excluding Taxes for the 1998 Period (the "1998 Cash
Disbursements"). The excess, if any, of the 1998 Gross Cash over the 1998 Cash
Disbursements shall be the "1998 Net Cash Position".
(ii) At the Closing, Seller shall pay or cause to be paid to
Buyer, by wire transfer of immediately available funds (or by intrabank
transfer, if practicable), an amount equal to an estimate determined in good
faith by Seller of the 1998 Net Cash Position (the "Estimated 1998 Net Cash
Position").
<PAGE> 16
12
(iii) Within sixty (60) days following the Closing, the
Accounting Firm (as defined in Section 3(c)) shall (x) determine (1) the amount
of the 1998 Net Cash Position (as so determined, the "1998 Final Cash
Position") and (2) the 1998 Final Cash Position minus the 1998 Estimated Cash
Position (the "1998 Cash Position Adjustment", which may be positive or
negative) and (y) deliver a letter (the "1998 Cash Certification") (1) setting
forth the calculation of the 1998 Cash Position Adjustment and its components
and (2) certifying that such calculations were made in compliance with this
Section 3(d). Such determinations and calculations will be conclusive absent
manifest error. If the 1998 Cash Position Adjustment is a positive number,
Seller shall pay such amount to Buyer within three (3) business days of
delivery of the 1998 Cash Certification. If the 1998 Cash Position Adjustment
is a negative number, Buyer shall pay an amount equal to the absolute value of
such number to Seller within three (3) business days of delivery of the 1998
Cash Certification. All payments pursuant to this Section 3(d) shall be made
by wire transfer of immediately available funds (or by interbank transfer, if
practicable).
(e) UNCOLLECTED ACCOUNTS RECEIVABLE. Within 135 days after
the Effective Date, Buyer shall have the right to (i) notify Seller in writing
(the "Receivables Notice") of the dollar amounts of the accounts receivable of
the Business existing on the Effective Date that have not been collected by
Buyer by the date of such notice and which are more than 120 days past due as
of the date of such notice (the "Greater than 120-Day Receivables") and (ii) at
its option, assign to Seller 100% of the then-outstanding Greater than 120-Day
Receivables. If so assigned, Seller shall purchase the Greater than 120-Day
Receivables for a price equal to (x) the face amount of the Greater than
120-Day Receivables less (y) the full amount of the reserve for receivables
reflected in the Net Current Assets, plus (z) interest on (x) minus (y) accrued
from the Effective Date at a rate equal to the 30-day Treasury bill rate in
effect on the Effective Date, payable by wire transfer of immediately available
funds to (or by interbank transfer, if applicable) Buyer within three (3)
business days following receipt of the Receivables Notice. In determining the
amount collected with regard to any account receivable, all amounts received
from any obligor shall be allocated to the receivable specified by such
obligor, or if not specified, to the receivables of such obligor in the order
in which
<PAGE> 17
13
such receivables arose. From and after the Closing, Buyer shall continue
collecting accounts receivable in all material respects in accordance with the
past practice of the Business prior to the Closing Date and shall provide
Seller reasonable access to review all information relating to the foregoing,
including all write-offs. From and after the date Buyer exercises its option
to assign the Greater than 120-Day Receivables to the Seller, Buyer shall
continue collecting such Greater than 120-Day Receivables on behalf of the
Seller for a reasonable fee to be agreed upon by the parties in proportion to
the services rendered.
(f) PRO FORMA CALCULATION. Notwithstanding anything to the
contrary contained in this Agreement or the Asset Purchase Agreement, no
payments shall be made under Sections 3(c), (d) and (e) of this Agreement
unless such payment would be required to be made if the determinations and
calculations required by such sections are made on a pro forma basis as if the
Business as defined in this Agreement and the Business as defined in the Asset
Purchase Agreement were treated as a single business (subject to a single
$1,000,000 threshold for the purposes of calculating the Adjustment pursuant to
Section 3(c) of this Agreement and the comparable provision of the Asset
Purchase Agreement), and in such event the portion of any such payment to be
made pursuant to this Agreement shall be equal to 44/309ths of such payment,
and the balance of such payment shall be made pursuant to the Asset Purchase
Agreement.
(g) PURCHASE PRICE ALLOCATION. The purchase price for the
Assets (including the Assumed Liabilities) shall be allocated among the Assets
in accordance with Schedule 1.3(i) to the Asset Purchase Agreement, to the
extent relating to the Business, to be prepared by the Buyer and delivered to
the Seller within 180 days after the Closing Date. Such allocation shall be
subject to Seller's consent, such consent not to be unreasonably withheld.
Following the Closing, the Buyer and the Seller in connection with their
respective U.S. federal, state and local income Tax returns and other filings
(including, without limitation Internal Revenue Service Form 8594), shall not
take any position inconsistent with such allocation. Any adjustment to the
purchase price shall be allocated as provided by Temp.Treas.Reg.Section
1.1060-1T(f). For purposes of this Section 3(g), the withholding by Seller of
its consent to a proposed allocation of purchase price to an asset or class of
assets shall be deemed to be reasonable
<PAGE> 18
14
if, within 30 days after receiving a copy of Schedule 1.3(i) to the Asset
Purchase Agreement, Seller provides to Buyer a written notice setting forth its
proposed allocation of purchase price to such asset or class of assets, and
such proposed allocation differs by more than 25% from the amount allocated on
Schedule 1.3(i) to the Asset Purchase Agreement to such asset or class of
assets, but compliance with this sentence shall not be necessary for such
withholding of consent by Seller to be deemed reasonable. The parties shall
negotiate in good faith to timely resolve any differences regarding such
allocation.
(h) PRORATION OF TAXES. All real estate, personal property
and ad valorem Taxes relating to the Assets which shall have accrued and become
payable prior to the Closing Date shall be paid by Seller. All such Taxes which
shall be accrued but unpaid shall be prorated to the Closing Date. In
connection with such proration of Taxes, in the event that actual Tax figures
are not available at the Closing Date, proration of Taxes shall be based upon
actual Taxes for the preceding year for which actual Tax figures are available
and re-prorated when actual Tax figures become available. The amount due one
party as a result of such proration shall be paid to the other party at the
Closing, and the amount due one party as a result of a re-proration of Taxes for
a taxing jurisdiction shall be paid to such party within 30 days after actual
Tax figures become a available for such taxing jurisdiction.
SECTION 4. CLOSING.
(a) CLOSING. The closing of the transactions contemplated
hereby (the "Closing") shall be held at the offices of Mayer, Brown & Platt,
190 South LaSalle Street, Chicago, Illinois 60603 commencing at 9:00 a.m.,
Chicago time, on January 30, 1998, or as soon as practicable thereafter after
the satisfaction or waiver of the conditions to closing set forth in Sections
12 and 13 of this Agreement, or at such other place, time or date as Buyer and
Seller may agree; provided that the Closing shall occur simultaneously with the
Closing under the Asset Purchase Agreement (as defined in Section 2.1 of the
Asset Purchase Agreement) (the "Closing Date").
(b) PAYMENTS. All payments hereunder shall be in U.S.
dollars, and shall be made no later than 12:00 noon on
<PAGE> 19
15
the Closing Date by wire transfer of immediately available funds (or interbank
transfer, if applicable) to an account or accounts of Seller or Buyer, as
applicable, at a bank or banks specified by Seller or Buyer, as applicable.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER. The
Company and Seller represent and warrant to Buyer and Investor as follows:
(a) Seller and the Company hereby make each of the
Representations and Warranties set forth in Article III of the Asset Purchase
Agreement, but modified so that:
(i) references to the "Business" shall refer to the Business
as defined in this Agreement and so that references to the "business
relating to the Relinquished Property" or similar phrases shall refer
to the Business as defined in the Asset Purchase Agreement;
(ii) references to the "Closing", the "Closing Date", the
"Transfer Date" and the "Effective Date" shall refer to the Closing,
Closing Date, Transfer Date and the Effective Date, respectively, as
defined in this Agreement;
(iii) references to the "transactions contemplated hereby"
shall refer to transactions contemplated by this Agreement;
(iv) the Asset Purchase Agreement shall be substituted for
the Like Kind Exchange Agreement in the definition of "Associated
Agreements";
(v) references to "this Agreement" shall refer to this
Agreement rather than the Asset Purchase Agreement;
(vi) references to "including the closing of the Like Kind
Exchange and the contribution of the Relinquished Property to CNCO" or
similar phrases shall refer to "including the closing under the Asset
Purchase Agreement"; and
(vii) capitalized terms used therein which are not otherwise
defined herein or addressed in this section are used with the meanings
ascribe to such
<PAGE> 20
16
terms in the Asset Purchase Agreement; and terms which are defined
therein which are not otherwise defined herein or addressed in this
section are used throughout this Agreement with the meanings so
ascribed to such terms.
For the convenience of the parties, the Disclosure Schedule
referred to in the Asset Purchase Agreement should also apply to this Agreement
to the extent the disclosures set forth therein relate to the Business as
defined in this Agreement.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER AND
INVESTOR. Buyer and Investor hereby represent and warrant to the Company and
Seller as follows:
(a) Buyer hereby makes each of the representations and
warranties set forth in Article IV of the Asset Purchase Agreement, but
modified so that:
(i) references to the "Business" shall refer to the Business
as defined in this Agreement and so that references to the "business
relating to the Relinquished Property" or similar phrases shall refer
to the Business as defined in the Asset Purchase Agreement;
(ii) references to the "Closing", the "Closing Date", the
"Transfer Date" and the "Effective Date" shall refer to the Closing,
Closing Date, Transfer Date and the Effective Date, respectively, as
defined in this Agreement;
(iii) references to the "transactions contemplated hereby"
shall refer to transactions contemplated by this Agreement;
(iv) the Asset Purchase Agreement shall be substituted for
the Like Kind Exchange Agreement in the definition of "Associated
Agreements";
(v) references to "this Agreement" shall refer to this
Agreement rather than the Asset Purchase Agreement;
(vi) references to "including the closing of the Like Kind
Exchange and the contribution of the
<PAGE> 21
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Relinquished Property to CNCO" or similar phrases shall refer to
"including the closing under the Asset Purchase Agreement"; and
(vii) capitalized terms used therein which are not otherwise
defined herein or addressed in this section are used with the meanings
ascribed to such terms in the Asset Purchase Agreement; and terms
which are defined therein which are not otherwise defined herein or
addressed in this section are used throughout this Agreement with the
meanings so ascribed to such terms.
For the convenience of the parties, the Disclosure Schedule
referred to in the Asset Purchase Agreement should also apply to this Agreement
to the extent the disclosures set forth therein relate to the Business as
defined in this Agreement.
SECTION 7. EMPLOYEE MATTERS.
(a) TRANSFERRED EMPLOYEES. Prior to the date on which
employees of the Business are transferred to Buyer (the "Transfer Date", which
date shall be the Closing Date or such later date as the parties shall mutually
agree in accordance with Section 7(c)), Buyer shall offer employment to each
employee of the Business set forth on Exhibit 5.14 to the Asset Purchase
Agreement to the extent relating to the Business (other than any such employees
whose employment has been terminated prior to the Transfer Date) and each other
person so employed on the Transfer Date whose employment primarily relates to
the Business (the "Employees") on such terms and conditions (including salary
and benefit level) that are not materially less favorable (exclusive of any
equity incentive compensation provided by Seller), when taken in the aggregate
to the terms and conditions of the employee's employment with Seller or its
subsidiaries, as the case may be, immediately prior to the Transfer Date.
Buyer will give Employees credit for accrued but unpaid vacation pay, sick pay
and holiday pay to the extent such pay is reflected in the Net Liabilities of
the Business as of the Effective Date.
(b) EMPLOYEE BENEFITS. Buyer shall recognize each Employee's
prior service with Seller and all members of Seller's controlled group within
the meaning of
<PAGE> 22
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Section 414(b), (c), (m), and (o) of the Internal Revenue Code of 1986, as
amended (the "Code") for all purposes (other than benefit accrual under a
defined benefit plan) under each employee benefit plan, policy or arrangement
of Buyer. Seller shall retain, and be solely responsible for, all benefits and
compensation payable to and with respect to Employees, or other employees of
Seller, with respect to services performed, and claims incurred, in each case,
prior to the Transfer Date under any welfare plan, pension plan, deferred
compensation plan, stock based plans, employee benefit pension plans (as
defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) or any other plans, agreements, policies or arrangements related to
compensation, severance or other employee benefits and all liabilities with
respect to such plans, agreements, policies or arrangements prior to the
Transfer Date. For purposes of this Section, disability claims are incurred on
the date on which the disability was incurred or, in the case of a disability
which is not incurred on a single, identifiable date, the date on which the
disability was diagnosed; medical and dental services are incurred when an
individual is provided with medical or dental care; death benefit claims are
incurred at the time of death of the insured notwithstanding any other
provision of any welfare benefit plan to the contrary. Seller shall be
responsible for all qualifying events under Part 6 of Title I of ERISA and
Section 4980B of the Code ("COBRA") and COBRA claims incurred under the welfare
plans of Seller on or before the Transfer Date.
(c) SEVERANCE CLAIMS. Seller shall be responsible for any
claim of severance by a person who refuses Buyer's offer of employment made in
accordance with Section 7(a) hereof pursuant hereto. Buyer shall be
responsible for any claim of severance made by any person who accepts such
offer of employment, who becomes an employee of Buyer and whose employment is
thereafter terminated. Buyer shall reimburse Seller for any payments made in
respect of severance to any person who does not accept Buyer's offer of
employment pursuant hereto but who is employed by Buyer or a subsidiary or
Affiliate within one year after the Transfer Date.
(d) WARN ACT LIABILITY. Seller shall be responsible for any
claims or liabilities relating to the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. Sections 2101-2109 (the "WARN Act") which arise in
<PAGE> 23
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connection with the Business or the Employees prior to the Closing Date
(whether or not filed prior to the Closing Date) or arise as a result of the
transactions contemplated by this Agreement (exclusive of any action taken by
or on behalf of Buyer after the Closing).
(e) UNDUE HARDSHIP TO BUYER. Notwithstanding anything to the
contrary herein, if taking the actions required pursuant to Section 7(a) prior
to the Closing Date, in the judgment of Buyer and Seller as mutually and
reasonably agreed, would be impracticable or would cause undue hardship to
Buyer or the Investor, or any of their Affiliates or subsidiaries then (i)
compliance with Section 7(a) shall not be required on the Closing Date and (ii)
the Employees shall remain employees of Seller and its subsidiaries, as
applicable, until such date as it becomes practicable for Buyer to comply with
Section 7(a); provided that the Transfer Date may be no later than 90 days
following the Closing Date. Without duplication of any other provision of this
Agreement, if the Transfer Date is not the Closing Date, Buyer shall indemnify,
defend and hold harmless Seller and its subsidiaries, and their officers,
directors, employees, advisors, agents and representatives (except to the
extent any such person is an Employee, in which case this indemnification shall
not apply to such person) from and against any and all demands, claims,
complaints, actions or causes of action, suits, proceedings, investigations,
arbitrations, assessments, losses, settlements, Taxes, damages, liabilities,
costs and expenses, including interest, penalties and reasonable attorneys' and
accounting fees and disbursements (including, but not limited to, all
administrative costs and expenses incurred as a result of the Employees
remaining employees of Seller or its subsidiaries after the Closing Date)
(including those relating to the enforcement of this indemnity) related to
Employees which arise between the Closing Date and the Transfer Date as a
result of the fact that the Transfer Date was not the Closing Date; provided
that Buyer shall not be required to make any indemnification in connection with
liabilities and obligations relating to severance which arise prior to the
Transfer Date or with respect to any Employee to the extent he or she is not an
employee of the Business between the Closing Date and the Transfer Date. No
deductible shall apply to Buyer's indemnification obligation under this Section
7(e). Without limiting the foregoing, if the Transfer Date is not the Closing
Date, Seller shall deliver to Buyer as promptly as
<PAGE> 24
20
practicable after the Transfer Date a statement itemizing all costs, expenses
and obligations of any kind whatsoever with respect to Employees, including all
compensation and benefits costs and Taxes related thereto but specifically
excluding severance costs and liabilities, incurred by Seller between the
Closing Date and the Transfer Date. Buyer shall pay the amount set forth in
such statement, unless it is disputed, to Seller in immediately available funds
within three (3) business days after receiving such statement. Disputes as to
such amount shall be resolved by the Accounting Firm.
SECTION 8. DOCUMENTS DELIVERED AT THE CLOSING. On the
Closing Date, the parties shall exchange documents as follows:
(a) Seller shall execute and deliver (i) Bill of Sale,
Assignment and Assumption substantially in the form of Exhibit A
hereto and (ii) Trademark and Trade Name Assignments substantially in
the form of Exhibit B hereto (the "Trademark and Trade Name
Assignments");
(b) American Publishing Management Services Inc. and Buyer
shall have executed and delivered the Transitional Services Agreement;
(c) [Reserved];
(d) Simultaneously with the Closing, Seller shall have paid to
Buyer an amount equal to the Estimated Net Cash Position;
(e) [Reserved];
(f) Simultaneously with the Closing, Buyer shall have made
the cash payments required under Section 3 and shall have assumed the
Assumed Liabilities.
SECTION 9. NONASSIGNABLE CONTRACTS. Anything contained
herein to the contrary notwithstanding, this Agreement shall not constitute an
agreement to assign any Assumed Contract or other commitment or asset if an
assignment or attempted assignment of the same without the consent of the other
party or parties thereto would constitute a breach thereof or in any way impair
the rights of Seller thereunder. If any consent necessary to convey
<PAGE> 25
21
any Asset is not obtained or if an attempted assignment would be ineffective or
would impair any party's rights under any such Assumed Contract or other Asset
so that Buyer would not receive all such rights, then (x) Seller shall use
commercially reasonable efforts (it being understood that such efforts shall
not include any requirement of Seller, the Company, Buyer or the Investor to
expend money or offer or grant any financial accommodation) to provide or cause
to be provided to Buyer, to the extent permitted by law, the benefits of any
such Assumed Contract or other Asset, and Seller shall promptly pay or cause to
be paid to Buyer, when received, all moneys received by Seller with respect to
any such Assumed Contract or other Asset and (y) in consideration thereof Buyer
shall pay, perform and discharge on behalf of Seller debts, liabilities,
obligations and commitments thereunder in a timely manner and in accordance
with the terms thereof. In addition, Seller shall take such other actions (at
the expense of Buyer, as designated by Buyer) as may reasonably be requested by
Buyer in order to place Buyer, insofar as reasonably possible, in the same
position as if such Assumed Contract or other Asset had been transferred as
contemplated hereby and so all the benefits and burdens relating thereto,
including possession, use, risk of loss, potential for gain and dominion,
control and command are to inure to Buyer. If and when such consents and
approvals are obtained, the transfer of the applicable asset shall be effected
in accordance with the terms of this Agreement.
SECTION 10. COVENANTS OF THE SELLER. The Company and Seller
hereby covenant and agree with the Buyer and the Investor as follows:
(a) CONSENTS AND AUTHORIZATIONS. Seller shall use all
commercially reasonable efforts and cooperate with Buyer to secure all
necessary consents, approvals, authorizations, beneficial assignments,
exemptions and waivers from third parties (collectively "Consents") as shall be
required in order to enable Buyer to effect the transactions contemplated
hereby and to prevent a breach of, a default under, or a termination, change in
the terms or conditions or modification of, any instrument, contract, lease,
license or other agreement to which the Seller is a party or is bound, and
shall otherwise use all commercially reasonable efforts to cause the
consummation of such transactions in accordance with the terms and conditions
hereof. Without limiting the provisions set forth in this
<PAGE> 26
22
Section 10(a), Seller shall file, or cause to be filed, with the Department of
Justice and the Federal Trade Commission a Pre-Merger Notification and Report
Form pursuant to the HSR Act in respect of the transactions contemplated hereby
within ten business days of the date of this Agreement and Seller shall use,
and shall cause each of its subsidiaries and Affiliates to use, all reasonable
efforts to take or cause to be taken all actions necessary, including to
promptly and fully comply with any requests for information from regulatory
authorities, to obtain any consent, waiver, approval or authorization relating
to the HSR Act that is necessary to enable the parties to consummate the
transactions contemplated by this Agreement. Notwithstanding the foregoing, no
provision of this Agreement shall be construed as requiring Seller to make
payments of any kind in order to obtain Consents.
(b) CONDUCT OF THE BUSINESS. (A) During the period from the
date of this Agreement to the Closing, except as otherwise contemplated by this
Agreement or as Buyer shall otherwise agree in writing in advance with respect
to the Business, Seller covenants and agrees to (i) conduct the Business in the
ordinary and usual course in a manner consistent with past practice, (ii) use
its best efforts to preserve intact its present business organization, (iii)
make available to Buyer the services of the officers and employees of the
Business, (iv) preserve the good will and relationships with customers,
suppliers and others having business dealings with the Business and (v) not
take any action which would cause any of the representations and warranties of
Seller in Section 5 to be untrue or incorrect in any material respect as of the
Closing. From December 31, 1997 through the Closing Date Seller will not (i)
declare, set aside or pay any dividends with respect to its capital stock, or
redeem or otherwise acquire any of its capital stock or other securities
(except for payments of cash dividends and redemptions for cash) or (ii) pay
any indebtedness or accounts payable except for indebtedness or accounts
payable of the Business to third parties in the ordinary course of business (it
being expressly understood that no payments will be made on any intercompany
notes).
(B) During the period from the date of this Agreement to the
Closing, except as otherwise provided for in this Agreement or Section 5.2 of
the Disclosure Schedule to the Asset Purchase Agreement as it relates to the
<PAGE> 27
23
Business or as the Buyer shall otherwise consent, Seller covenants and agrees
that, with respect to the Business, it shall not:
(i) other than (a) sales of products in the ordinary course of
business, or (b) sales of obsolete plants and equipment in the
ordinary course of business, sell, transfer, convey, assign or
otherwise dispose of, or agree to sell, transfer, convey, assign or
otherwise dispose of, any of its assets or properties, or suffer or
permit the creation of any Encumbrance, other than in the ordinary
course of business;
(ii) other than (a) Commitments to distributors in the
ordinary course of business consistent with past practice or (b) in
the ordinary course of business consistent with past practice (x) take
any action, or enter into or authorize any Commitment or transaction
or (y) terminate, modify, amend or otherwise alter any material terms
or provisions of any of its Commitments, except as expressly
contemplated by this Agreement;
(iii) abandon, sell, pledge, alter, amend or enter into any
licensing or contractual arrangements with respect to any Intellectual
Property Rights;
(iv) fail to pursue the collection of receivables in the
ordinary course of business, fail to discharge its payables in the
ordinary course of business or otherwise make any material change in
the course of dealing with customers or suppliers as a whole; or
(v) agree or commit to any of the foregoing.
(c) ACCESS. From the date hereof and prior to the Closing,
Seller shall provide Buyer with such information as Buyer may from time to time
reasonably request with respect to Seller and the transactions contemplated by
this Agreement, provide Buyer and its representatives reasonable access during
regular business hours and upon reasonable notice to the properties, books and
records of the Seller as Buyer may from time to time reasonably request,
provided that the Seller shall not be obligated to provide Buyer with any
information which would violate (i) any law, rule or regulation or term of any
Commitment, or (ii) any confidentiality provision of any
<PAGE> 28
24
contract, or if the provision thereof would adversely affect the ability of
Seller to assert attorney client, attorney work product or other similar
privilege. Notwithstanding the foregoing, Buyer shall have the absolute right
to review any Commitment or other Assumed Contract.
(d) PERMITS. Seller agrees to use commercially reasonable
efforts to assist Buyer in obtaining all Permits required for the Business to
the extent they cannot be transferred to Buyer pursuant to this Agreement.
Notwithstanding the foregoing, Buyer shall have the right to direct Seller to
forego one or more applications for Permits. Seller shall pay the costs of such
Permits.
(e) FURTHER ASSURANCES. At any time after the Closing Date,
Seller shall promptly execute, acknowledge and deliver any other assurances or
documents reasonably requested by Buyer and necessary for Buyer to satisfy its
obligations hereunder or obtain the benefits contemplated hereby.
(f) NO DEFAULT. Neither Seller nor its subsidiaries shall do
any act or omit to do any act, or permit any act or omission to act, which will
cause a breach of any Commitment to which the Seller or its subsidiaries are a
party or by which any of them or their assets are bound or the Business are
subject, the breach of which would have a Material Adverse Effect.
(g) COMPLIANCE WITH LAWS. Through the close of business on
the Closing Date, Seller shall comply with all laws, statutes, regulations,
rules and orders applicable to the Business or the operation of Seller, except
where the failure to comply therewith, individually or in the aggregate, does
not have a Material Adverse Effect.
(h) SUPPLEMENTAL INFORMATION. From time to time prior to the
Closing, Seller will promptly disclose in writing to Buyer any matter hereafter
arising which, if existing, occurring or known at the date of this Agreement
would have been required to be disclosed to Buyer or which would render
inaccurate any of the representations, warranties or statements set forth in
Section 5 hereof. No information provided to a party pursuant to this Section
shall be deemed to cure any breach of any representation, warranty or covenant
made in this Agreement.
<PAGE> 29
25
(i) [RESERVED].
(j) TRANSITIONAL SERVICES. Seller agrees to provide
transition management and administrative services ("Transitional Services") to
Buyer for a period of up to 3 years pursuant to the Transitional Services
Agreement substantially in the form of Exhibit 5.12 to the Asset Purchase
Agreement (the "Transitional Services Agreement"). Buyer must approve any and
all changes to the form of Transitional Services Agreement that is an exhibit
to the Asset Purchase Agreement.
(k) EMPLOYEES. Seller agrees to cooperate with Buyer with
respect to Buyer's making of employment offers to the employees of the Business
pursuant to Section 7(a). Exhibit 5.14 to the Asset Purchase Agreement
includes a list of employees of the Business. Seller will provide Buyer by
November 25, 1997 with a substituted Exhibit 5.14 to the Asset Purchase
Agreement containing a list of the employees of the Business as of the date
hereof. At the request of Buyer, Seller will forward employment offers on
behalf of Buyer to the employees of the Business. Seller will permit Buyer to
discuss employment offers with employees of the Business during business hours
and to make presentations to the employees of the Business during business
hours. Seller agrees that beginning on the date of this Agreement until the
second anniversary of the Transfer Date (as defined in Section 7(a)), neither
it nor any of its Affiliates or subsidiaries will directly or indirectly
solicit any employees of Buyer with respect to employment, without the prior
written consent of Buyer. However, nothing herein prevents Seller or its
Affiliates from placing any general advertisements for employees or from hiring
any employees of Buyer at any time who initiate employment discussions with
Seller or its Affiliates or who respond to any general advertisement for
employees placed by Seller or its Affiliates. During the period commencing on
the date hereof through the Closing Date, Seller will not increase the
compensation of employees of the Business, except that any employee receiving a
merit based promotion in the ordinary course of business and resulting in
increased responsibilities may receive a raise appropriate to reflect such
employee's new position. Bonuses paid to employees of the Business for 1997 in
amounts determined by the Company in the ordinary course of business shall be
reflected in Net Liabilities of the Business for purposes of Section 3(c), and,
unless Buyer consents otherwise, Buyer will pay such
<PAGE> 30
26
bonuses after the Closing Date. Buyer consents to the payment of such bonuses
by Seller if the Closing Date is later than January 30, 1998.
(l) AMENDED DISCLOSURE SCHEDULE. Seller may provide an
amended Disclosure Schedule to the Asset Purchase Agreement to the extent
relating to the Business, adding solely matters that have arisen since the date
of this Agreement, to Buyer 48 hours prior to Closing; provided, however, that
such amended Disclosure Schedule to the Asset Purchase Agreement shall not
affect any representation or warranty or obligation of Seller to satisfy the
conditions to Closing set forth in Section 12(a). The purpose of the additions
to the Disclosure Schedule to the Asset Purchase Agreement shall solely be to
provide Buyer with information for purposes of Section 12(a) below about the
extent, if any, to which Seller's representations and warranties will not be
true and correct as of the Closing, and any failure of the Seller's
representations and warranties to be true and correct as of the Closing
disclosed by such additions shall not give rise to liability after the Closing
if the Closing occurs.
(m) INSURANCE. Seller agrees to maintain existing insurance
on the Business for the benefit of Buyer with respect to events happening on or
prior to the Closing Date.
(n) VEHICULAR TITLES. Seller agrees to provide the
certificates transferring title to Buyer for all Assets which are motor
vehicles (the "Vehicular Titles") on the Closing Date.
(o) UCC TERMINATION STATEMENTS. Seller agrees to deliver to
Buyer on the Closing Date UCC termination statements, releases of mortgages
and/or deeds of trust and any other documents as are necessary for the
discharge of all Encumbrances (other than Permitted Encumbrances) affecting the
Business or any other of the assets.
(p) REAL ESTATE CONVEYANCE DOCUMENTS AND LEASE ASSIGNMENTS.
Seller agrees to deliver to Buyer on the Closing Date real estate conveyance
documents and lease assignments, as applicable, with respect to all of the real
property set forth on Sections 3.18 and 3.19, as applicable, of the Disclosure
Schedule to the Asset Purchase Agreement,
<PAGE> 31
27
to the extent relating to the Business, as amended as of the Closing Date.
SECTION 11. COVENANTS OF BUYER AND INVESTOR. Buyer and
Investor hereby covenant and agree with Seller and the Company:
(a) COOPERATION BY BUYER. From the date hereof and prior to
the Closing, Buyer shall use all reasonable efforts, and shall cooperate with
the Seller, to secure all necessary consents, approvals, authorizations,
exemptions and waivers from third parties as shall be required in order to
enable Seller to effect the transactions contemplated hereby, and shall
otherwise use all reasonable efforts to cause the consummation of such
transactions in accordance with the terms and conditions hereof. Without
limiting the provisions set forth in this Section, Buyer shall file with the
Department of Justice and the Federal Trade Commission a Pre-Merger
Notification and Report Form pursuant to the HSR Act in respect of the
transactions contemplated hereby within ten (10) business days of the date of
this Agreement, and Buyer shall use, and shall cause each of its Affiliates to
use, all reasonable efforts to take or cause to be taken all actions necessary,
including to promptly and fully comply with any requests for information from
regulatory authorities, to obtain any consent, waiver, approval or
authorization relating to the HSR Act that is necessary to enable the parties
to consummate the transactions contemplated by this Agreement.
(b) PRESERVATION OF BOOKS AND RECORDS. For a period of (i)
five years from the Closing Date with respect to Books and Records (as defined
below) relating to litigation, Tax or environmental matters and (ii) three
years from the Closing Date with respect to Books and Records relating to all
other matters:
(i) Buyer shall not dispose of or destroy any of the books
and records of the Business relating to periods prior to the Closing
("Books and Records") without first offering to turn over possession
thereof to Seller by written notice to Seller at least 90 days prior
to the proposed date of such disposition or destruction.
(ii) Buyer shall allow Seller and its agents access to all
Books and Records on reasonable notice
<PAGE> 32
28
and at reasonable times at Buyer's principal place of business or at
any location where any Books and Records are stored, and Seller shall
have the right, at their own expense, to make copies of any Books and
Records; provided, however, that any such access or copying shall be
had or done in such manner so as not to unduly interfere with the
normal conduct of Buyer's business and provided that Seller shall
maintain the confidentiality of such Books and Records.
(c) EMPLOYEES. Buyer agrees that for the period beginning as
of the date hereof and ending on the second anniversary of the date of the
Transfer Date, without the prior written consent of Seller, Buyer shall not
directly or indirectly solicit any employees of Seller with respect to
employment other than persons employed by the Business at the Transfer Date.
However, nothing herein prevents Buyer from placing any general advertisement
for employees or from hiring any employees of Seller at any time who initiate
employment discussions with Buyer or who respond to any general advertisement
for employees placed by Buyer.
SECTION 12. CONDITIONS TO BUYER'S OBLIGATIONS. The
obligations of Buyer to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction (or waiver, where permissible)
at or prior to the Closing of all of the following conditions:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER.
Seller shall have complied in all material respects with each of its agreements
and covenants contained herein to be complied with on or prior to the Closing
Date. All the representations and warranties of Seller set forth in this
Agreement that are qualified as to materiality shall be true and correct, and
the representations and warranties of Seller set forth in this Agreement that
are not so qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement, and as of the Closing Date as
though made on and as of the Closing Date, with future tense references in
Section 3.1 of the Asset Purchase Agreement to the extent modified by Section 5
of this Agreement being deemed to be present tense references as of the Closing
Date, except that the accuracy of representations and warranties that by their
terms speak as of the date of this Agreement or some other date shall be
determined as of such date; provided that this condition
<PAGE> 33
29
shall not be unsatisfied unless it would be unsatisfied if the representations
and warranties of Seller in this Agreement were deemed to refer to the Business
as defined in this Agreement and the "Business" as defined in the Asset
Purchase Agreement, taken as a whole, and the Disclosure Schedule to the Asset
Purchase Agreement is read to apply to such combination of both such
Businesses. Buyer shall have received a certificate executed by or on behalf
of Seller, dated as of the Closing Date, certifying as to the fulfillment of
the conditions set forth in this Section.
(b) CONSENTS. The applicable waiting period under the HSR
Act shall have expired or been terminated and all other consents, approvals,
authorizations, exemptions and waivers by, or filing with, notice to or permit
from governmental agencies or other persons that shall be required in order to
enable Buyer to consummate the transactions contemplated hereby shall have been
obtained (except for such consents, approvals, authorizations, exemptions and
waivers, filings, notices or permits, the absence of which would not prohibit
consummation of such transactions or render such consummation illegal).
(c) NO PROHIBITIONS. No statute, rule or regulation or order
or decree of any court or governmental body shall be in effect which prohibits
Buyer from consummating the transactions contemplated by this Agreement.
(d) CLOSING DOCUMENTS. In addition to other documents
expressly referenced in this Section or Section 8, Seller shall have delivered
or caused to be delivered the following closing documents in form and substance
satisfactory to Buyer:
(i) a copy of the resolution or resolutions duly adopted
by the board of directors of Seller authorizing the execution,
delivery and performance of this Agreement and the transactions
contemplated hereby, certified by the Secretary or an Assistant
Secretary of Seller;
(ii) a certificate of the Secretary or an Assistant
Secretary of Seller as to the incumbency and signatures of the
officers executing this Agreement;
<PAGE> 34
30
(iii) certificates issued by the Secretary of State of the
State of Delaware, as of a recent date, as to the good standing of
Seller;
(iv) certificates issued by the Secretary of State of each
jurisdiction in which Seller is licensed or qualified to do business
as a foreign corporation, as of a recent date, as to the good standing
of Seller;
(v) copies of all governmental consents, approvals and filings
which have been obtained by Seller pursuant hereto; and
(vi) such other documents relating to the transactions
contemplated hereby as Buyer or its counsel may reasonably request.
(e) OPINION OF COUNSEL. Buyer shall have received an opinion of
Cravath, Swaine & Moore, counsel for Seller, substantially in the form of
Exhibit 7.5-1 to the Asset Purchase Agreement and the opinion of internal
counsel of Seller, substantially in the form of Exhibit 7.5-2 to the Asset
Purchase Agreement.
(f) SIMULTANEOUS CLOSINGS. The closing of the Asset Purchase
Agreement shall occur simultaneously with the Closing.
(g) ADDITIONAL CONDITIONS. The conditions set forth in
Sections 7.6 and 7.9 of the Asset Purchase Agreement shall have been satisfied.
SECTION 13. CONDITIONS TO SELLER'S OBLIGATIONS. The
obligation of Seller to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction (or waiver, where permissible)
at or prior to the Closing of all of the following conditions:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER.
Buyer shall have complied in all material respects with each of its agreements
and covenants contained herein to be complied with on or prior to the Closing
Date. All the representations and warranties of Buyer set forth in this
Agreement that are qualified as to materiality shall be true and correct, and
the representations and warranties of Buyer set forth in this Agreement that
are not so qualified
<PAGE> 35
31
shall be true and correct in all material respects, in each case as of the date
of this Agreement, and as of the Closing Date as though made on and as of the
Closing Date, except that the accuracy of representations and warranties that
by their terms speak as of the date of this Agreement or some other date shall
be determined as of such date. Seller shall have received a certificate
executed by or on behalf of Buyer, dated as of the Closing Date, certifying as
to the fulfillment of the conditions set forth in this Section 13(a).
(b) CONSENTS. The applicable waiting period under the HSR
Act shall have expired or been terminated and all other consents, approvals,
authorizations, exemptions by, or filing with, notice to or permit from
governmental agencies or other persons that shall be required in order to
enable Seller to consummate the transactions contemplated hereby shall have
been obtained (except for such consents, approvals authorizations, exemptions,
filings, notices or permits, the absence of which would not prohibit
consummation of such transactions or render such consummation illegal).
(c) NO PROHIBITIONS. No statute, rule or regulation or order
or decree of any court or governmental body shall be in effect which prohibits
Seller from consummating the transactions contemplated by this Agreement.
(d) CLOSING DOCUMENTS. In addition to other documents
expressly referenced in this Section 13 or Section 8, Buyer shall have
delivered or caused to be delivered the following closing documents in form and
substance satisfactory to Seller:
(i) a copy of the resolution or resolutions duly adopted
by the board of directors of Buyer authorizing the execution, delivery
and performance of this Agreement and the transactions contemplated
hereby;
(ii) a certificate of the Secretary, or an Assistant
Secretary of Buyer as to the incumbency and signatures of the officers
executing the Agreement;
(iii) certificates issued by the Secretary of State of Delaware
as to the good standing of Buyer; and
<PAGE> 36
32
(iv) such other documents relating to the transactions
contemplated hereby as Seller or its counsel may reasonably request.
(e) OPINION OF COUNSEL. Seller shall have received an opinion
of Mayer, Brown & Platt, counsel for Buyer, substantially in the form of Exhibit
8.5 to the Asset Purchase Agreement.
SECTION 14. TERMINATION, AMENDMENT AND WAIVER.
(a) TERMINATION. This Agreement may be terminated by either
party, by a written notice to the other parties, prior to Closing:
(i) by the mutual written consent of Seller and Buyer;
(ii) by either Buyer or Seller if the Closing shall not
have occurred on or before February 28, 1998; provided that this right
to terminate shall not be available to any party whose breach of this
Agreement has been the cause of, or resulted in, the Closing not
occurring; or
(iii) by Buyer if the Lenders' Consent as defined in Section
7.9 of the Asset Purchase Agreement has not been received by three (3)
weeks from the date of execution hereof.
(b) EFFECT ON OBLIGATIONS. (i) Termination of this
Agreement pursuant to this Section shall terminate all rights and obligations
of the parties hereunder and none of the parties shall have any liability to
the other party hereunder, except that Sections 16, 17, 18 and 19 shall remain
in effect, and provided that neither anything herein nor the termination of
this Agreement shall relieve any party from liability for any breach of this
Agreement prior to such termination.
(ii) In the event of a termination by Seller or Buyer pursuant
to Section 14(a), written notice thereof shall forthwhile be given to the other
party. In addition, Buyer shall return all documents and other material
received from Seller relating to the transactions contemplated hereby, whether
obtained before or after the execution
<PAGE> 37
33
hereof, to Seller and shall destroy all analyses, notes, reports, and other
documents prepared in connections with the transactions contemplated by this
Agreement and shall deliver to Seller a certificate signed by an officer of
Buyer certifying as to such destruction.
SECTION 15. INDEMNIFICATION.
(a) SURVIVAL. All of the representations and warranties
contained in this Agreement or in any certificates delivered pursuant to this
Agreement will survive the Closing (except for Section 3.14 of the Asset
Purchase Agreement, to the extent modified by Section 5 of this Agreement,
which shall not survive the Closing) and continue in full force and effect (i)
in the case of the representations and warranties contained in Sections 3.1,
3.2, 3.8(a), 3.21, 4.1 and 4.2 of the Asset Purchase Agreement, to the extent
modified by Sections 5 and 6 of this Agreement, indefinitely, (ii) in the case
of representations and warranties contained in Section 3.20 of the Asset
Purchase Agreement, to the extent modified by Section 5 of this Agreement,
until the third anniversary of the Closing Date and (iii) in the case of any
other representation or warranty contained in this Agreement or in any
certificate delivered pursuant to this Agreement, until eighteen months
following the Closing Date; provided, however, that if a written claim for a
breach of any representation or warranty is made before the expiration
thereof, such representation or warranty shall be deemed to survive
indefinitely for purposes of that claim. The covenants and agreements
contained in this Agreement or in any certificates delivered pursuant to this
Agreement shall survive the Closing and continue in full force and effect
indefinitely except for the covenants contained in Sections 10(b), (f) and (g)
of this Agreement which shall survive the Closing and remain in full force and
effect until eighteen months following the Closing Date.
(b) INDEMNIFICATION BY THE COMPANY, THE ASSOCIATED
SUBSIDIARIES AND SELLER. Subject to the limitations of this Section 15(b) and
the conditions and provisions of Section 15(d), the Company, the Associated
Subsidiaries and Seller agree to indemnify, defend and hold harmless Buyer the
Investor and their respective officers, directors, employees, agents, advisors,
representatives and Affiliates (collectively, "Buyer Indemnitees") from and
<PAGE> 38
34
against any and all demands, complaints, actions or causes of action, suits,
proceedings, investigations, arbitrations, assessments, losses, settlements,
Taxes, claims, judgments, damages, liabilities, costs and expenses, including
interest, penalties, reasonable attorneys' and accounting fees and
disbursements and costs of investigation (including those relating to the
enforcement of this indemnity) ("Buyer Damages"), asserted against, imposed
upon or incurred by any Buyer Indemnitee, directly or indirectly, by reason of,
relating to or resulting from (i) any Retained Assets or Retained Liabilities,
(ii) any nonfulfillment of any agreement on the part of the Company, the
Associated Subsidiaries or Seller contained herein, or (iii) any breach of
representation or warranty on the part of the Company, the Associated
Subsidiaries or Seller contained herein. Breaches are to be determined for
these purposes without regard to any materiality, Material or Material Adverse
Effect standard or qualifier set forth in any representation or warranty,
covenant or certificate; provided that such materiality, Material and Material
Adverse Effect qualifiers shall apply to (i) any obligation to list matters on
the Disclosure Schedule to the Asset Purchase Agreement where the
representation or warranty specifies that only Material matters are to be so
listed and (ii) Section 3.7 of the Asset Purchase Agreement to the extent
incorporated by Section 5 of this Agreement and Sections 10(f) and 10(g) of
this Agreement. Notwithstanding the foregoing, Seller will not have any
obligation to indemnify Buyer from and against any Buyer Damages with respect
to breaches of representations and warranties or of the covenant set forth in
Section 10(b) of this Agreement except to the extent that Buyer Damages arising
from any breaches of representations and warranties of this Agreement and the
Asset Purchase Agreement or of the covenants set forth in Section 5.2 to the
Asset Purchase Agreement or Section 10(b) of this Agreement, taken together,
are equal to or are greater than $1,000,000 (the "Deductible"), whereupon
Seller shall pay the Buyer for all such Buyer Damages in excess of the
Deductible. The Deductible shall not apply except as specifically provided in
the preceding sentence, and the circumstances under which the Deductible shall
not apply include (w) breaches of Section 3.8(a) to the Asset Purchase
Agreement to the extent incorporated by Section 5 of this Agreement, (x)
breaches of covenants or obligations hereunder other than Section 10(b), (y)
Retained Assets or Retained Liabilities or (z) adjustments pursuant to Section
3 of this Agreement. Recovery pursuant to
<PAGE> 39
35
indemnification for Retained Liabilities shall be for any and all Buyer Damages
even if (i) the facts giving rise to such indemnification may also give rise
for a claim of breach of the representation and warranties of this Agreement or
the Asset Purchase Agreement or (ii) facts relating to such Retained Liability
appear on the Disclosure Schedule to the Asset Purchase Agreement to the extent
related to this Business. In addition to any indemnification of any Buyer
Indemnitee pursuant to this Section, such Buyer Indemnitee shall be entitled to
its rights and remedies pursuant to this Agreement, and otherwise at law or in
equity.
(c) INDEMNIFICATION BY BUYER. Subject to the limitations of
this Section 15(c) and the conditions and provisions of Section 15(d), Buyer
agrees to indemnify, defend and hold harmless the Company, Seller and the
Associated Subsidiaries, and their officers, directors, employees, agents,
advisors, representatives and Affiliates (collectively, "Seller Indemnitees")
from and against any and all demands, complaints, actions or causes of action,
suits, proceedings, investigations, arbitrations, assessments, losses,
settlements, Taxes, claims, judgments, damages, liabilities, costs and
expenses, including, but not limited to, interest, penalties and reasonable
attorneys' and accounting fees and disbursements and costs of investigation
(including those relating to the enforcement of this indemnity) ("Seller
Damages"), asserted against, imposed upon or incurred by any Seller Indemnitee,
directly or indirectly, by reason of, relating to or resulting from (i) all
liabilities and obligations of Buyer relating to or arising out of the conduct
of the Business or the use of the Assets following the Closing or the Assumed
Liabilities following the Closing or (ii) nonfulfillment of any agreement on
the part of Buyer contained herein. In addition to any indemnification of any
Seller Indemnitee pursuant to this Section 15(c), such Seller Indemnitee shall
be entitled to its rights and remedies pursuant to this Agreement, and
otherwise at law or in equity.
(d) MATTERS INVOLVING THIRD PARTIES. The party or parties
making a claim for indemnification under this Section 15 shall be for the
purposes of this Agreement, referred to as the "Indemnified Party" and the
party or parties against whom such claims are asserted under this Section 15
shall be, for the purposes of this Agreement, referred to as the "Indemnifying
Party". All claims by any
<PAGE> 40
36
Indemnified Party under this Section 15 shall be asserted and resolved as
follows:
(i) In the event that (x) any claim, demand or action is
asserted or instituted by any person other than the parties to this
Agreement or their Affiliates which could give rise to Buyer Damages
or Seller Damages, as applicable, for which an Indemnifying Party
could be liable to an Indemnified Party under this Agreement (such
claim or demand or action, a "Third Party Claim" or (y) any
Indemnified Party under this Agreement shall have a claim to be
indemnified by any Indemnifying Party under this Agreement which does
not involve a Third Party Claim (such claim, a "Direct Claim"), the
Indemnified Party shall with reasonable promptness send to the
Indemnifying Party a written notice specifying the nature of such
claim, demand or action and the amount or estimated amount thereof,
provided that a delay in notifying the Indemnifying Party shall not
relieve the Indemnifying Party of its obligations under this Agreement
except to the extent that (and only to the extent that) such failure
shall have caused the Buyer Damages or Seller Damages, as applicable,
for which the Indemnifying Party is obligated to be greater than such
Buyer Damages or Seller Damages, as applicable, would have been had
the Indemnified Party given the Indemnifying Party prompt notice
(which amount or estimated amount shall not be conclusive of the final
amount, if any, of such claim, demand or action) (a "Claim Notice").
(ii) Except as provided below, in the event of a Third Party
Claim, the Indemnifying Party shall be entitled to control the defense
of such Third Party Claim and to appoint counsel of the Indemnifying
Party's choice at the expense of the Indemnifying Party to represent
the Indemnified Party and any others the Indemnifying Party may
reasonably designate in connection with such claim, demand or action
(in which case the Indemnifying Party shall not thereafter be
responsible for the fees and expenses of any separate counsel retained
by any Indemnified Party except as set forth below); provided that
such counsel is reasonably acceptable to the Indemnified Party.
Notwithstanding an Indemnifying Party's election to appoint counsel to
represent an Indemnified Party in connection with a Third Party Claim,
an Indemnified Party shall have the
<PAGE> 41
37
right to participate in the defense of such claim and to employ
counsel of its choice for such purpose; provided that the fees and
expenses of such separate counsel shall be borne by the Indemnified
Party (except as provided below and except for any fees and expenses
of such separate counsel that are incurred prior to the date the
Indemnifying Party effectively assumes control of such defense which,
notwithstanding the foregoing, shall be borne by the Indemnifying
Party). If requested by the Indemnifying Party, the Indemnified Party
agrees to cooperate with the Indemnifying Party and its counsel in
contesting any claim, demand or action which the Indemnifying Party
defends, or, if appropriate and related to the claim, demand or action
in question, in making any counterclaim against the person asserting
the Third Party Claim, or any cross-complaint against any person. The
Indemnifying Party shall not be entitled to assume control of the
defense of a Third Party Claim and shall pay the reasonable fees and
expenses of counsel retained by the Indemnified Party (provided that
such counsel is reasonably acceptable to the Indemnifying Party) if
(i) the claim for indemnification relates to or arises in connection
with any criminal proceeding, action, indictment, allegation or
investigation, (ii) an adverse determination with respect to the
action, lawsuit, investigation, proceeding or other claim giving rise
to such claim for indemnification would reasonably be likely to be
materially detrimental to the Indemnified Party's reputation or
business, (iii) the claim seeks an injunction or equitable relief
against the Indemnified Party or (iv) the claim involves liabilities
under environmental laws that require remedial action at facilities
that were transferred pursuant to this Agreement, in which case the
Indemnified Party shall have control and management authority over the
resolution of such claims, including hiring environmental consultants
and conducting environmental investigations and cleanups; provided
that the Indemnified Party shall keep the Indemnifying Party apprised
of any major developments relating to any such environmental claim and
provided further that, in the case of any of (i) through (iv) above,
(x) the Indemnified Party shall not agree to any stipulation to or the
entry of a court order that adversely affects the Indemnifying Party
without the Indemnifying Party's consent and (y) the Indemnifying
Party shall have the
<PAGE> 42
38
right to retain counsel of its choice at its own expense and
participate in the defense of the Third Party Claim, in which case the
third sentence of this Section 15(d)(ii) shall be fully applicable.
No Third Party Claim (regardless of whether the Indemnifying Party has
assumed control of such Third Party Claim or such Third Party Claim
falls into any of the categories set forth in (i) through (iv) above)
may be settled or compromised (i) by the Indemnified Party without the
prior written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld or delayed or (ii) by the Indemnifying
Party without the prior written consent of the Indemnified Party,
which consent shall not be unreasonably withheld or delayed. In the
event any Indemnified Party settles or compromises or consents to the
entry of any judgment with respect to any Third Party Claim without
the prior written consent of the Indemnifying Party, each Indemnified
Party shall be deemed to have waived all rights against the
Indemnifying Party for indemnification under this Section 15.
SECTION 16. EXPENSES. Seller, on the one hand, and Buyer, on
the other hand, shall pay all costs and expenses incurred by such party or on
its behalf in connection with this Agreement and the transactions contemplated
hereby, including without limiting the generality of the foregoing, fees and
expenses of its financial consultants, accountants and counsel. All excise,
sales, use, transfer (including real property transfer or gains), stamp,
documentary, filing recordation or other Taxes, if any, incident to the
transfer of the Assets to Buyer or which may be imposed or assessed as a result
of the transactions contemplated hereby and all of the expenses relating to
obtaining any governmental permits, licenses and authorizations, approvals,
exemptions, certificates or similar instruments or documents which are
necessary for the conduct of the Business immediately after the Closing Date
shall be paid by Seller; provided that Buyer shall pay all of the expenses
relating to the qualification of Buyer to do business in such foreign
jurisdictions as are necessary for the conduct of the Business immediately
after the Closing Date.
SECTION 17. ASSIGNMENT. The terms and conditions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective
<PAGE> 43
39
successors and permitted assigns; provided, however, that neither this
Agreement nor any of the rights, interests, or obligations hereunder may be
assigned by any of the parties hereto without the prior written consent of the
other parties, except (i) as set forth in the following sentence and (ii) Buyer
and, after the Closing, Seller may assign any or all of their respective rights
and obligations hereunder to any of their Affiliates without the consent of the
other parties; provided, that any such assignment under the foregoing clauses
(i) and (ii) shall not relieve Seller or Buyer, as the case may be, from any
liability hereunder. Seller desires that the purchase and sale of the Assets
be effectuated in a transaction that will qualify, to the maximum extent
possible, as a "like-kind exchange" under Section 1031 of the Code and the
applicable Treasury regulations, and the parties to this Agreement hereby agree
to cooperate with each other and to take all such actions as may be necessary
to effectuate, to the extent reasonably practicable, the purchase and sale of
the Assets in such a way as to so qualify, including, but not limited to, (i)
the assignment by Seller prior to the Closing of its rights to receive the
purchase price referred to in Section 3(b), but not its obligations, under this
Agreement to an entity which meets the requirement of Section 1031 of the Code
with respect to a qualified intermediary and which is mutually acceptable to
the parties and (ii) the execution of such agreements and other documents as
may be necessary to complete and otherwise effectuate such "like-kind
exchange"; provided, however, that (i) Buyer's agreement to cooperate in
accordance herewith shall not require it to take any actions that would delay
the Closing beyond the closing of the Asset Purchase Agreement and (ii) Seller
agrees to reimburse Buyer for any liabilities, costs, and expenses, including
reasonable legal expenses, incurred by Buyer in connection with any action
taken by them at Seller's request pursuant to this Section.
SECTION 18. NOTICES. Any notice, payment or other
communication required or permitted hereunder shall be sufficiently given (and
will be deemed to have been duly given upon receipt) if given in writing and
delivered in
<PAGE> 44
40
person, or by facsimile (where a facsimile number is indicated), or by
overnight courier or by registered or certified mail, postage prepaid, as
follows:
(a) To Buyer:
Liberty Group Operating, Inc.
c/o Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard
Suite 2000
Los Angeles, CA 90025
Telecopy: (310) 954-0404
Attention: Peter J. Nolan and Kenneth L. Serota
with a copy (which shall not constitute notice) to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attn: Scott J. Davis, Esq.
Facsimile Number: (312) 701-7711
(b) To Seller:
American Publishing Company of Illinois
c/o Hollinger International Inc.
401 North Wabash Avenue
Chicago, Illinois 60611
Attn: General Counsel
Facsimile Number: (312) 321-0629
<PAGE> 45
41
with copies (which shall not constitute notice) to:
Hollinger Inc.
10 Toronto Street
Toronto, Ontario M5C 2B7
Canada
Attn: Vice President and General Counsel
Facsimile Number: (416) 364-2088
Cravath, Swaine & Moore
Worldwide Plaza
825 8th Avenue
New York, New York 10019
Attn: William P. Rogers, Esq.
Facsimile Number: (212) 474-3700
or at such other address for a party as shall be specified by like notice.
SECTION 19. MISCELLANEOUS.
(a) PUBLICITY. No public release or announcement concerning
the transactions contemplated hereby shall be issued by any party without the
prior consent of the other party (which consent shall not be unreasonably
withheld), except as such release or announcement may be required by law or the
rules or regulations of any United States or foreign securities exchange, in
which case the party required to make the release or announcement shall give
the other party notice in advance of such issuance.
(b) SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
adverse manner to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner so that the transactions contemplated hereby are fulfilled to the
greatest extent possible.
<PAGE> 46
42
(c) CAPTIONS. The Section and other headings contained in
this Agreement are inserted for convenience of reference only and will not
affect the meaning or interpretation of this Agreement. All references to
Sections contained herein mean Sections of this Agreement unless otherwise
stated. All capitalized terms defined herein are equally applicable to both
the singular and plural forms of such terms.
(d) REFUNDS. Seller shall be entitled to any refunds or
credits of Taxes for any Taxable period (or portion thereof) ending on or prior
to the Closing Date. Buyer shall be entitled to any refunds or credits of
Taxes for any Taxable period (or portion thereof) beginning after the Closing
Date.
(e) GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement
shall be construed in accordance with and governed by the laws of the State of
Delaware applicable to agreements made and to be performed wholly within such
jurisdiction. All disputes, litigation, proceedings or other legal actions by
any party to this Agreement in connection with or relating to this Agreement or
any matters described or contemplated in this Agreement shall be instituted in
the courts of the State of Delaware or of the United States sitting in the
State of Delaware. Each party to this Agreement irrevocably submits to the
exclusive jurisdiction of the courts of the State of Delaware and of the United
States sitting in the State of Delaware in connection with any such dispute,
litigation, action or proceeding arising out of or relating to this Agreement.
Each party to this Agreement will maintain at all times a duly appointed agent
in the State of Delaware for the service of any process or summons in
connection with any such dispute, litigation, action or proceeding brought in
any such court and, if it fails to maintain such an agent during any period,
any such process or summons may be served on it by mailing a copy of such
process or summons to it at its address set forth, and in the manner provided,
in Section 18, with such service deemed effective on the fifteenth day after
the date of such mailing.
Each party to this Agreement irrevocably waives the right to a
trial by jury in connection with any matter arising out of this Agreement and,
to the fullest extent permitted by applicable law, any defense or objection it
may now or hereafter to have the laying of venue of any
<PAGE> 47
43
proceeding under this Agreement brought in the courts of the State of Delaware
or of the United States sitting in the State of Delaware and any claim that any
proceeding under this Agreement brought in any such court has been brought in
an inconvenient forum.
(f) COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute but one and the same agreement. Copies
of executed counterparts transmitted by telecopy, telefax or other electronic
transmission service shall be considered original executed counterparts for
purposes of this Section, provided receipt of copies of such counterparts is
confirmed.
(g) AMENDMENT. This Agreement may not be modified or amended
except by an instrument or instruments in writing signed by all parties hereto.
Any party hereto may, only by an instrument in writing, waive compliance by the
other party hereto with any term or provision hereof on the part of such other
party hereto to be performed or complied with. The waiver by any party hereto
of a breach of any term or provision hereof shall not be construed as a waiver
of any subsequent breach.
(h) INTERPRETATION. For the purposes hereof: (i) words in
the singular shall be held to include the plural and vice versa and words of
one gender shall be held to include the other gender as the context requires;
(ii) the terms "hereof," "herein," and "herewith" and words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as a
whole (including all of the Schedules and Exhibits hereto) and not to any
particular provision of this Agreement, and Section, paragraph, Exhibit and
Schedule references are to the Sections, paragraphs, Exhibits and Schedules to
this Agreement unless otherwise specified; (iii) the word "including" and words
of similar import when used in this Agreement shall mean "including, without
limitation," unless the context otherwise requires or unless otherwise
specified; (iv) the word "or" shall not be exclusive; and (v) this Agreement
shall be construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting or causing any
instrument to be drafted.
<PAGE> 48
44
To the extent that a provision in this Agreement is similarly
worded to a provision in the Asset Purchase Agreement but the wording in this
Agreement is different from the wording of the comparable provision in the
Asset Purchase Agreement in a way that is not dictated by the different
transactions and Businesses covered in each of this Agreement and the Asset
Purchase Agreement, the language in this Agreement shall be deemed to be
modified to read as the comparable language in the Asset Purchase Agreement.
(i) FURTHER ASSURANCES. Following the Closing, Buyer and
Seller shall each from time to time at the other's reasonable request and
without further consideration execute and deliver to the other such additional
instruments of transfer and conveyance and take such action as may be
reasonably requested in order better to assure, convey and confirm to Buyer all
of Seller's right, title, interest in and all benefits of and to the Assets to
be assigned, conveyed and transferred hereunder.
(j) EXTENSION; WAIVER. At any time the parties may extend
the time for the performance of any of the obligations or other acts of the
other party, waive any inaccuracies in the representations and warranties
contained in this Agreement and waive compliance with any of the agreements or
conditions in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument signed on
behalf of such party. The waiver by any party hereto of a breach of any
provision hereunder shall not operate to be construed as a waiver or any prior
or subsequent breach of the same or any other provision hereunder.
SECTION 20. GUARANTEE. The Company and the Associated
Subsidiaries guarantee the obligations of the Seller under this Agreement
(including the obligations pursuant to Sections 3(c)-3(i) and indemnifications
obligations), notwithstanding the assignment of the right to receive the
purchase price pursuant to the "like-kind exchange" as described in Section 17.
SECTION 21. LIMITED GUARANTEE. Green Equity Investors II,
L.P. ("GEI II"), which shall be a party to this Agreement solely for purposes
of this Section 21 and Section 19(e), guarantees, subject to the limitations
<PAGE> 49
45
provided below, the obligations of Buyer under this Agreement to the extent
that such obligations are to be performed on the Closing Date; provided that
GEI II's obligations hereunder shall be limited to the payment of money not to
exceed $150 million and shall terminate at the Closing and provided further
that GEI II's obligations hereunder shall be further reduced to the extent GEI
II makes payments under Article XIII of the Asset Purchase Agreement (it being
understood that GEI II shall in no event be responsible for more than $150
million in the aggregate under this Section 21 and Article XIII of the Asset
Purchase Agreement). GEI II agrees to be bound by the provisions of Section
19(e) of this Agreement with respect solely to its promises in this Section 21.
<PAGE> 50
SCHEDULE 1
ALL OF AMERICAN PUBLISHING COMPANY OF ILLINOIS'S
PUBLICATIONS AND PRINTING PRESSES IN THE
FOLLOWING LOCATIONS
ILLINOIS
Albion
Canton
Carmi
Du Quoin
Eldorado
Flora
Harrisburg
Monmouth
Galesburg
Olney
West Frankfort
<PAGE> 51
EXHIBIT A
[FORM OF]
BILL OF SALE
BILL OF SALE, dated as of [ ], 1998,
by and among AMERICAN PUBLISHING COMPANY OF ILLINOIS,
a Delaware corporation (the "Seller"), and LIBERTY
GROUP OPERATING, INC., a Delaware corporation
("Buyer"; the term Buyer shall include subsidiaries
of Buyer unless the context otherwise provides).
WHEREAS pursuant to the Asset Purchase Agreement dated as of
the date hereof, among the Seller, the Investor, the Company, the Associated
Subsidiaries and Buyer (the "Asset Purchase Agreement"), Seller has agreed to
transfer to Buyer the Business and the Assets and enter into certain ancillary
agreements; and
WHEREAS pursuant to the Asset Purchase Agreement, Buyer has
agreed to assume the Assumed Liabilities.
NOW, THEREFORE, in consideration of the sale and assignment of
the Business and the Assets contemplated to be delivered to Buyer on the date
of the Closing, the assumption of the Assumed Liabilities contemplated to be
assumed by Buyer on the date of the Closing, the payment of the purchase price
for the Assets as provided for in the Asset Purchase Agreement and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
SECTION 1. Defined Terms. All capitalized terms used and not
otherwise defined herein shall have the meanings ascribed to them in the Asset
Purchase Agreement.
SECTION 2. Sale of Assets. Upon the terms and subject to the
conditions of the Asset Purchase Agreement, Seller hereby sells, assigns,
transfers, conveys and delivers to Buyer, and Buyer hereby accepts from Seller,
effective as of the date of the Closing, all right, title and interest of
Seller and/or any of its Affiliates or other entities in and to the Assets
contemplated to be delivered to Buyer on the Closing Date.
Whether or not all of the Assets contemplated to be delivered
to Buyer on the Closing Date shall have been
<PAGE> 52
2
legally transferred to Buyer as of the Closing Date, Buyer shall have, and
shall be deemed to have acquired, complete and sole beneficial ownership over
all of the Assets contemplated to be delivered as of the Closing Date.
SECTION 3. Survival of Certain Provisions. The parties
hereto acknowledge that the Asset Purchase Agreement includes various
provisions related hereto that expressly survive the Closing Date, including,
without limitation, provisions relating to indemnification and cooperation
after the Closing Date and non-assignable contracts, and the parties agree that
all such provisions shall continue in full force and effect in accordance with
the Asset Purchase Agreement.
SECTION 4. Retained Assets. The parties hereby agree that
Seller does not hereby sell, assign, transfer, convey or deliver to Buyer any
Retained Assets.
SECTION 5. Counterparts. This Bill of Sale may be executed
in one or more counterparts, each of which shall be deemed an original and all
of which shall, taken together, be considered one and the same Bill of Sale, it
being understood that all parties need not sign the same counterpart.
SECTION 6. Delaware Law. This Bill of Sale shall be governed
by, and construed in accordance with, the laws of the State of Delaware,
without regard to its principles of conflicts of laws. The parties agree that
irreparable damage would occur in the event that any of the provisions of this
Bill of Sale were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Bill of
Sale and to enforce specifically the terms and provisions of this Bill of Sale
in any court of the United States located in the State of Delaware or in
Delaware state court, this being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Bill of Sale or any of the transactions contemplated
by this Bill of Sale, (b) agrees that it will not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any
<PAGE> 53
2
such court and (c) agrees that it will not bring any action relating to this
Bill of Sale or any of the transactions contemplated by this Bill of Sale in
any court other than a Federal court sitting in the State of Delaware or in
Delaware state court.
SECTION 7. Assignment. Each party hereto consents to the
assignment of this Bill of Sale, to any other person, in whole or in part,
whether by operation of law or otherwise, by the other party, its successors or
assigns.
SECTION 8. No Third Party Beneficiaries. This Bill of Sale
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Bill
of Sale to be duly executed as of the day and year first above written.
AMERICAN PUBLISHING COMPANY
OF ILLINOIS
By:
------------------------
Name:
Title:
LIBERTY GROUP OPERATING, INC.
By:
------------------------
Name:
Title:
<PAGE> 54
EXHIBIT B
[FORM OF]
TRADEMARK AND TRADE NAME ASSIGNMENT
THIS TRADEMARK AND TRADE NAME ASSIGNMENT (the "Assignment") is
made as of this [ ] day of [ ], 1998, by and between American
Publishing Company of Illinois, a Delaware corporation ("Seller"), with its
principal office at [ ] and Liberty Group Operating, Inc., a Delaware
corporation ("CNCO") with its principal office at [ ].
WHEREAS, CNCO and Seller are parties to that certain Asset
Purchase Agreement, dated as of [ ] pursuant to which Seller has agreed
to sell and CNCO has agreed to purchase certain Assets (as defined in the Asset
Purchase Agreement) including, without limitation, the United States trademark
registrations identified and set forth on Schedule A attached hereto and
incorporated herewith (collectively, the "Marks"), the unregistered trademarks
and the trade names identified and set forth in Schedule B, attached hereto and
incorporated herewith (collectively, the "Trade Names"), and the goodwill of
the business associated therewith; and
WHEREAS, CNCO wishes to acquire Seller's entire right, title and
interest in and to the Marks, title and interest in and to the Marks and the
Trade Names, together with the goodwill of the business in connection with
which the Marks and the Trade Names are used;
NOW THEREFORE, for good and valuable consideration, the receipt
of which is hereby acknowledged, Seller does hereby sell and assign to CNCO all
the right, title and interest Seller has or may have in the Marks and in any
and all other marks or names owned or used by Seller or in which Seller
otherwise has any ownership interest and which include the listed terms of said
Marks alone or in combination with other words, figures, designs or indicia,
including any rights, title and interest as service marks, trademarks, trade
names and all common law rights connected therewith, together with the goodwill
of the business with respect to which the Marks or any such other marks or
names have been used and/or registered and all claims and causes of action
relating to infringement of said Marks or said other marks or name.
<PAGE> 55
Seller will assist in obtaining or providing any further
documents which may be required to confirm claim or title thereto.
Signed at [ ] this [ ] day of [ ].
AMERICAN PUBLISHING COMPANY OF ILLINOIS
By:______________________
Name:
Title:
Date:
LIBERTY GROUP OPERATING, INC.
By:______________________
Name:
Title:
Date:
<PAGE> 1
EXHIBIT 2.3
EXCHANGE AGREEMENT
This Exchange Agreement ("AGREEMENT") is made as of this 21st day of
November, by and between American Publishing Company of Illinois (referred to
herein as "APC"), and Chicago Deferred Exchange Corporation (referred to herein
as "EXCHANGOR").
WITNESSETH:
WHEREAS, APC owns certain assets used or useful in the business of
publishing, marketing and distributing certain community newspapers as further
identified in Exhibit A (all of such assets are referred to collectively herein
as the "RELINQUISHED PROPERTY"); and
WHEREAS, APC has entered into that certain Asset Purchase Agreement,
dated November _, 1997, with Liberty Group Publishing, Inc. ("LG Entity"), Green
Equity Investors II, L.P. (as Guarantor), Liberty Group Operating, Inc.,
Hollinger International Inc., APAC-90, Inc., American Publishing (1991) Inc. and
APAC-95, Inc. pursuant to which APC has agreed to sell the Relinquished Property
to LG Entity (the "LG PURCHASE AGREEMENT"); and
WHEREAS, Post-Tribune Publishing, Inc. ("POST-TRIBUNE") owns certain
assets used or useful in the operation of the newspaper known as The
Post-Tribune in Gary, Indiana (all of such assets are herein referred to as the
"REPLACEMENT PROPERTY"); and
WHEREAS, Hollinger International, Inc. ("HII") has entered into that
certain Asset Purchase Agreement, dated October 17, 1997, among Knight-Ridder,
Inc. ("KRI"), Post-Tribune and HII (the "KR PURCHASE AGREEMENT") pursuant to
which HII has agreed to purchase the Replacement Property from Post-Tribune; and
WHEREAS, HII has assigned its rights to acquire the Replacement Property
pursuant to the KR Purchase Agreement to APC; and
WHEREAS, it is the intention of the parties that Exchangor, subject to
the terms and provisions of this Agreement and acting as APC's qualified
intermediary, shall acquire the Relinquished Property from APC and transfer it
to LG Entity pursuant to the LG Purchase Agreement and shall acquire the
Replacement Property from Post-Tribune pursuant to the KR Purchase Agreement and
transfer it to APC; and
WHEREAS, it is the intention of the parties that (i) Exchangor
constitute a "qualified intermediary" as provided in the Qualified Intermediary
Safe Harbor of Treasury Regulation Section 1.1031(k)-1(g)(4), and (ii) the
acquisition by APC of the Replacement Property in exchange for the Relinquished
Property shall qualify as a "like-kind" exchange within the meaning of Section
1031 of the Internal Revenue Code of 1986, as amended (the "CODE"), and the
applicable regulations thereunder;
<PAGE> 2
NOW, THEREFORE, in consideration of the mutual promises herein
contained, APC and Exchangor agree as follows:
ARTICLE ONE
A. ASSIGNMENT OF LG PURCHASE AGREEMENT
1. APC agrees to transfer the Relinquished Property to Exchangor,
and Exchangor agrees to acquire the Relinquished Property upon the terms and
conditions set forth in this Agreement. The Relinquished Property shall be
transferred to Exchangor subject to the right of LG Entity to acquire the
Relinquished Property from the Exchangor pursuant to the terms of the LG
Purchase Agreement. The LG Purchase Agreement is attached hereto as Exhibit B
and in all events is incorporated herein by reference.
2. APC agrees to assign to Exchangor all of APC's rights to sell
the Relinquished Property to LG Entity and to receive the purchase price for the
Relinquished Property payable at the closing pursuant to the LG Purchase
Agreement, and Exchangor agrees to accept assignment from APC of such rights. No
other rights (including, without limitation, rights relating to indemnification)
and no obligations (other than the obligation to transfer the Relinquished
Property) pursuant to the LG Purchase Agreement will be assigned to Exchangor.
B. NOTICE TO LG ENTITY
APC represents that it will provide notice to LG Entity that APC's
rights in the LG Purchase Agreement have been assigned to Exchangor on or before
the Closing Date under the LG Purchase Agreement (the "RELINQUISHED PROPERTY
CLOSING DATE").
ARTICLE TWO
A. EXCHANGE CONSIDERATION
The consideration for the transfer of the Relinquished Property to
Exchangor shall be the transfer by Exchangor to APC of the Replacement Property.
B. ASSIGNMENT OF KR PURCHASE AGREEMENT
1. APC agrees to assign to Exchangor all of APC's rights in the
KR Purchase Agreement and Exchangor agrees to accept assignment from APC of
APC's rights in the KR Purchase Agreement. The KR Purchase Agreement is attached
hereto as Exhibit C and in all events is incorporated herein by reference. It is
understood and agreed by APC that Exchangor shall be under no obligation to
execute or take assignment of any contract, or to do any other act or thing
contemplated by this Agreement, the LG Purchase Agreement or the KR Purchase
Agreement without, in each case, receiving a written instrument from APC in form
and
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<PAGE> 3
substance satisfactory to Exchangor, which written instrument shall contain such
directions, releases, representations, warranties and indemnities as Exchangor
shall reasonably require.
2. APC represents that it will provide notice to Post-Tribune and
KRI that APC's rights in the KR Purchase Agreement have been assigned to
Exchangor on or before the Closing Date under the KR Purchase Agreement (the
"REPLACEMENT PROPERTY CLOSING DATE").
C. LEASEHOLD INTERESTS
If any of the Replacement Property shall consist of a leasehold interest
in real property and the KR Purchase Agreement or the lease being assigned
thereunder shall require an assumption of the lessee's obligations under such
lease in connection with an assignment of such interest, then, in such event any
such lease shall provide that Exchangor shall be released of all obligations of
the lessee accruing from and after such assignment or, in lieu thereof, there
shall be delivered to Exchangor at the time of such assignment the agreement of
any such lessor to the effect that Exchangor shall be released of all
obligations accruing thereunder from and after such assignment. If the KR
Purchase Agreement or any transaction in connection therewith shall require
Exchangor to execute a lease as lessor thereof, such lease shall provide that in
the event of any transfer or conveyance of title, the lessor of the lease shall
be automatically freed and relieved, from and after the date of such transfer or
conveyance, of all personal liability as respects the performance of any
covenants or obligations on the part of lessor contained in the lease thereafter
to be performed.
D. RELINQUISHED PROPERTY EQUITY
For the purposes of this Agreement, the term "RELINQUISHED PROPERTY
EQUITY" is deemed to be $44,419,116 less the sum of the following items to the
extent provided in the LG Purchase Agreement: (i) the unpaid principal amount,
if any, on the Relinquished Property Closing Date, of the mortgage recorded
against the Relinquished Property that are being paid in connection with the
transfer of the Relinquished Property, and (ii) transactional items that relate
to the disposition of the Relinquished Property and appear under local standards
in the typical closing statement as the responsibility of the seller (e.g.
commissions, prorated taxes, recording charges, State, City or other transfer
taxes, mortgage taxes, and other governmental gains taxes, owner's title
insurance premium, lender's title insurance premium, escrow fees, messenger
fees, and exchange fees).
E. REPLACEMENT PROPERTY EQUITY
For the purposes of this Agreement, the term "REPLACEMENT PROPERTY
EQUITY" shall be an amount equal to 100% of the sum of the following items: (i)
the aggregate cash portion of the aggregate consideration required to be paid by
Exchangor under the KR Purchase Agreement and (ii) the cost to Exchangor of the
acquisition of all Replacement Property which shall include any mortgage taxes,
recording taxes, State, City or other transfer taxes, recording charges,
brokerage commissions, charges for title searches, title insurance, survey
costs, closing adjustments, letter of credit expenses, if any, and similar
charges and expenses including interest
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<PAGE> 4
paid or incurred by Exchangor on sums above the Relinquished Property Equity
required to be borrowed by Exchangor simultaneously with the Closing under the
KR Purchase Agreement.
F. ADVANCED OR LOANED FUNDS
1. In no event shall Exchangor be required to advance sums in excess of
the Relinquished Property Equity on account of the purchase of Replacement
Property. APC shall have the right to (a) advance funds to Exchangor in the
event amounts in excess of the Relinquished Property Equity are required in
order to purchase the Replacement Property ("ADVANCED FUNDS"), or (b) locate and
designate a lender or lenders from which Exchangor shall borrow funds ("LOANED
FUNDS"), and in such event, Exchangor shall complete such borrowing upon terms
acceptable to APC, provided that Exchangor shall have no personal liability with
respect to such borrowing and shall not be required to execute any loan
documents which do not contain appropriate provisions exculpating Exchangor from
personal liability thereunder.
2. The Advanced Funds or Loaned Funds shall be delivered in immediately
available funds to Exchangor no later than the date such funds are required to
be paid pursuant to the KR Purchase Agreement. The term "mortgage" as used in
this Exchange Agreement shall include a trust indenture or deed of trust and the
term "note" shall include a bond.
G. EXCHANGOR FEE
As additional consideration for Exchangor's acquisition and transfer of
Replacement Property to APC, Exchangor shall receive an amount equal to
Exchangor's then current rate schedule. Exchangor shall also receive reasonable
compensation for any special services which may be rendered by Exchangor. Such
fees, charges and other compensation shall be paid to the Exchangor from the
Exchange Trust Account, as provided in this Agreement.
ARTICLE THREE
A. PRORATIONS
With respect to the Relinquished Property, the same apportionments and
adjustments shall be made as of the Relinquished Property Closing Date between
APC and Exchangor as are made between Exchangor and LG Entity pursuant to the LG
Purchase Agreement. With respect to the Replacement Property, the same
apportionments and adjustments shall be made as of the Replacement Property
Closing Date between APC and Exchangor as are made between Exchangor and
Post-Tribune pursuant to the KR Purchase Agreement.
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<PAGE> 5
B. PAYMENTS
All adjustments and payments shall be made between APC and Exchangor as
of the Relinquished Property Closing Date or the Replacement Property Closing
Date, as the case may be, by either (i) good and sufficient certified check of
Exchangor or APC, as the case may be, drawn on a bank or banks which are members
of the New York Clearing House, or (ii) official check or checks of such
bank(s), or a combination of any such checks, or (iii) by wiring federal or
other immediately available funds.
C. DIRECT DEEDING
1. For purposes of this Agreement, a conveyance by APC to
Exchangor includes a direct conveyance from APC to LG Entity or its permitted
assigns pursuant to the LG Purchase Agreement, and a conveyance by Exchangor to
APC includes a direct conveyance from Post-Tribune to APC. Exchangor shall for
purposes of this Agreement be considered to have acquired the Relinquished
Property and transferred it to LG Entity and to have acquired the Replacement
Property and transferred it to APC, as provided by Treasury Regulation Section
1.1031(k)-1(g)(4)(iii) and 1.1031(k)-1(g)(4)(iv).
2. At no time shall Exchangor hold title to the Relinquished
Property. On the Relinquished Property Closing Date, APC shall convey title to
the Relinquished Property directly to LG Entity or its permitted assigns
pursuant to the LG Purchase Agreement to the terms and conditions set forth in
the LG Purchase Agreement. Immediately after the transaction described in the
previous sentence, Exchangor shall assign all of its rights under the LG
Purchase Agreement as the transferor or seller of the Relinquished Property that
survive the Relinquished Property Closing Date to APC.
3. At no time shall Exchangor hold title to the Replacement
Property. On the Replacement Property Closing Date, Post-Tribune shall convey
title to the Replacement Property directly to APC pursuant to the terms and
conditions set forth in the KR Purchase Agreement. Effective immediately after
the transaction described in the previous sentence, Exchangor shall assign all
of its rights under the KR Purchase Agreement as a transferee or purchaser of
the Replacement Property that survive the Replacement Property Closing Date to
APC.
ARTICLE FOUR
A. QUALIFIED EXCHANGE TRUST AGREEMENT
In order to secure Exchangor's obligations to purchase Replacement
Property and transfer it to APC, Exchangor shall enter into a QUALIFIED EXCHANGE
TRUST AGREEMENT as defined by IRC Regulation Section 1.1031(k)-1(g)(3)(iii) and
deposit the Relinquished Property Equity into a segregated account with THE
CHICAGO TRUST COMPANY, as Trustee, hereinafter referred to as
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<PAGE> 6
"Trustee", The Initial Exchange Trust Account, together with accumulated income
therefrom, shall constitute the "EXCHANGE TRUST ACCOUNT".
B. MONEY FOR REPLACEMENT PROPERTY
Exchangor shall be entitled to withdraw funds from the Exchange Trust
Account in order (i) to make earnest money deposits on Replacement Property and
(ii) to pay the balance of the purchase price due on the purchase of the
Replacement Property. APC shall give detailed written notice to Exchangor no
less than one (1) business day prior to any disbursement by Exchangor. The
amount of the Exchange Trust Account shall be reduced by (x) the amount of any
withdrawals made by the Exchangor under this Agreement, and (y) the Exchangor's
fees and other expenses for which the Exchangor is entitled to be paid pursuant
to this Agreement.
C. ADDITIONAL RESTRICTIONS ON EXCHANGOR AND QUALIFIED EXCHANGE TRUST
IRC REGULATION SECTION 1.1031(k)-1(g)(6)
No amounts in the Exchange Trust Account, and no amounts held by
Exchangor, shall be paid, loaned, pledged or otherwise made available to APC
until APC has received the Replacement Property. The Exchange Trust Account
shall terminate on the day after the Replacement Property Closing Date (or as
soon thereafter as is practical) and The Chicago Trust Company shall, in
satisfaction of Exchangor's remaining obligations under this Agreement, pay any
remaining amount in the Exchange Trust Account to APC. Notwithstanding the
foregoing, amounts in the Exchange Trust Account or held by the Exchangor shall
be paid, loaned, pledged or otherwise made available to APC, and the Exchange
Trust Account shall terminate, only in compliance with Treasury Regulation
Section 1.1031(k)-1(g)(6).
D. INTEREST REPORTING
APC and Exchangor acknowledge and agree that Exchangor will report to
the Internal Revenue Service the income accumulated in the Exchange Trust
Account, and that such amount will be attributed to APC for Federal income tax
purposes.
ARTICLE FIVE
A. ADVANCES AND INDEMNITIES
If Exchangor shall make any advances or incur any expenses under this
Agreement, the KR Purchase Agreement or the LG Purchase Agreement or shall incur
any expenses by reason of being a party to any litigation in connection with or
arising out of any of the terms and provisions of this Agreement, the KR
Purchase Agreement or the LG Purchase Agreement; or if Exchangor shall be
compelled to pay any money on account of this Agreement, the KR Purchase
Agreement or the LG Purchase Agreement or otherwise, whether as a tax, or for
breach of contract, injury to person or property, or fines or penalties under
any law including,
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<PAGE> 7
without limitation, under any federal, state or local law with respect to
environmental matters or hazardous wastes, or otherwise, APC agrees to pay to
Exchangor on demand, with interest at the Default Rate (as hereinafter defined),
the amount of all such advances or payments made by Exchangor, plus all of
Exchangor's out-of-pocket expenses and reasonable attorneys' fees. Exchangor
shall not be required to pay any funds being held in the Exchange Trust Account
or any part of it until all of such expenses, payments, or advances made or
incurred by Exchangor (including Exchangor's fees and costs) shall have been
paid, together with interest (at the Default Rate) where required hereunder.
Exchangor shall not be obligated to pay any money under this Agreement, the KR
Purchase Agreement or the LG Purchase Agreement to prosecute or defend any legal
proceeding involving this Agreement, the KR Purchase Agreement or the LG
Purchase Agreement unless it is furnished with sufficient funds or is
indemnified by APC to Exchangor's satisfaction. Notwithstanding anything to the
contrary contained in this Agreement, Exchangor shall be under no obligation to
disburse any part of the funds in the Exchange Trust Account if Exchangor
reasonably determines that it may be held accountable to any person or entity
for any amount of money or for any other damages or remedies, including those of
an equitable nature, unless it shall elect to do so and is furnished with
sufficient funds or is indemnified by APC to Exchangor's satisfaction.
B. NO PERSONAL LIABILITY
APC hereby agrees that Exchangor shall not be required to assume or bear
any personal obligation or liability in dealing with the Relinquished Property
or the Replacement Property, or the LG Purchase Agreement or the KR Purchase
Agreement or to make itself liable for any damages, costs, expenses, fines or
penalties relating or arising out of such properties or agreements. Exchangor
shall not be liable for any loss, liability, expense or damage to the
Replacement Property occasioned by its acts or omission in good faith and in any
event Exchangor shall be liable only for its own willful misconduct or gross
negligence, but not for honest errors of judgment. All contracts, agreements or
other instruments executed by Exchangor pursuant to this Agreement, the KR
Purchase Agreement or the LG Purchase Agreement shall, as to APC and any person
claiming by, through or under APC, be deemed to include a provision exculpating
Exchangor from any personal liability thereunder and limiting recourse to the
assets comprising the Replacement Property. APC hereby agrees that Exchangor
shall be held harmless and fully indemnified by APC for acting on behalf of APC
pursuant to the terms of this Agreement, the KR Purchase Agreement or the LG
Purchase Agreement and this indemnity shall survive the termination of this
Agreement. APC's designation of Exchangor to act on APC's behalf pursuant to the
terms of this Agreement is intended to conform to, and shall be construed in a
manner consistent with, Section 1031 of the Code and the regulations thereunder.
APC shall contribute such additional funds to Exchangor as shall be necessary to
protect Exchangor from any of the aforesaid liabilities or to enable Exchangor
to complete the conveyances of the Relinquished Property and the Replacement
Property.
C. FAILURE OF REPLACEMENT PROPERTY
Notwithstanding anything to the contrary contained herein, Exchangor
shall not be in default under this Agreement and shall not be liable for any
damages, losses or expenses incurred by APC, if: (i) Exchangor fails to take any
steps to borrow or locate funds to acquire
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<PAGE> 8
the Replacement Property, or (ii) any Replacement Property fails to qualify as
"like-kind" property, or (iii) the transaction otherwise fails, for any reason,
to afford APC the benefits of Section 1031 of the Code.
D. AUTHORITY
1. APC represents and warrants to Exchangor that APC is duly
authorized to enter into this Agreement and to consummate the proposed
transactions contemplated hereunder.
2. Exchangor represents and warrants to APC that Exchangor is
duly authorized to enter into this Agreement and to consummate the proposed
transactions contemplated hereunder.
E. DUE DILIGENCE
Exchangor makes no representation or warranty that the exchange
contemplated by this Agreement, the KR Purchase Agreement or the LG Purchase
Agreement qualifies as a like-kind exchange within the meaning of Section 1031
of the Code. APC is solely responsible for all tax consequences arising out of
this Agreement, the KR Purchase Agreement or the LG Purchase Agreement. APC
hereby represents to Exchangor that it has obtained independent professional
advice from an attorney (or other advisors), who has reviewed this Agreement,
regarding federal, state and local tax, legal and practical consequences of the
transactions contemplated by this Agreement, the KR Purchase Agreement and the
LG Purchase Agreement, and APC acknowledges and expressly agrees that APC is not
relying on any advice of Exchangor with respect to any of the matters set forth
in this Agreement or as described under Section 1031 of the Code.
ARTICLE SIX
NOTICES
Any notice, designation, consent, approval or other communication
required or permitted to be given pursuant to the provisions of this Agreement
(referred to, collectively, as "NOTICE") shall be given in writing and shall be
sent by certified or registered mail, Federal Express, overnight courier, or
telecopier, addressed as follows:
IF TO APC:
c/o American Publishing Company
401 N. Wabash Avenue
Chicago, Illinois 60611
Attn: Mr. Jerry Strader
Fax: (312) 321-0629
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<PAGE> 9
With a copy to:
Kenneth L. Serota, Esq.
Hollinger International Inc.
401 N. Wabash Avenue
Chicago, Illinois 60611
Fax: (312) 321-0629
IF TO EXCHANGOR:
Chicago Deferred Exchange Corporation
171 North Clark, Ninth Floor
Chicago, Illinois 60601-3294
Fax: (312) 223-3301
Either party may, by Notice given in accordance with the provisions of this
Article Six, designate any further or different address to which subsequent
Notices shall be sent pursuant to the provisions of this Agreement. Any Notice
shall be deemed to have been given on the date such Notice shall have been
delivered. If such delivery shall be made on a Saturday, Sunday or holiday, said
Notice shall be deemed to have been given on the next succeeding business day.
ARTICLE SEVEN
A. DEFAULT RATE
For purposes of this Agreement and where expressly set forth herein, the
term "Default Rate" shall be deemed to mean the rate of interest then most
recently announced by First National Bank of Chicago, at Chicago, Illinois, as
its reference rate plus two percent (2%).
B. SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors, and except as otherwise herein provided, their assigns. This
Agreement shall not be transferred or assigned by APC without the prior written
consent of Exchangor. This Agreement, including all exhibits attached hereto and
documents to be delivered pursuant hereto, shall constitute the entire agreement
and understanding of the parties and, except for the Qualified Exchange Trust
Agreement, there are no other prior or contemporary written or oral agreements,
undertakings, promises, warranties or covenants not contained herein.
C. GOVERNING LAW
This Agreement shall be governed by and construed under the law of the
State of Illinois. This Agreement shall not be recorded or filed in the public
records of the State of Illinois or any
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<PAGE> 10
other government or quasi-governmental body or office without prior written
consent of Exchangor.
D. FIRPTA CERTIFICATION
APC hereby certifies under penalties of perjury that APC is not a
"FOREIGN PERSON" as defined by Section 1445 of the Code and the regulations
promulgated thereunder, that APC's United States taxpayer identification number
is 37-1227370, and that APC's address is 401 N. Wabash Avenue, Chicago,
Illinois 60611, and that APC is not subject to backup withholding,
E. FURTHER ASSURANCES
Each of the parties hereto shall hereafter execute and deliver such
further instruments and do such further acts and things as may be required or
necessary to carry out the intent and purposes of this Agreement and which are
not otherwise inconsistent with any of the terms of this Agreement.
F. RELATIONSHIP OF THE PARTIES
Nothing herein contained shall be construed or is intended to make
Exchangor and APC partners or joint venturers of one another and this Agreement
is not intended to and does not constitute or result in a partnership agreement.
This Agreement does not render Exchangor liable for the debts or obligations of
APC and Exchangor is acting solely on behalf of APC. APC's designation of
Exchangor to act on its behalf is intended to conform to, and shall be construed
in a manner consistent with, Section 1031 of the Code and the regulations
thereunder.
G. REMEDIES CUMULATIVE; WAIVER
All rights, privileges and remedies afforded Exchangor shall be deemed
cumulative and not exclusive and the exercise of any one of such remedies shall
not be deemed to be a waiver of any other right, remedy or privilege provided
for herein or available at law or in equity. No failure by Exchangor to
exercise, or delay by Exchangor in exercising, any right, remedy or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy or privilege hereunder preclude any other or
further exercise thereof, or the exercise of any other right, remedy or
privilege. No notice to or demand on APC shall, in itself, entitle APC to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of Exchangor under this Agreement.
H. THIRD PARTY BENEFICIARY
None of the provisions of this Agreement shall be for the benefit of or
enforceable by any creditor of the parties hereto or for the benefit of or
enforceable by any third party.
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<PAGE> 11
I. SURVIVAL
The covenants and agreements contained in this Agreement, including,
without limitation, any indemnities contained herein shall survive the
termination of this Agreement and the consummation of the transactions
contemplated hereby. All representations, warranties, covenants and agreements
made herein or in any certificate or other document furnished to a party hereto
pursuant to or in anticipation of this Agreement shall be deemed to have been
relied upon by the party to whom such certificate or other document is furnished
notwithstanding any investigation heretofore or hereafter made, and shall
continue in full force and effect as long as there remains unperformed any
obligation hereunder.
J. ATTORNEY'S FEES
If Exchangor commences an action against or defends an action to enforce
any of the terms hereof or because of the purported breach of any of the terms
hereof, then Exchangor shall be entitled to receive from APC its reasonable
attorneys' fees and other costs and expenses incurred in connection with the
prosecution or defense of such action.
K. COUNTERPARTS
This Agreement may be executed in two or more identical counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto set their hand and seals as of
the day and year first above written.
AMERICAN PUBLISHING COMPANY
OF ILLINOIS
By: /s/ J. A. Boultbee
-----------------------------
Name:___________________________
Title:__________________________
CHICAGO DEFERRED EXCHANGE
CORPORATION
By: /s/ Miriam Golden
-----------------------------
Name: Miriam Golden
--------------------------
Title: Vice President
--------------------------
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EXHIBIT A
ALL OF APC'S PUBLICATIONS AND PRINTING PRESSES IN THE FOLLOWING
LOCATIONS (OTHER THAN THOSE OWNED BY HII)
Location
Olney, Illinois
West Frankfort, Illinois
Canton, Illinois
Carmi, Illinois
Eldorado, Illinois
DuQuoin, Illinois
Flora, Illinois
Harrisburg, Illinois
Monmouth, Illinois
Albion, Illinois
Galesburg, Illinois
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<PAGE> 1
EXHIBIT 2.4
QUALIFIED EXCHANGE TRUST AGREEMENT
This QUALIFIED EXCHANGE TRUST AGREEMENT ("Agreement") made as of the
21st day of November, 1997 among The Chicago Trust Company as Trustee under
Trust No. 38347501 ("Trustee"), Chicago Deferred Exchange Corporation
("Exchangor") and American Publishing Company of Illinois ("Beneficiary").
WITNESSETH:
WHEREAS, Beneficiary is the owner of the property described in Exhibit A
of this Agreement (the "Property"); and
WHEREAS, Exchangor desires to acquire the Property; and
WHEREAS, Beneficiary does not wish to sell the Property for cash but
instead desires to exchange the Property for other property of like kind within
the meaning of Section 1031 of the Internal Revenue Code, and the Regulations
promulgated thereunder; and
WHEREAS, Exchangor and Beneficiary have entered into an Exchange
Agreement with respect to the Property (the "Exchange Agreement"); and
WHEREAS, Exchangor and Beneficiary have agreed that Exchangor will
create the Trust provided for in this Agreement to secure its obligations to
complete a tax-deferred exchange within the meaning of Section 1031 of the
Internal Revenue Code, and the Regulations promulgated thereunder; and
WHEREAS, Exchangor, Beneficiary, and Trustee intend that this Agreement
create a Qualified Trust for purposes of IRC Regulation Section
1.1031(k)-1(g)(3);
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE I
A. On or before the "Closing Date" under the LG Purchase Agreement, as
defined in the Exchange Agreement, Exchangor shall deposit the "Relinquished
Property Equity" as defined in the Exchange Agreement, with Trustee. The
Relinquished Property Equity shall constitute the "Initial Exchange Trust
Account".
B. Trustee, on behalf of Exchangor, shall invest and reinvest the
Initial Exchange Trust Account in the Goldman Sachs Money Market Trust,
hereinafter referred to as to the "Trust". The investment objective of the Trust
is to maximize current income to the extent consistent with the preservation of
capital and the maintenance of liquidity. Trustee shall receive reasonable
compensation for serving as administrator of the Trust and as Trustee under this
<PAGE> 2
Agreement. The Initial Exchange Trust Account, together with accumulated income
therefrom, shall constitute the "Exchange Trust Account".
ARTICLE 2
A. Except as provided in Paragraph B of this Article, the Exchange Trust
Account shall be used only to make required earnest money deposits and to
complete the acquisition of the Replacement Property consistent with the
Exchange Agreement.
B. Beneficiary shall have no right to receive, pledge, borrow or
otherwise have available the Exchange Trust Account prior to receipt by the
Beneficiary of the Replacement Property. Upon such occurrence, the unexpended
and unapplied Exchange Trust Account shall be paid to the Beneficiary, and this
trust shall thereupon terminate. Notwithstanding the foregoing, amounts in the
Exchange Trust Account shall be paid to the Beneficiary, and this trust shall
terminate, only in compliance with Treasury Regulation Section
1.1031(k)-1(g)(6). Trustee shall not be obligated to pay any funds in the
Exchange Trust Account to the Beneficiary in the event that Exchangor has not
obtained the releases described in the Exchange Agreement.
ARTICLE 3
A. Trustee shall hold legal and equitable title to all property at any
time constituting a part of the Trust Estate in trust, to be administered and
disposed of by Trustee pursuant to the terms of this Trust Agreement.
B. Trustee shall not be required to inquire into the propriety of any
direction given it by Exchangor or Beneficiary under this Agreement. Trustee
shall have no liability whatsoever arising out of its investment of funds in the
Exchange Trust Account. Anyone who may deal with Trustee shall not be required
or privileged to inquire into the necessity or expediency of any act of Trustee
or into the provisions of this Agreement. Trustee shall not be required to
assume any personal obligations or liability in dealing with the Exchange Trust
Account or to make itself personally liable for any damages, costs, expenses,
fines or penalties. Neither Exchangor nor Beneficiary is the agent of Trustee
for any purpose, and neither has any authority to act for, or in the name of
Trustee or to obligate Trustee personally or as Trustee.
ARTICLE 4
A. This Agreement shall be governed by and construed in accordance with
the law of the State of Illinois. In this Agreement, the plural includes the
singular and vice versa. Each of the terms and provisions of this Agreement is
and is deemed severable in whole or in part, and if any term or provision or
the application thereof in any circumstances should be invalid, illegal or
unenforceable, the remaining terms and provisions or application thereof to
circumstances other than those as to which a term or provision is held invalid,
illegal, unenforceable, shall not be affected and they shall remain in full
force and effect. This Agreement and the rights and obligations of the parties
hereto shall insure to the benefit of and
2
<PAGE> 3
shall bind the parties hereto and their respective successors and assigns. In
the event Beneficiary terminates, dissolves, or dies prior to that time of
distribution of any property otherwise distributable to Beneficiary, said
property shall be distributed to Beneficiary's successors or assigns or, in the
event of Beneficiary's death, to his estate.
B. All notices to be given under this Agreement shall be in writing and
served personally or by registered or certified mail, or overnight courier, to
the parties at the following addresses:
To Trustee: The Chicago Trust Company
Exchange Trust Division
171 North Clark Street
Chicago, Illinois 60606-3294
To Exchangor: Chicago Deferred Exchange Corporation
171 North Clark
Chicago, Illinois 60601-3294
To Beneficiary: c/o American Publishing Company
401 North Wabash Avenue
Chicago, Illinois 60611
Attention: Mr. Jerry Strader
Each such notice shall be deemed served on the date on which the return receipt
is signed or delivery is refused or the notice is designated by the postal
authorities as not deliverable, as the case may be.
C. The Exchangor, Trustee and Beneficiary hereby acknowledge and agree
that, for federal income tax purposes, income earned on the Exchange Trust
Account will be attributed to Beneficiary, and that the Trustee will report to
the Internal Revenue Service the income earned on the Exchange Trust Account in
the aforesaid manner.
3
<PAGE> 4
IN WITNESS WHEREOF, Trustee, Exchangor and Beneficiary have caused this
Qualified Exchange Trust Agreement to be signed as of this day of .
THE CHICAGO TRUST COMPANY
AS TRUSTEE
By: /s/ Mary Cunningham-Watson
-------------------------------------
Vice President
CHICAGO DEFERRED EXCHANGE
CORPORATION AS EXCHANGOR
By: /s/ Miriam Golden
-------------------------------------
Vice President
AMERICAN PUBLISHING COMPANY
OF ILLINOIS
By: /s/ J. A. Boultbee
-------------------------------------
4
<PAGE> 1
EXHIBIT 2.5
AMENDMENT, dated January 14, 1998 to the
ASSET PURCHASE AGREEMENT dated November 21, 1997, by
and among Liberty Group Publishing, Inc., a Delaware
corporation, Green Equity Investors II, L.P., a
Delaware limited partnership, Liberty Group
Operating, Inc., a Delaware corporation, Hollinger
International Inc., a Delaware corporation, APAC-90
Inc., a Delaware corporation, American Publishing
(1991) Inc., a Delaware corporation and APAC-95
Inc., a Delaware corporation (the "Asset Purchase
Agreement").
WHEREAS, the parties to the Asset Purchase Agreement desire to
correct a mutual mistake made in Exhibit A of the Asset Purchase Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
The undersigned, being all the parties to the Asset Purchase
Agreement, hereby amend the Asset Purchase Agreement by replacing in its
entirety Exhibit A and substituting the attached Amended Exhibit A.
IN WITNESS WHEREOF, the undersigned have executed this
Amendment as of the date first above written.
LIBERTY GROUP PUBLISHING, INC.,
by /s/ Kenneth L. Serota
------------------------------
Name: Kenneth L. Serota
Title: Secretary
GREEN EQUITY INVESTORS II, L.P.,
by /s/ Gregory J. Annick
------------------------------
Name: Gregory J. Annick
Title: Vice President
<PAGE> 2
2
LIBERTY GROUP OPERATING, INC.,
by /s/ Kenneth L. Serota
------------------------------
Name: Kenneth L. Serota
Title: Secretary
HOLLINGER INTERNATIONAL INC.,
by /s/ J. A. Boultbee
------------------------------
Name: J. A. Boultbee
Title: Executive Vice
President and
Chief Financial
Officer
APAC-90 INC.,
by /s/ J. A. Boultbee
------------------------------
Name: J. A. Boultbee
Title: Vice President
AMERICAN PUBLISHING (1991) INC.,
by /s/ J. A. Boultbee
------------------------------
Name: J. A. Boultbee
Title: Vice President
APAC-95 INC.,
by /s/ J. A. Boultbee
------------------------------
Name: J. A. Boultbee
Title: Vice President
<PAGE> 1
EXHIBIT 2.6
AMENDMENT, dated January 14, 1998 to the ASSET
PURCHASE AGREEMENT dated November 21, 1997, by and among
Liberty Group Publishing, Inc., a Delaware corporation,
Green Equity Investors II, L.P., a Delaware limited
partnership, Liberty Group Operating, Inc., a Delaware
corporation, American Publishing Company of Illinois, a
Delaware corporation, Hollinger International Inc., a
Delaware corporation, APAC-90 Inc., a Delaware
corporation, American Publishing (1991) Inc., a Delaware
corporation and APAC-95 Inc., a Delaware corporation (the
"Asset Purchase Agreement (Like Kind)").
WHEREAS, the parties to the Asset Purchase Agreement (Like Kind)
desire to correct a mutual mistake made in Schedule 1 of the Asset Purchase
Agreement (Like Kind).
NOW, THEREFORE, the parties hereto hereby agree as follows:
The undersigned, being all the parties to the Asset Purchase
Agreement (Like Kind), hereby amend the Asset Purchase Agreement (Like Kind) by
replacing in its entirety Schedule 1 and substituting the attached Amended
Schedule 1.
IN WITNESS WHEREOF, the undersigned have executed this Amendment
as of the date first above written.
LIBERTY GROUP PUBLISHING, INC.,
by /s/ Kenneth L. Serota
------------------------------------
Name: Kenneth L. Serota
Title: Secretary
GREEN EQUITY INVESTORS II, L.P.,
by /s/ Gregory J. Annick
------------------------------------
Name: Gregory J. Annick
<PAGE> 2
2
Title: Vice President
LIBERTY GROUP OPERATING, INC.,
by /s/ Kenneth L. Serota
------------------------------------
Name: Kenneth L. Serota
Title: Secretary
AMERICAN PUBLISHING COMPANY OF
ILLINOIS,
by /s/ J. A. Boultbee
------------------------------------
Name: J. A. Boultbee
Title: Vice President
HOLLINGER INTERNATIONAL INC.,
by /s/ J. A. Boultbee
------------------------------------
Name: J. A. Boultbee
Title: Executive Vice
President and
Chief Financial
Officer
APAC-90 INC.,
by /s/ J. A. Boultbee
------------------------------------
Name: J. A. Boultbee
Title: Vice President
AMERICAN PUBLISHING (1991) INC.,
by /s/ J. A. Boultbee
------------------------------------
Name: J. A. Boultbee
<PAGE> 3
Title: Vice President
3
APAC-95 INC.,
by /s/ J. A. Boultbee
------------------------------------
Name: J. A. Boultbee
Title: Vice President
<PAGE> 1
EXHIBIT 2.7
AMENDMENT, dated January 14, 1998 to the EXCHANGE
AGREEMENT dated November 21, 1997, by and among American
Publishing Company of Illinois and Chicago Deferred
Exchange Corporation (the "Exchange Agreement").
WHEREAS, the parties to the Exchange Agreement desire to correct a mutual
mistake made in Exhibit A of the Exchange Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
The undersigned, being all the parties to the Exchange Agreement, hereby
amend the Exchange Agreement by replacing in its entirety Exhibit A and
substituting the attached Amended Exhibit A.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
date first above written.
AMERICAN PUBLISHING COMPANY OF ILLINOIS,
by /s/ J. A. Boultbee
---------------------------------
Name: J. A. Boultbee
Title: Vice President
CHICAGO DEFERRED EXCHANGE CORPORATION,
by /s/ Miriam Golden
---------------------------------
Name: Miriam Golden
Title: Vice President
<PAGE> 1
EXHIBIT 2.8
AMENDMENT, dated January 14, 1998 to the QUALIFIED
EXCHANGE TRUST AGREEMENT dated November 21, 1997, by and
among The Chicago Trust Company as Trustee under Trust No.
38347501, Chicago Deferred Exchange Corporation and
American Publishing Company of Illinois (the "Trust
Agreement").
WHEREAS, the parties to the Trust Agreement desire to correct a mutual
mistake made in Exhibit A of the Trust Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
The undersigned, being all the parties to the Trust Agreement, hereby
amend the Trust Agreement by replacing in its entirety Exhibit A and
substituting the attached Amended Exhibit A.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
date first above written.
AMERICAN PUBLISHING COMPANY OF ILLINOIS,
by /s/ J. A. Boultbee
---------------------------------
Name: J. A. Boultbee
Title: Vice President
CHICAGO DEFERRED EXCHANGE CORPORATION,
by /s/ Miriam Golden
---------------------------------
Name: Miriam Golden
Title: Vice President
THE CHICAGO TRUST COMPANY AS TRUSTEE,
by /s/ Mary Cunnigham-Watson
---------------------------------
Name: Mary Cunnigham-Watson
Title: Vice President
<PAGE> 1
EXHIBIT 2.9
HOLLINGER INTERNATIONAL INC.
January 15, 1998
Liberty Group Operating, Inc.
Green Equity Investors II, L.P.
Liberty Group Publishing, Inc.
c/o Liberty Group Publishing, Inc.
3000 Dundee Road, Suite 203
Northbrook, IL 60062
Dear Sirs and Madams:
The purpose of this letter is to set forth our
agreement with respect to the following matters relating to
(i) the Asset Purchase Agreement dated as of November 21,
1997 by and among Liberty Group Publishing, Inc. (the
"Investor"), Green Equity Investors II, L.P. (the
"Guarantor"), Liberty Group Operating, Inc. ("CNCO"),
Hollinger International, Inc. (the "Company"), APAC-90 Inc.
("APAC-90"), American Publishing (1991) Inc. ("AP-91") and
APAC-95 Inc. ("APAC-95"), and (ii) the Asset Purchase
Agreement dated as of November 21, 1997, by and among the
Investor, the Guarantor, CNCO, American Publishing Company
of Illinois ("APC III"), the Company, APAC-90, AP-91 and
APAC-95 (collectively, the Asset Purchase Agreements").
The parties have agreed that the Closing Date (as defined in the
Asset Purchase Agreement) shall be January 27, 1998. However, because it is
impracticable to prepare balance sheets or other financial statements as of that
Closing Date the parties have also agreed that (i) no financial statements are
required to be prepared as of the Closing Date (although financial statements
will be prepared in the ordinary course as of January 31, 1998) and (ii) the
determination of the 1998 Net Cash Position and the Estimated 1998 Net Cash
Position (each as defined in the Asset Purchase Agreements) shall be made with
respect to the period from December 31, 1997 through January 31, 1998, so that
the term "1998 Period" as used in each of the Asset Purchase Agreements shall be
deemed to refer the period from December 31, 1997 through January 31, 1998.
Very truly yours,
<PAGE> 2
2
HOLLINGER INTERNATIONAL INC.
By: /s/ J. A. Boultbee
-------------------------
AMERICAN PUBLISHING COMPANY
OF ILLINOIS
By: /s/ J. A. Boultbee
-------------------------
APAC 90 INC.
By: /s/ J. A. Boultbee
-------------------------
AMERICAN PUBLISHING (1991) INC.
By: /s/ J. A. Boultbee
-------------------------
APAC-95 INC.
By: /s/ J. A. Boultbee
-------------------------
Accepted and agreed to by:
LIBERTY GROUP PUBLISHING, INC.
By: /s/ Kenneth L. Serota
-------------------------
LIBERTY GROUP OPERATING, INC.
By: /s/ Kenneth L. Serota
-------------------------
GREEN EQUITY INVESTORS II, L.P.
By: /s/ Gregory J. Annick
-------------------------
<PAGE> 1
EXHIBIT 2.10
AMERICAN PUBLISHING COMPANY OF ILLINOIS
January 23, 1998
Chicago Deferred Exchange Corporation
171 North Clark, Ninth Floor
Chicago, IL 60601-3294
The Chicago Trust Company
Exchange Trust Division
171 North Clark Street
Chicago, IL 60601-3294
Dear Sirs and Madams:
The purpose of this letter is to set forth our agreement with respect to
the following matters relating to (i) the Exchange Agreement dated as of
November 21, 1997 by and between American Publishing Company of Illinois
("APC") and Chicago Deferred Exchange Corporation ("Exchangor"), as amended on
January 14, 1998, and (ii) the Qualified Exchange Trust Agreement dated as of
November 21, 1997, among The Chicago Trust Company as Trustee under Trust No.
38347501 ("Trustee"), the Exchangor and APC, as amended on January 14, 1998
(collectively, the "Exchange Agreements"). All capitalized terms used herein
and not defined herein shall have the meaning ascribed to such terms in the
Exchange Agreements.
Whereas APC desires to provide for payments through the Exchange Trust
Account of certain adjustments in connection with the closing of both the LG
Purchase Agreement and the KR Purchase Agreement.
APC, the Exchangor and the Trustee have agreed that APC's rights under the
LG Purchase Agreement that were assigned to the Exchangor under the Exchange
Agreements shall be expanded to include all of APC'S rights to both
receive and pay out (1) all purchase price payments and adjustments
contemplated by the LG Purchase Agreement which are to occur on the
Relinquished Property Closing Date and (2) the adjustments contemplated by
Sections 3(c) and 3(d)
<PAGE> 2
of the LG Purchase Agreement which are to occur after the Relinquished Property
Closing Date.
APC, the Exchangor and the Trustee further agree that APC's rights under
the KR Purchase Agreement that were assigned to the Exchangor under the
Exchange Agreements include all of APC's rights to both receive and pay out (1)
all purchase price payments and adjustments contemplated by the KR Purchase
Agreement which are to occur on the Replacement Property Closing Date and (2)
the adjustments contemplated by Sections 2.6 and 2.7 of the KR Purchase
Agreement which are to occur after the Replacement Property Closing Date.
Notwithstanding the foregoing, APC shall remain liable for any and all
payment obligations under the LG Purchase Agreement and the KR Purchase
Agreement that have been assigned to the Exchangor herein in the event that
such obligations are not paid by the Exchangor.
APC, the Exchangor and the Trustee agree that APC shall have no right to
receive, pledge, borrow or otherwise have available the Exchange Trust Account
prior to the earlier of (i) the payment of all of the above adjustments which
are to be made after the Relinquished Property Closing Date and the Replacement
Property Closing Date or (ii) the passing of 180 days after the Relinquished
Property Closing Date, at which point this trust shall terminate. Subject to
the next sentence, nothing contained herein shall limit or otherwise be deemed
to limit the ability of the Exchangor to pay the purchase price for the
Replacement Property on the Replacement Property Closing Date pursuant to the
KR Purchase Agreement. Notwithstanding the foregoing, amounts in the Exchange
Trust Account shall be paid to APC, and this trust shall terminate, only in
compliance with Treasury Regulation Section 1.1031(k)-1(g)(6).
Very truly yours,
AMERICAN PUBLISHING COMPANY OF
ILLINOIS
By: /s/ J. A. Boultbee
--------------------------
Accepted and agreed to by:
CHICAGO DEFERRED EXCHANGE CORPORATION
By: /s/ Miriam Golden
-----------------------------
THE CHICAGO TRUST COMPANY
By: /s/ Mary Cunningham-Watson
-----------------------------
<PAGE> 1
EXHIBIT 2.11
HOLLINGER INTERNATIONAL INC.
January 26, 1998
Liberty Group Operating, Inc.
Green Equity Investors II, L.P.
Liberty Group Publishing, Inc.
c/o Liberty Group Publishing, Inc.
3000 Dundee Road, Suite 203
Northbrook, IL 60062
Dear Sirs and Madams:
The purpose of this letter is to set forth our
agreement with respect to the following matters relating to
(i) the Asset Purchase Agreement dated as of November 21,
1997 by and among Liberty Group Publishing, Inc. (the
"Investor"), Green Equity Investors II, L.P. (the
"Guarantor"), Liberty Group Operating, Inc. ("CNCO"),
Hollinger International, Inc. (the "Company"), APAC-90 Inc.
("APAC-90"), American Publishing (1991) Inc. ("AP-91") and
APAC-95 Inc. ("APAC-95") (the "Asset Purchase Agreement"),
and (ii) the Asset Purchase Agreement dated as of
November 21, 1997, by and among the Investor, the Guarantor,
CNCO, American Publishing Company of Illinois ("APC Ill"),
the Company, APAC-90, AP-91 and APAC-95 (the "Asset Purchase
Agreement (Like Kind)").
The parties hereby agree to the changes set forth below:
The parties hereby agree that Schedule 3.3 is corrected so as to
encompass the complete list of Consents which will be delivered at Closing and
as so corrected is attached hereto.
The parties hereby agree further that Schedule 3.9 is corrected
so as to encompass the complete list of Trademarks and Trade Names which will be
transferred at Closing pursuant to a Trademark and Trade Name Assignment
substantially in the form of Exhibit 7.4(b) to the Asset Purchase Agreement and
Exhibit B to the Asset Purchase Agreement (Like Kind) and as so corrected is
attached hereto.
The parties hereby agree further that Schedule 3.18 is corrected
so as to encompass the complete list of real property owned by the Company which
will be transferred to the specified CNCO subsidiaries at Closing and as so
corrected is attached hereto.
<PAGE> 2
2
The parties hereby agree further that Schedule 3.19 is corrected
so as to encompass the complete list of real property leased or subleased by the
Company which will be transferred to the specified CNCO subsidiaries at Closing
and as so corrected is attached hereto.
The parties hereby agree further that for the purposes of
performing any calculations under the Asset Purchase Agreement and the Asset
Purchase Agreement (Like Kind) the 30-day Treasury bill rate in effect on
December 31, 1997 is deemed to be 5.25% and such rate will be applied to the
aggregate consideration of $309,100,000, including the consideration of
$44,419,116 payable under the Asset Purchase Agreement (Like Kind), as set forth
on the exhibit attached hereto. In determining the number of days for which such
interest is payable, the Closing Date shall not be counted with respect to any
funds which are received on or before a time (which is expected to be noon
Chicago time) on the Closing Date when it is reasonably practicable to reinvest
such funds on that date.
The parties hereby agree further that the terms "Asset" and
"Assumed Contracts" as defined in Section 1.1(a) of the Asset Purchase Agreement
and as defined in Section 1(a) of the Asset Purchase Agreement (Like Kind) shall
not include the contract dated January 16, 1998 by and between the Company and
Valassis Communications Inc. and such contract shall not be assigned to CNCO or
any of its subsidiaries.
The parties hereby agree further that the Transfer Date for the
transfer of employees is January 31, 1998.
The parties hereby agree to grant each other reasonable access
during regular business hours to each other's employees (but without any
requirement of travel on the part of such employees) to the extent necessary to
investigate the facts relating to claims or litigation arising after the closing
that relate to the preclosing period.
<PAGE> 3
3
Very truly yours,
HOLLINGER INTERNATIONAL INC.
By: /s/ J. A. Boultbee
----------------------------
AMERICAN PUBLISHING COMPANY
OF ILLINOIS
By: /s/ J. A. Boultbee
----------------------------
APAC-90 INC.
By: /s/ J. A. Boultbee
----------------------------
AMERICAN PUBLISHING (1991) INC.
By: /s/ J. A. Boultbee
----------------------------
APAC-95 INC.
By: /s/ J. A. Boultbee
----------------------------
Accepted and agreed to by:
LIBERTY GROUP PUBLISHING, INC.
By: /s/ Kenneth L. Serota
----------------------------
LIBERTY GROUP OPERATING, INC.
By: /s/ Kenneth L. Serota
----------------------------
GREEN EQUITY INVESTORS II, L.P.
By Grand Avenue Capital Partners, L.P.
its sole general partner
By Grand Avenue Capital Corporation
its sole general partner
By: /s/ Gregory J. Annick
----------------------------
Name: Gregory J. Annick
Title: Vice President
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LIBERTY GROUP PUBLISHING, INC.
Pursuant to Section 245 of the
General Corporation Law
of the State of Delaware
Liberty Group Publishing, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Company"), hereby
certifies as follows:
1. The Company was originally incorporated under the name "LGP
Holdings Inc." The present name of the Company is Liberty Group Publishing, Inc.
2. That the Certificate of Incorporation of the Company was filed
in the office of the Secretary of State of the State of Delaware on the 10th day
of November, 1997. A Certificate of Amendment was filed in the Office of the
Secretary of State of the State of Delaware on the 19th day of November 1997.
3. That this Amended and Restated Certificate of Incorporation
amends and restates in its entirety the Certificate of Incorporation of the
Company, as heretofore amended.
4. That the text of the Certificate of Incorporation, as
heretofore amended, is hereby amended and restated to read in its entirety as
follows:
FIRST: The name of the Company is Liberty Group Publishing,
Inc.
SECOND: The address of the registered office of the Company
in Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
THIRD: The nature of the business or purpose to be conducted
or promoted by the Company is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware (the
"GCL").
FOURTH: The total number of shares of all classes of stock
which the Company shall have authority to issue is twenty-one million two
hundred fifty-five thousand (21,255,000) of which twenty-one million one hundred
seventy-five thousand
<PAGE> 2
(21,175,000) shall be designated Preferred Stock, par value $0.01 per share
(hereinafter the "Preferred Stock"), and eighty thousand (80,000) shall be
designated Common Stock, par value $0.01 per share (hereinafter the "Common
Stock").
A. AUTHORITY OF BOARD OF DIRECTORS TO FIX POWERS, DESIGNATIONS,
PREFERENCES, RIGHTS, QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SHARES OF PREFERRED STOCK NOT FIXED HEREBY.
Shares of Preferred Stock may be issued from time to time, in one or
more series, as may from time to time be determined by the Board of Directors,
each of said series to be distinctly designated. Except for any differences
provided by the Board of Directors, all shares of any one series of Preferred
Stock shall be alike in every particular. The voting powers, designations and
preferences and the relative, participating, optional or other special rights of
each such series, and the qualifications, limitations or restrictions thereof,
if any, may differ from those of any and all other series at any time
outstanding; and, subject to the provisions of subparagraph 1 of Paragraph C of
this Article FOURTH, the Board of Directors hereby is expressly granted
authority to fix by resolution or resolutions adopted prior to the issuance of
any shares of a particular series of Preferred Stock, the powers, designations
and preferences, the relative, participating, optional or other special rights
and the qualifications, limitations and restrictions of such series, including,
but without limiting the generality of the foregoing, the following:
(a) the distinctive designation of, and the number of shares of
Preferred Stock which shall constitute, such series, which number may be
increased (except where otherwise provided by the Board of Directors) or
decreased (but not below the number of shares thereof then outstanding) from
time to time by like action of the Board of Directors;
(b) the rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be paid, the
extent of the preference or relation if any, of which dividends to the dividends
payable on any other class or classes or series of the same or any other class
or classes of stock of the Company and whether such dividends shall be
cumulative or non-cumulative;
(c) the right, if any, of the holders of Preferred Stock of such
series to convert the same into, or exchange the same for, shares of any other
class or classes or of any series of the same or any other class or classes of
stock of the Company and the terms and conditions of such conversion or exchange
(including without limitation the price or prices or the rate or rates of
conversion or exchange or any terms for adjustment thereof);
(d) whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices (which price or prices
may be different in different circumstances or at different redemption dates)
and the time or times at which, and the terms and conditions on which, Preferred
Stock of such series may be redeemed
-2-
<PAGE> 3
(including without limitation the dates upon or after which the shares of the
series must or may be redeemed);
(e) the restrictions, if any, on the issuance of shares of the
same or any other class or classes or of any series of the same or any other
class or classes of stock of the Company;
(f) the rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger, consolidation,
distribution or sale of assets, dissolution or winding-up of the Company;
(g) the voting powers, if any, of the holders of such series of
Preferred Stock which, without limiting the generality of the foregoing, may be
equal to, more than or less than one vote per share and may include the right,
voting as a series by itself or together with other series of Preferred Stock or
all series of Preferred Stock as a class, or, together with any other class or
classes or series of any other class or classes of stock of the Company, to
elect one or more directors of the Company if there shall have been a default in
the payment of dividends on any one or more series of Preferred Stock or under
such other circumstances and on such conditions as the Board of Directors may
determine;
(h) whether the shares of such series of Preferred Stock shall be
entitled to the benefits of a sinking fund for the redemption or purchase of
shares (the term "sinking fund" being understood to include any similar fund or
account, howsoever designated) and the terms thereof; and
(i) any other powers, preferences, rights and limitations of the
series.
B. STATEMENT OF LIMITATIONS, RELATIVE RIGHTS AND POWERS IN
RESPECT OF COMMON STOCK.
1. After the requirements with respect to preferential dividends on
the Preferred Stock (fixed in accordance with the provisions of
Paragraph A of this Article Fourth), if any, shall have been met
and after the Company shall have complied with all the
requirements, if any, with respect to the setting aside of sums
as sinking funds or redemption or purchase accounts for the
Preferred Stock (fixed in accordance with the provisions of
Paragraph A of this Article Fourth), and subject further to any
other conditions which may be fixed in accordance with the
provisions of Paragraph A of this Article FOURTH, then and not
otherwise the holders of Common Stock shall be entitled to
receive such dividends as may be declared from time to time by
the Board of Directors.
2. After distribution in full of the preferential amount, if any, to
be distributed to the holders of Preferred Stock in the event of
voluntary or involuntary
-3-
<PAGE> 4
liquidation, dissolution or winding-up of the Company, the
holders of the Common Stock, subject to the rights, if any, of
the holders of Preferred Stock to participate therein (fixed in
accordance with the provisions of Paragraph A of this Article
FOURTH), shall be entitled to receive all the remaining assets of
the Company, tangible and intangible, of whatever kind available
for distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them, respectively.
3. Except as may otherwise be required by law, by the provisions of
this Article FOURTH or by the provisions of such resolution or
resolutions as may be adopted by the Board of Directors pursuant
to the provisions of Paragraph A of this Article FOURTH, each
holder of Common Stock shall have one vote in respect of each
share of Common Stock held by him on all matters voted upon by
the stockholders.
C. OTHER PROVISIONS.
1. The relative powers, preferences and rights of each series of
Preferred Stock in relation to the powers, preferences and rights
of each other series of Preferred Stock shall be, in each case,
as may be fixed from time to time by the Board of Directors in
such resolution or resolutions as may be adopted pursuant to
authority granted in Paragraph A of this Article FOURTH and,
except as may otherwise be provided in any resolution or
resolutions adopted pursuant to authority granted in Paragraph A
of this Article FOURTH, the consent, by class or series vote or
otherwise, of the holders of each of the series of Preferred
Stock as are from time to time outstanding shall not be required
for the issuance by the Board of Directors of any other series of
Preferred Stock whether or not the powers, preferences and rights
of such other series shall be fixed by the Board of Directors as
senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred Stock
adopted pursuant to the provisions of Paragraph A of this Article
FOURTH that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the outstanding
shares of such series voting thereon shall be required for the
issuance of any or all other series of Preferred Stock.
2. Subject to the provisions of this Paragraph C of this Article
FOURTH, shares of any series of Preferred Stock may be issued
from time to time as the Board of Directors of the Company shall
determine, for such consideration and upon such terms as the
Board of Directors may determine.
-4-
<PAGE> 5
3. Shares of Common Stock may be issued from time to time as the
Board of Directors of the Company shall determine, for such
consideration and upon such terms as the Board of Directors may
determine.
4. The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or
decreased from time to time by the affirmative vote of the
holders of a majority of the stock of the Company entitled to
vote thereon.
FIFTH: The Company is to have perpetual existence.
SIXTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors of the Company is expressly
authorized to make, adopt, alter, amend or repeal the By-Laws of the Company.
SEVENTH:
(a) A director of the Company shall have no personal
liability to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except (i) for any breach of a director's duty of
loyalty to the Company or its stockholders; (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of the
law; (iii) under Section 174 of the GCL as it may from time to time be amended
or supplemented or any successor provision thereto; or (iv) for any transaction
from which a director denied an improper personal benefit.
(b) Any repeal or modification of the foregoing paragraph
shall not adversely affect any right or protection of any person thereunder with
respect to any act or omission occurring prior to or at the time of such repeal
or modification.
EIGHTH: Meetings of the stockholders may be held within or
without the State of Delaware, as may be designated by or in the manner provided
in the By-Laws of the Company. The books of the Company may be kept (subject to
the provisions of any law or regulation) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of Directors
or in the By-Laws of the Company. Elections of directors need not be by written
ballot unless the By-Laws of the Company shall so provide.
NINTH: The Company reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation in
the manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
-5-
<PAGE> 6
TENTH: Whenever a compromise or arrangement is proposed
between the Company and its creditors or any class of them and/or between the
Company and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Company or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for the Company under the
provisions of Section 291 of Title 8 of the GCL, or on the application of
trustees in dissolution of or any receiver or receivers appointed for the
Company under the provisions of Section 279 of Title 8 of the GCL, order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Company, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Company, as the case may be, agree
to any compromise or arrangement and to any reorganization of the Company as a
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, sanctioned by the court to which
the said application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of the
Company, as the case may be, and also on the Company.
ELEVENTH:
(a) The Company shall to the fullest extent permitted by
Delaware law, as in effect from time to time (but, in the case of any amendment
of the GCL of the State of Delaware, only to the extent that such amendment
permits the Company to provide broader indemnification rights than said law
permitted the Company to provide prior to such amendment), indemnify each person
who is or was a director or officer of the Company or of any of its wholly-owned
subsidiaries who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, or was or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that on or after such date he or she is or was a director, officer,
employee or agent of the Company or of any of its subsidiaries, or is or was at
any time on or after such date serving, at the request of the Company, as a
director, officer, employee or agent of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise in any capacity
against all expense, liability and loss (including, but not limited to,
attorneys' fees, judgments, fines, excise taxes or penalties (with respect to
any employee benefit plan or otherwise), and amounts paid or to be paid in
settlement) incurred or suffered by such director or officer in connection with
such proceeding; provided, however, that, except as provided in Paragraph (e) of
this Article ELEVENTH, the Company shall not be obligated to indemnify any
person under this Article ELEVENTH in connection with a proceeding (or part
thereof) if such proceeding (or part thereof) was not authorized by the Board of
Directors of the Company and was initiated by such person against (i) the
Company or any of its subsidiaries, (ii) any person who is or was a director,
officer, employee or agent of the Company or any of its subsidiaries and/or
(iii) any person or entity which controlled, is or was controlled by, or
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under common control with, the Company or has or had business relations with the
Company or any of its subsidiaries.
(b) The right to indemnification conferred in this Article
ELEVENTH shall be a contract right, shall continue as to a person who has ceased
to be a director or officer of the Company or of any of its wholly-owned
subsidiaries and shall inure to the benefit of his or her heirs, executors and
administrators, and shall include the right to be paid by the Company the
expenses incurred in connection with the defense or investigation of any such
proceeding in advance of its final disposition; provided, however, that if and
to the extent that Delaware law so requires, the payment of such expense in
advance of the final disposition of a proceeding shall be made only upon
delivery to the Company of an undertaking, by or on behalf of such director or
officer or former director or officer, to repay all amounts so advanced if it
shall ultimately be determined that such director or officer or former director
or officer is not entitled to be indemnified by the company.
(c) The Company's obligation to indemnify and to pay
expenses in advance of the final disposition of a proceeding under this Article
ELEVENTH shall arise, and all rights and protections granted to directors and
officers under this Article ELEVENTH shall vest, at the time of the occurrence
of the transaction or event to which any proceeding relates, or at the time that
the action or conduct to which any proceeding relates was first taken or engaged
in (or omitted to be taken or engaged in), regardless of when any Proceeding is
first threatened, commenced or completed.
(d) Notwithstanding any other provision of this Amended and
Restated Certificate of Incorporation or the By-laws of the Company, no action
by the Company, either by amendment to or repeal of this Article ELEVENTH or the
By-laws of the Company or otherwise shall diminish or adversely affect any right
or protection granted under this Article ELEVENTH to any director or right of
protection granted under this Article ELEVENTH to any director or officer or
former director or officer of the Company or of any of its wholly-owned
subsidiaries which shall have become vested as aforesaid prior to the date that
any such amendment, repeal or other corporate action is taken.
(e) If a claim for indemnification and/or for payment of
expenses in advance of the final disposition of a proceeding arising under this
Article ELEVENTH is not paid in full by the Company within thirty days after a
written claim has been received by the Company, the claimant may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim and, if successful in whole or in part, the claimant shall be entitled to
be paid also the expense of prosecuting such claim.
(f) The right to indemnification of expenses incurred in
connection with the defense or investigation of a proceeding in advance of its
final disposition conferred in this Article ELEVENTH shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, provision of this Amended and Restated
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Certificate of Incorporation, By-laws, agreement, vote of stockholders or
disinterested directors or otherwise.
(g) In addition to the persons specified in subsection (a)
of this Article ELEVENTH, the Company may indemnify all other persons to the
fullest extent permitted by Delaware law.
5. This Amended and Restated Certificate of Incorporation was
duly adopted by the Board of Directors in accordance with the provisions of
Sections 242 and 245 of the General Corporation Law of Delaware and it was duly
adopted by the unanimous written consent of the stockholders in accordance with
the provisions of Section 228 of the GCL.
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IN WITNESS WHEREOF, the Company has caused this Amended and Restated
Certificate of Incorporation to be signed by its President on this 23rd day of
January, 1998.
LIBERTY GROUP PUBLISHING, INC.
By: /s/ Kenneth L. Serota
_____________________________________
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EXHIBIT 3.2
BY-LAWS
OF
LIBERTY GROUP PUBLISHING, INC.
ARTICLE I.
OFFICES
Section 1. The registered office of the Corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The Corporation may also
have offices at such other places both within and without the State of Delaware
as the Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II.
STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of the stockholders for
the election of directors or for any other purpose shall be held at such time
and place, within or without the State of Delaware, as shall be designated by
the Board of Directors. In the absence of a designation of a place for any such
meeting by the Board of Directors, each such meeting shall be held at the
principal office of the Corporation.
Section 2. Annual Meetings. An annual meeting of stockholders shall be held
for the purpose of electing directors and transacting such other business as may
properly be brought before the meeting. The date of the annual meeting shall be
determined by the Board of Directors.
Section 3. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by the Certificate of
Incorporation or by law, may be called by the Chief Executive Officer or by the
President and shall be called by the Secretary at the direction of a majority of
the Board of Directors, or at the request in writing delivered to the Chief
Executive Officer, the President or the Secretary of the Corporation of
stockholders owning a majority in amount of the entire capital stock of the
Corporation issued and outstanding and entitled to vote.
Section 4. Notice of Meetings. Written notice of each meeting of the
stockholders stating the place, date and time of the meeting shall be given not
less than ten nor more than sixty days before the date of the meeting, to each
stockholder entitled to vote at such meeting. The notice of any special meeting
of stockholders shall state the purpose or purposes for which the meeting
<PAGE> 2
is called. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice. Neither the business to be
transacted at, nor the purpose of, an annual or special meeting of stockholders
need be specified in any written waiver of notice.
Section 5. Quorum; Adjournments. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except as otherwise required by
the Certificate of Incorporation or the Delaware General Corporation Law as from
time to time in effect (the "Delaware Law"). If a quorum is not represented, the
holders of the stock present in person or represented by proxy at the meeting
and entitled to vote thereat shall have power, by the affirmative vote of the
holders of a majority of such stock, to adjourn the meeting to another time
and/or place, without notice other than announcement at the meeting, except as
hereinafter provided, until a quorum shall be present or represented. At such
adjourned meeting, at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the original
meeting. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting. Withdrawal of stockholders from any meeting shall not cause
the failure of a duly constituted quorum at such meeting.
Section 7. Voting. (a) At all meetings of the stockholders, each
stockholder shall be entitled to vote, in person, or by proxy appointed in an
instrument in writing subscribed by the stockholder or otherwise appointed in
accordance with Section 212 of the Delaware Law, each share of voting stock
owned by such stockholder of record on the record date for the meeting. Each
stockholder shall be entitled to one vote for each share of voting stock held by
such stockholder, unless otherwise provided in the Delaware Law or the
Certificate of Incorporation.
(b) When a quorum is present at any meeting, the affirmative vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy and voting shall decide any question brought before such
meeting, unless the question is one upon which, by express provision of law or
of the Certificate of Incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Any stockholder who is in attendance at a meeting of stockholders either in
person or by proxy, but who abstains from the vote on any matter, shall not be
deemed present or represented at such meeting for purposes of the preceding
sentence with respect to such vote, but shall be deemed present or represented
at such meeting for all other purposes.
Section 8. Informal Action by Stockholders. Any action required to be taken
at a meeting of the stockholders, or any other action which may be taken at a
meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice
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of the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those stockholders who have not consented in
writing.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed and controlled by or under the direction of its Board of
Directors, which may exercise all such powers of, and do all such acts and
things as may be done by, the Corporation and do all such lawful acts and things
as are not by law or by the Certificate of Incorporation or by these By-laws
directed or required to be exercised or done by the stockholders.
Section 2. Number, Qualification and Tenure. The Board of Directors of the
Corporation shall consist of not less than two (2) members and not more than
seven (7) members. Within the limit above specified, the number of directors
shall be determined from time to time by resolution of the Board of Directors.
The directors shall be elected at the annual meeting of the stockholders, except
as provided in the Certificate of Incorporation or Section 3 of this Article,
and each director elected shall hold office until his or her successor is
elected and qualified or until his or her earlier death, termination,
resignation or removal from office. Directors need not be stockholders.
Section 3. Vacancies and Newly-Created Directorships. Vacancies and newly
created directorships resulting from any increase in the number of directors may
be filled by a majority of the directors then in office, although less than a
quorum, or by a sole remaining director, and each director so chosen shall hold
office until his or her successor is elected and qualified or until his or her
earlier death, termination, resignation, retirement, disqualification or removal
from office. If there are no directors in office, then an election of directors
may be held in the manner provided by law.
Section 4. Place of Meetings. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. Meetings. The Board of Directors shall hold a regular meeting,
to be known as the annual meeting, immediately following each annual meeting of
the stockholders. Other regular meetings of the Board of Directors shall be held
at such time and place as shall from time to time be determined by the Board. No
notice of regular meetings need be given, other than by announcement at the
immediately preceding regular meeting. Special meetings of the Board may be
called by the Chief Executive Officer, by the President or by the Secretary on
the written request of a majority of the Board of Directors. Notice of any
special meeting of the Board shall be given at least two days prior thereto,
either in writing, or telephonically if confirmed promptly in writing, to each
director at the address shown for such director on the records of the
Corporation.
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Section 6. Waiver of Notice; Business and Purpose. Notice of any meeting of
the Board of Directors may be waived in writing signed by the person or persons
entitled to such notice either before or after the time of the meeting. The
attendance of a director at any meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened and at the beginning of the meeting records such
objection with the person acting as secretary of the meeting and does not
thereafter vote on any action taken at the meeting. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
need be specified in the notice or waiver of notice of such meeting, unless
specifically required by the Delaware Law.
Section 7. Quorum and Manner of Acting. At all meetings of the Board of
Directors a majority of the total number of directors shall constitute a quorum
for the transaction of business. 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. The act of a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors,
except as may be otherwise specifically provided by the Delaware Law or by the
Certificate of Incorporation. Withdrawal of directors from any meeting shall not
cause the failure of a duly constituted quorum at such meeting. A director who
is in attendance at a meeting of the Board of Directors but who abstains from
the vote on any matter shall be counted for purposes of constituting a quorum
but shall not be deemed present at such meeting for purposes of determining the
act of a majority of the directors with respect to such vote, but shall be
deemed present at such meeting for all other purposes.
Section 8. Organization. The Chairman of the Board, if elected, shall act
as chairman at all meetings of the Board of Directors. If the Chairman of the
Board is not elected or, if elected, is not present, the Vice Chairman, if any,
or if no such Vice Chairman is present, a director chosen by a majority of the
directors present, shall act as chairman at such meeting of the Board of
Directors.
Section 9. Committees. The Board of Directors, by resolution adopted by a
majority of the whole Board, may designate one or more directors to constitute
an Executive Committee. The Board of Directors, by resolution adopted by a
majority of the whole Board, may create one or more other committees and appoint
one or more directors to serve on such committee or committees. Each director
appointed to serve on any such committee shall serve, unless the resolution
designating the respective committee is sooner amended or rescinded by the Board
of Directors, until the next annual meeting of the Board or until their
respective successors are designated. The Board of Directors, by resolution
adopted by a majority of the whole Board, may also designate additional
directors as alternate members of any committee to serve as members of such
committee in the place and stead of any regular member or members thereof who
may be unable to attend a meeting or otherwise unavailable to act as a member of
such committee. In the absence or disqualification of a member and all alternate
members designated to serve in the place
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and stead of such member, the member or members thereof present at any meeting
and not disqualified from voting, whether or not such member or members
constitute a quorum, may unanimously appoint another director to act at the
meeting in the place and stead of such absent or disqualified member.
The Executive Committee shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation between the meetings of the Board of Directors, and
any other committee may exercise the power and authority of the Board of
Directors to the extent specified by the resolution establishing such committee,
or the Certificate of Incorporation or these By-laws; provided, however, that no
committee may take any action that is expressly required by the Delaware Law or
the Certificate of Incorporation or these By-laws to be taken by the Board of
Directors and not by a committee thereof. Each committee shall keep a record of
its acts and proceedings, which shall form a part of the records of the
Corporation in the custody of the Secretary, and all actions of each committee
shall be reported to the Board of Directors at the next meeting of the Board.
Meetings of committees may be called at any time by the Chairman of the
Board, if any, or the chairman of the respective committee. A majority of the
members of the committee shall constitute a quorum for the transaction of
business and, except as expressly limited by this section, the act of a majority
of the members present at any meeting at which there is a quorum shall be the
act of such committee. Except as expressly provided in this section or in the
resolution designating the committee, a majority of the members of any such
committee may select its chairman, fix its rules of procedure, fix the time and
place of its meetings and specify what notice of meetings, if any, shall be
given.
Section 10. Action without Meeting. Unless otherwise specifically
prohibited by the Certificate of Incorporation or these By-laws, 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 of Directors or such committee, as the case may be, execute a consent
thereto in writing setting forth the action so taken, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
such committee.
Section 11. Attendance by Telephone. Members of the Board of Directors, or
any committee thereof, may participate in and act at any meeting of the Board of
Directors, or such committee, as the case may be, through the use of a
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other. Participation in such
meeting shall constitute attendance and presence in person at the meeting of the
person or persons so participating.
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Section 12. Compensation. By resolution of the Board of Directors,
irrespective of any personal interest of any of the members, the directors may
be paid their reasonable expenses, if any, of attendance at each meeting of the
Board of Directors and may be paid a fixed sum of attendance at meetings or a
stated salary as directors. These payments shall not preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV.
OFFICERS
Section 1. Enumeration. The officers of the Corporation shall be chosen by
the Board of Directors and shall include a President and a Secretary. The Board
of Directors may also elect a Chairman of the Board, a Vice Chairman, one or
more Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or
more Assistant Treasurers and such other officers and agents as it may deem
appropriate. Any number of offices may be held by the same person.
Section 2. Term of Office. The officers of the Corporation shall be elected
at the annual meeting of the Board of Directors and shall hold office until
their successors are elected and qualified, or until their earlier death,
termination, resignation or removal from office. Any officer or agent of the
Corporation may be removed at any time by the Board of Directors, with or
without cause. Any vacancy in any office because of death, resignation,
termination, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
Section 3. Chairman of the Board. The Chairman of the Board, when and if
elected, shall be the chief executive officer of the Corporation and, as such,
shall have general supervision, direction and control of the business and
affairs of the Corporation, subject to the control of the Board of Directors,
shall preside at meetings of the Board of Directors and of stockholders and
shall have such other functions, authority and duties as customarily appertain
to the office of the chief executive of a business corporation or as may be
prescribed by the Board of Directors. The Chairman of the Board, if any, shall
be a member of the Board of Directors of the Corporation.
Section 4. Vice Chairman. The Vice Chairman, if any, in the absence of the
Chairman or in the event of the Chairman's inability or refusal to act, shall
have the authority to perform the duties of the Chairman and such other duties
as may from time to time be prescribed by the Board of Directors or the Chairman
of the Board. The Vice Chairman, if any, shall be a member of the Board of
Directors of the Corporation.
Section 5. President. During any period when there shall be an office of
Chairman of the Board, the President shall be the chief operating officer of the
Corporation and shall have such functions, authority and duties as may be
prescribed by the Board of Directors or the Chairman of the Board. During any
period when there shall not be an office of Chairman of the Board, the President
shall be the chief executive officer of the Corporation, and, as such, shall
have the
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functions, authority and duties provided for the Chairman of the Board when
there is an office of Chairman of the Board.
Section 6. Vice President. Each Vice President shall perform such duties
and have such other powers as may from time to time be prescribed by the Board
of Directors, the Chairman of the Board or the President.
Section 7. Secretary. The Secretary shall: (a) keep a record of all
proceedings of the stockholders, the Board of Directors and any committees
thereof in one of more books provided for that purpose; (b) give, or cause to be
given, all notices that are required by law or these Bylaws to be given by the
Secretary; (c) be custodian of the corporate records and, if the Corporation has
a corporate seal, of the seal of the Corporation; (d) have authority to affix
the seal of the Corporation to all instruments the execution of which requires
such seal and to attest such affixing of the seal; (e) keep a register of the
post office address of each stockholder which shall be furnished to the
Secretary by such stockholder; (f) sign, with the Chairman or the Vice Chairman,
if any, or President or any Vice President, or any other officer thereunto
authorized by the Board of Directors, any certificates for shares of the
Corporation, or any deeds, mortgages, bonds, contracts or other instruments
which the Board of Directors has authorized to be executed by the signature of
more than one officer; (g) have general charge of the stock transfer books of
the Corporation; (h) have authority to certify as true and correct, copies of
the By-laws, or resolutions of the stockholders, the Board of Directors and
committees thereof, and of other documents of the Corporation; and (i) in
general, perform the duties incident to the office of secretary and such other
duties as from time to time may be prescribed by the Board of Directors, the
Chairman of the Board or the President. The Board of Directors may give general
authority to any other officer to affix the seal of the Corporation and to
attest such affixing of the seal.
Section 8. Assistant Secretary. The Assistant Secretary, or if there shall
be more than one, each Assistant Secretary in the absence of the Secretary or in
the event of the Secretary's inability or refusal to act, shall have the
authority to perform the duties of the Secretary, subject to such limitations
thereon as may be imposed by the Board of Directors, and such other duties as
may from time to time be prescribed by the Board of Directors, the Chairman of
the Board, the President or the Secretary.
Section 9. Treasurer. The Treasurer shall be the principal accounting and
financial officer of the Corporation. The Treasurer shall: (a) have charge of
and be responsible for the maintenance of adequate books of account for the
Corporation; (b) have charge and custody of all funds and securities of the
Corporation, and be responsible therefor and for the receipt and disbursement
thereof; and (c) perform the duties incident to the office of treasurer and such
other duties as may from time to time be prescribed by the Board of Directors,
the Chairman of the Board or the President. The Treasurer may sign with the
Chairman or the Vice Chairman, if any, or the President, or any Vice President,
or any other officer thereunto authorized by the Board of Directors,
certificates for shares of the Corporation. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of his or
her duties in such sum and with such surety or sureties as the Board of
Directors may determine.
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Section 10. Assistant Treasurer. The Assistant Treasurer, or if there shall
be more than one, each Assistant Treasurer, in the absence of the Treasurer or
in the event of the Treasurer's inability or refusal to act, shall have the
authority to perform the duties of the Treasurer, subject to such limitations
thereon as may be imposed by the Board of Directors, and such other duties as
may from time to time be prescribed by the Board of Directors, the Chairman of
the Board, the President or the Treasurer.
Section 11. Other Officers and Agents. Any officer or agent who is elected
or appointed from time to time by the Board of Directors and whose duties are
not specified in these By-laws shall perform such duties and have such powers as
may from time to time be prescribed by the Board of Directors, the Chairman of
the Board or the President.
ARTICLE V.
CERTIFICATES OF STOCK AND THEIR TRANSFER
Section 1. Form. The shares of the Corporation shall be represented by
certificates; provided, however, the Board of Directors may provide by
resolution or resolutions that some or all of any or all classes or series of
the Corporation's stock shall be uncertificated shares. Each certificate for
shares shall be consecutively numbered or otherwise identified. Certificates of
stock in the Corporation, shall be signed by or in the name of the Corporation
by the Chairman or Vice Chairman of the Board or the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation. Where a certificate is countersigned by
a transfer agent, other than the Corporation or an employee of the Corporation,
or by a registrar, the signatures of one or more officers of the Corporation may
be facsimiles. 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, the certificate may be issued by the Corporation with the same effect
as if such officer, transfer agent or registrar were such officer, transfer
agent or registrar at the date of its issue.
Section 2. Transfer. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate of stock or
uncertificated shares in place of any certificate theretofore issued by the
Corporation to the person entitled thereto, cancel the old certificate and
record the transaction in its stock transfer books.
Section 3. Replacement. In case of the loss, destruction, mutilation or
theft of a certificate for any stock of the Corporation, a new certificate of
stock or uncertificated shares in place of any certificate theretofore issued by
the Corporation may be issued upon the surrender of the mutilated certificate
or, in the case of loss, destruction or theft of a certificate, upon
satisfactory proof of such loss, destruction or theft and upon such terms as the
Board of Directors may prescribe. The
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Board of Directors may in its discretion require the owner of the lost,
destroyed or stolen certificate, or his legal representative, to give the
Corporation a bond, in such sum and in such form and with such surety or
sureties as it may direct, to indemnify the Corporation against any claim that
may be made against it with respect to the certificate alleged to have been
lost, destroyed or stolen.
ARTICLE VI.
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
Section 1. Third Party Actions. The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative, including all appeals (other than an action,
suit or proceeding by or in the right of the Corporation) by reason of the fact
that he or she is or was a director or officer of the Corporation (and the
Corporation, in the discretion of the Board of Directors, may so indemnify a
person by reason of the fact that he or she is or was an employee or agent of
the Corporation or is or was serving at the request of the Corporation in any
other capacity for another corporation, partnership, joint venture, trust or
other enterprise), against expenses (including attorneys' fees), judgments,
decrees, fines, penalties, and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith or in a manner which he or
she reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or pro ceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding the
foregoing, the Corporation shall be required to indemnify a director or officer
in connection with an action, suit or proceeding initiated by such person only
if such action, suit or proceeding was authorized by the Board of Directors.
Section 2. Actions By or in the Right of the Corporation. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed action or suit, including all
appeals, by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that he or she is or was a director or officer of
the Corporation (and the Corporation, in the discretion of the Board of
Directors, may so indemnify a person by reason of the fact that he or she is or
was an employee or agent of the Corporation or is or was serving at the request
of the Corporation in any other capacity for another corporation, partnership,
joint venture, trust or other enterprise), against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
with the defense or settlement of such action or suit if he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Corporation, except that no indemnification shall be
-9-
<PAGE> 10
made in respect of any claim, issue or matter as to which such person shall have
been finally adjudged to be liable to the Corporation unless and only to the
extent that the court in which such action or suit was brought, or any other
court of competent jurisdiction, shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses as
such court shall deem proper. Notwithstanding the foregoing, the Corporation
shall be required to indemnify a director or officer in connection with an
action, suit or proceeding initiated by such person only if such action, suit or
proceeding was authorized by the Board of Directors.
Section 3. Indemnity if Successful. To the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section 1
or 2 of this Article, or in defense of any claim, issue or matter therein, he or
she shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith.
Section 4. Standard of Conduct. Except in a situation governed by Section 3
of this Article, any indemnification under Section 1 or 2 of this Article
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in Section 1 or 2, as
applicable, of this Article. Such determination shall be made (i) by a majority
vote of directors acting at a meeting at which a quorum consisting of directors
who were not parties to such action, suit or proceeding is present, or (ii) if
such a quorum is not obtainable, or even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders. The determination required by clauses (i)
and (ii) of this Section 4 may in either event be made by written consent of the
majority required by each clause.
Section 5. Expenses. Expenses (including attorneys' fees) of each director
and officer hereunder indemnified actually and reasonably incurred in defending
any civil, criminal, administra tive or investigative action, suit or proceeding
or threat thereof shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such person to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the Corporation
as authorized in this Article. Such expenses (including attorneys' fees)
incurred by employees and agents may be so paid upon the receipt of the
aforesaid undertaking and such terms and conditions, if any, as the Board of
Directors deems appropriate.
Section 6. Nonexclusivity. The indemnification and advancement of expenses
provided by, or granted pursuant to, other Sections of this Article shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may now or hereafter be entitled under any law, by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding such office.
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<PAGE> 11
Section 7. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another Corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of the Delaware
Law.
Section 8. Definitions. For purposes of this Article, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had the power and authority to indemnify any or all of its directors,
officers, employees and agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation in any other capacity for another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article with respect to the
resulting or surviving corporation as such person would have had with respect to
such constituent corporation if its separate existence had continued.
For purposes of this Article, references to "other capacities" shall
include serving as a trustee or agent for any employee benefit plan; references
to "other enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with respect to an
employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director, officer, employee or agent
of the Corporation which imposes duties on, or involves services by such
director, officer, employee, or agent with respect to an employee benefit plan,
its participants, or beneficiaries. A person who acted in good faith and in a
manner he or she reasonably believed to be in the best interests of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation" as
referred to in this Article.
Section 9. Continuation. The indemnification and advancement of expenses
provided by, or granted pursuant to, the Delaware Law, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
Section 10. Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, the other provisions hereof shall remain in
full force and effect in such jurisdiction, and the remaining provisions hereof
shall be liberally construed to effectuate the provisions hereof, and the
invalidity of any provision hereof in any jurisdiction shall not affect the
validity or enforceability of such provision in any other jurisdiction.
Section 11. Amendment. The right to indemnification conferred by this
Article shall be deemed to be a contract between the Corporation and each person
referred therein until amended or repealed, but no amendment to or repeal of
these provisions shall apply to or have any effect
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<PAGE> 12
on the right to indemnification of any person with respect to any liability or
alleged liability of such person for or with respect to any act or omission of
such person occurring prior to such amendment or repeal.
ARTICLE VII.
GENERAL PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be fixed
from time to time by resolution of the Board of Directors.
Section 2. Corporation Seal. The corporate seal, if any, of the Corporation
shall be in such form as may be approved from time to time by the Board of
Directors. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
Section 3. Notices and Mailing. Except as otherwise provided in the Act,
the Articles of Incorporation or these By-laws, all notices required to be given
by any provision of these By-laws shall be deemed to have been given (i) when
received, if given in person, (ii) on the date of acknowledgment of receipt, if
sent by telex, facsimile or other wire transmission, (iii) one day after
delivery, properly addressed, to a reputable courier for same day or overnight
delivery or (iv) three days after being deposited, properly addressed, in the
U.S. Mail, certified or registered mail, postage prepaid.
Section 4. Waiver of Notice. Whenever any notice is required to be given
under the Delaware Law or the provisions of the Certificate of Incorporation or
these By-laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to notice.
Section 5. Interpretation. In these By-laws, unless a clear contrary
intention appears, the singular number includes the plural number and vice
versa, and reference to either gender includes the other gender.
ARTICLE VIII.
AMENDMENTS
These By-laws may be altered, amended or repealed or new By-laws may be
adopted by the Board of Directors. The fact that the power to amend, alter,
repeal or adopt the By-laws has been conferred upon the Board of Directors shall
not divest the stockholders of the same powers.
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<PAGE> 1
EXHIBIT 4.1
_________________________________________________________
LIBERTY GROUP PUBLISHING, INC.
TO
STATE STREET BANK AND TRUST COMPANY
as Trustee
________________
Indenture
Dated as of January 27, 1998
________________
$89,000,000
11 5/8% Senior Discount Debentures due 2009
___________________________________________________________
<PAGE> 2
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of January 27, 1998
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- ----------------- ---------
<S> <C>
Section 310(a)(1) ............................................ 609
(a)(2) ............................................ 609
(a)(3) ............................................ Not
Applicable
(a)(4) ............................................ Not
Applicable
(b) ............................................ 608
610
Section 311(a) ............................................ 613(a)
(b) ............................................ 613(b)
(b)(2) ............................................ 703(a)(2)
703(b)
Section 312(a) ............................................ 701
702(a)
(b) ............................................ 702(b)
(c) ............................................ 702(c)
Section 313(a) ............................................ 703(a)
(b) ............................................ 703(b)
(c) ............................................ 703(a)
703(b)
(d) ............................................ 703(c)
Section 314(a) ............................................ 704
(b) ............................................ Not
Applicable
(c)(1) ............................................ 102
(c)(2) ............................................ 102
(c)(3) ............................................ Not
Applicable
(d) ............................................ Not
Applicable
(e) ............................................ 102
Section 315(a) ............................................ 601(a)
(b) ............................................ 602
703(a)(6)
(c) ............................................ 601(b)
(d) ............................................ 601(c)
(d)(1) ............................................ 601(a)(1)
(d)(2) ............................................ 601(c)(2)
(d)(3) ............................................ 601(c)(3)
(e) ............................................ 514
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- ----------------- ---------
<S> <C>
Section 316(a) ............................................ 101
(a)(1)(A) ............................................ 502
512
(a)(1)(B) ............................................ 513
(a)(2) ............................................ Not
Applicable
(b) ............................................ 508
Section 317(a)(1) ............................................ 503
(a)(2) ............................................ 504
(b) ............................................ 1003
Section 318(a) ............................................ 107
</TABLE>
______________
Note: This reconciliation and tie shall not, for any purpose, be deemed
to be a part of the Indenture.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE ONE
Definitions and Other Provisions of
General Application
<S> <C> <C>
SECTION 101. Definitions .............................................. 1
SECTION 102. Compliance Certificates and
Opinions ................................................. 31
SECTION 103. Form of Documents Delivered to
Trustee .................................................. 32
SECTION 104. Acts of Holders; Record Date ............................. 33
SECTION 105. Notices, Etc., to Trustee
and Company .............................................. 34
SECTION 106. Notice to Holders; Waiver ................................ 35
SECTION 107. Conflict with Trust Indenture Act ........................ 35
SECTION 108. Effect of Headings and Table of Contents ................. 36
SECTION 109. Successors and Assigns ................................... 36
SECTION 110. Separability Clause ...................................... 36
SECTION 111. Benefits of Indenture .................................... 36
SECTION 112. Governing Law ............................................ 36
SECTION 113. Legal Holidays ........................................... 36
SECTION 114. No Personal Liability of Partners, Stockholders,
Officers, Directors ...................................... 37
ARTICLE TWO
Debenture Forms
SECTION 201. Forms Generally .......................................... 37
ARTICLE THREE
The Debentures
SECTION 301. Title and Terms .......................................... 39
SECTION 302. Denominations ............................................ 40
SECTION 303. Execution, Authentication,
Delivery and Dating ...................................... 40
SECTION 304. Temporary Debentures ..................................... 41
SECTION 305. Registration, Registration of
Transfer and Exchange .................................... 42
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 306. Mutilated, Destroyed, Lost and
Stolen Debentures ........................................ 53
SECTION 307. Payment of Interest; Interest Rights Preserved ........... 54
SECTION 308. Persons Deemed Owners .................................... 55
SECTION 309. Cancellation ............................................. 56
SECTION 310. Computation of Accretion
and Interest ............................................. 56
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge
of Indenture ............................................. 56
SECTION 402. Application of Trust Money ............................... 58
ARTICLE FIVE
Remedies
SECTION 501. Events of Default ........................................ 58
SECTION 502. Acceleration of Maturity; Rescission
and Annulment ............................................ 61
SECTION 503. Collection of Indebtedness and Suits
for Enforcement by Trustee ............................... 61
SECTION 504. Trustee May File Proofs of Claim ......................... 63
SECTION 505. Trustee May Enforce Claims Without Possession of
Debentures ............................................... 63
SECTION 506. Application of Money Collected ........................... 64
SECTION 507. Limitation on Suits ...................................... 64
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest ..................................... 65
SECTION 509. Restoration of Rights and Remedies ....................... 65
SECTION 510. Rights and Remedies Cumulative ........................... 66
SECTION 511. Delay or Omission Not Waiver ............................. 66
SECTION 512. Control by Holders ....................................... 66
SECTION 513. Waiver of Past Defaults .................................. 67
SECTION 514. Undertaking for Costs .................................... 67
SECTION 515. Waiver of Usury, Stay or Extension Laws .................. 68
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
Page
----
ARTICLE SIX
The Trustee
<S> <C> <C>
SECTION 601. Certain Duties and
Responsibilities ......................................... 68
SECTION 602. Notice of Defaults ....................................... 68
SECTION 603. Certain Rights of Trustee ................................ 69
SECTION 604. Not Responsible for Recitals or
Issuance of Debentures ................................... 70
SECTION 605. May Hold Debentures ...................................... 70
SECTION 606. Money Held in Trust ...................................... 71
SECTION 607. Compensation and Reimbursement ........................... 71
SECTION 608. Disqualification;
Conflicting Interests .................................... 71
SECTION 609. Corporate Trustee Required;
Eligibility .............................................. 72
SECTION 610. Resignation and Removal;
Appointment of Successor ................................. 72
SECTION 611. Acceptance of Appointment
by Successor ............................................. 74
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business ................................ 74
SECTION 613. Preferential Collection of Claims
Against Company .......................................... 75
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee
Names and Addresses of Holders ........................... 75
SECTION 702. Preservation of Information;
Communications to Holders ................................ 76
SECTION 703. Reports by Trustee ....................................... 76
SECTION 704. Reports by Company ....................................... 76
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Limitation on Merger, Sale or Consolidation .............. 77
SECTION 802. Successor Substituted .................................... 78
</TABLE>
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<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 803. Transfer of Subsidiary Assets ........................... 78
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders ...... 79
SECTION 902. Supplemental Indentures with Consent of Holders ......... 80
SECTION 903. Execution of Supplemental
Indentures .............................................. 81
SECTION 904. Effect of Supplemental Indentures ....................... 81
SECTION 905. Conformity with Trust
Indenture Act ........................................... 81
SECTION 906. Reference in Debentures to
Supplemental Indentures ................................. 81
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest .............. 82
SECTION 1002. Maintenance of Office or Agency ......................... 82
SECTION 1003. Money for Debenture Payments to be Held in Trust ........ 83
SECTION 1004. Existence ............................................... 85
SECTION 1005. Maintenance of Properties ............................... 85
SECTION 1006. Payment of Taxes and Other Claims ....................... 85
SECTION 1007. Maintenance of Insurance ................................ 86
SECTION 1008. Limitation on Incurrence of
Additional Indebtedness and
Disqualified Capital Stock .............................. 86
SECTION 1009. Limitation on Restricted Payments ....................... 88
SECTION 1010. Limitations on Dividends and Other
Payment Restrictions Affecting Subsidiaries ............. 89
SECTION 1011. Limitation on Liens Securing Indebtedness ............... 91
SECTION 1012. Limitation on Transactions with Affiliates .............. 91
SECTION 1013. Limitation on Sale of Assets and Subsidiary Stock ....... 92
</TABLE>
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<PAGE> 8
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1014. Limitation on Issuances and Sales
of Capital Stock of Wholly Owned Subsidiaries ........... 97
SECTION 1015. Repurchase of Debentures at the
Option of the Holder Upon a Change
of Control .............................................. 97
SECTION 1016. Investment Company ...................................... 100
SECTION 1017. Limitation on Lines of Business ......................... 100
SECTION 1018. Statement by Officers as to Default; Compliance
Certificates ............................................ 101
SECTION 1019. Waiver of Certain Covenants ............................. 101
ARTICLE ELEVEN
Redemption of Debentures
SECTION 1101. Right of Redemption ..................................... 102
SECTION 1102. Applicability of Article ................................ 102
SECTION 1103. Election to Redeem; Notice
to Trustee .............................................. 103
SECTION 1104. Selection by Trustee of Debentures
to Be Redeemed .......................................... 103
SECTION 1105. Notice of Redemption .................................... 103
SECTION 1106. Deposit of Redemption Price ............................. 104
SECTION 1107. Debentures Payable on Redemption
Date .................................................... 104
SECTION 1108. Debentures Redeemed in Part ............................. 105
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. Company's Option to Effect
Defeasance or Covenant Defeasance ....................... 105
SECTION 1202. Defeasance and Discharge ................................ 106
SECTION 1203. Covenant Defeasance ..................................... 106
SECTION 1204. Conditions to Defeasance or Covenant Defeasance ......... 107
SECTION 1205. Deposited Money and U.S. Government Obligations to be
Held in Trust; Other Miscellaneous Provisions ........... 110
SECTION 1206. Reinstatement ........................................... 110
Annex A FORM OF DEBENTURE ............................................ A-1
</TABLE>
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<PAGE> 9
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Annex B FORM OF REGULATION S CERTIFICATE
FOR HOLDER ............................................ B-1
</TABLE>
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<PAGE> 10
INDENTURE, dated as of January 27, 1998, between Liberty Group
Publishing, Inc., a corporation duly organized and existing under the laws
of the State of Delaware (herein called the "Company"), having its principal
office at 3000 Dundee Road, Suite 203, Northbrook, Illinois 60062, and State
Street Bank and Trust Company, a trust company duly organized and existing
under the laws of the Commonwealth of Massachusetts, as Trustee (herein called
the "Trustee").
Each party agrees as follows for the benefit of each other and for
the equal and ratable benefit of the Holders of the Company's 11 5/8% Series A
Senior Discount Debentures due 2009 and the class of 11 5/8% Series B Senior
Discount Debentures due 2009 to be exchanged for the 11 5/8% Series A Senior
Discount Debentures due 2009 of the Company:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
(4) unless otherwise specifically set forth herein, all calculations
or determinations of a Person shall be performed or made on a
consolidated basis in accordance with generally accepted accounting
principles; and
(5) the words "herein", "hereof" and "hereunder"
and other words of similar import refer to this
<PAGE> 11
Indenture as a whole and not to any particular Article, Section or other
subdivision.
Certain terms, used principally in Article Six, are defined in that
Article.
"40-day restricted period" has the meaning set forth in Section 201.
"Accreted Value" means, as of any date of determination, the sum
(rounded to the nearest whole dollar) of (a) the Issue Price and (b) the
portion of the excess of the principal amount at maturity of the Debentures
over the Issue Price which shall have been accreted thereon through such date,
such amount to be so accreted on a daily basis at the rate of 11 5/8% per annum
compounded semi-annually on each February 1 and August 1, commencing on August
1, 1998, from the Issue Date through the date of determination. On and after
February 1, 2003, the Accreted Value of the Debentures shall be equal to the
principal amount at maturity.
"Acquired Indebtedness" means Indebtedness or Disqualified Capital
Stock of any Person existing at the time such Person becomes a Subsidiary of
the Company, including by designation, or is merged or consolidated into or
with the Company or one of its Subsidiaries.
"Acquisition" means the purchase or other acquisition of, or
combination with, any Person (including, without limitation, the
acquisition of more than 50% of the Equity Interests of any Person) or all or
substantially all the assets of any Person by any other Person, whether by
purchase, stock purchase, merger, consolidation, or other transfer, and
whether or not for consideration.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" means any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the
Company. For purposes of this definition, the term "control" means the power
to direct the management and policies of a Person, directly or through one or
more intermediaries, whether through the ownership of voting securities, by
contract, or otherwise, provided, that, with respect to ownership interest in
the Company and its Subsidiaries, a Beneficial Owner of 10% or more of the
total voting power normally entitled to vote in
-2-
<PAGE> 12
the election of directors, managers or trustees, as applicable, shall for such
purposes be deemed to constitute control.
"Asset Sale" has the meaning set forth in Section 1013.
"Asset Sale Offer" has the meaning set forth in Section 1013.
"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (i) the sum of the
products (a) of the number of months from the date of determination to the date
or dates of each successive scheduled principal (or redemption) payment of such
security or instrument and (b) the amount of each such respective principal (or
redemption) payment by (ii) the sum of all such principal (or redemption)
payments.
"Beneficial Owner" or "beneficial owner" for purposes of the definition of
Change of Control and Affiliate has the meaning attributed to it in Rules 13d-3
and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether or
not applicable.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any committee of the Board of Directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the board of directors of such Person.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York or
Hartford, Connecticut are authorized or obligated by law or executive order to
close.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital
-3-
<PAGE> 13
lease obligations under GAAP and, for purposes of this definition, the amount
of such obligations at any date shall be the capitalized amount of such
obligations at such date, determined in accordance with GAAP.
"Capital Stock" means, with respect to any corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
Indebtedness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of or interests (however designated) in
stock issued by that corporation.
"Cash Equivalent" means (a) 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 one year from the
date of acquisition; (b) marketable general obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition thereof, having a credit
rating of "A" or better from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.; (c) certificates of deposit, time deposits, Eurodollar
time deposits, overnight bank deposits or bankers' acceptances having
maturities of not more than one year from the date of acquisition thereof of
any domestic commercial bank, the long-term debt of which is rated at the time
of acquisition thereof at least A or the equivalent thereof by Standard &
Poor's Ratings Group, or A or the equivalent thereof by Moody's Investors
Service, Inc. and having capital and surplus in excess of $500,000,000; (d)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (a), (b) and (c) above entered
into with any bank meeting the qualifications specified in clause (c) above;
(e) commercial paper rated at the time of acquisition thereof at least A-2 or
the equivalent thereof by Standard & Poor's Ratings Group or P-2 or the
equivalent thereof by Moody's Investors Service, Inc., or carrying an
equivalent rating by a nationally recognized rating agency, if both of the two
named rating agencies cease publishing ratings of investments, and in either
case maturing within 270 days after the date of acquisition thereof; and
(f) interests in any investment company which invests solely in instruments of
the type specified in clauses (a) through (e) above.
-4-
<PAGE> 14
"CEDEL" has the meaning set forth in Section 201.
"Change of Control" has the meaning specified in Section 1015.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture and thereafter "Company" shall mean
such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President
or a Vice President, and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"consolidated" means, with respect to the Company, the consolidated
accounts of its Subsidiaries with those of the Company, all in accordance with
GAAP; provided that "consolidated" will not include consolidation of the
accounts of any Unrestricted Subsidiary with the accounts of the Company.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the Consolidated Net Income of such Person for such period adjusted to add
thereto (to the extent deducted from net revenues in determining Consolidated
Net Income), without duplication, the sum of (i) consolidated income taxes,
(ii) consolidated depreciation and amortization (including amortization of debt
issuance costs in connection with any Indebtedness of
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<PAGE> 15
such Person and its Subsidiaries), (iii) Consolidated Fixed Charges and (iv)
all other non-cash charges; provided that consolidated income taxes,
depreciation and amortization of a Subsidiary of such Person that is less than
wholly owned shall only be added to the extent of the equity interest of such
Person in such Subsidiary.
"Consolidated Fixed Charges" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of (a) interest expensed or capitalized, paid, accrued, or scheduled
to be paid or accrued (including, in accordance with the following sentence,
interest attributable to Capitalized Lease Obligations) of such Person and its
Consolidated Subsidiaries during such period, excluding amortization of debt
issuance costs incurred in connection with the Debentures, the Principal
Subsidiary Notes or the Credit Agreement but including (i) original issue
discount and non-cash interest payments or accruals on any Indebtedness, (ii)
the interest portion of all deferred payment obligations, and (iii) all
commissions, discounts and other fees and charges owed with respect to bankers'
acceptances and letters of credit financings and currency and Interest Swap and
Hedging Obligations, in each case to the extent attributable to such period,
and (b) the amount of cash dividends paid by such Person or any of its
Consolidated Subsidiaries in respect of Preferred Stock (other than by
Subsidiaries of such Person to such Person or such Person's wholly owned
Subsidiaries). For purposes of this definition, (x) interest on a Capitalized
Lease Obligation shall be deemed to accrue at an interest rate reasonably
determined by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (y) to the extent such
expense would result in a liability upon the consolidated balance sheet of such
Person in accordance with GAAP, interest expense attributable to any
Indebtedness represented by the guaranty by such Person or a Subsidiary of such
Person of an obligation of another Person shall be deemed to be the interest
expense attributable to the Indebtedness guaranteed. Notwithstanding the
foregoing, Consolidated Fixed Charges shall not include costs, fees and
expenses incurred in connection with the Transactions, and any non-cash charge
or expense associated with the write-off of deferred debt issuance costs
associated with the Credit Agreement, the Principal Subsidiary Notes or the
Debentures.
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"Consolidated Net Income" means, with respect to any Person for any
period, the net income (or loss) of such Person and its Consolidated
Subsidiaries (determined on a consolidated basis in accordance with GAAP) for
such period, adjusted to exclude (only to the extent included in computing such
net income (or loss) and without duplication): (a) all gains and losses which
are either extraordinary (as determined in accordance with GAAP) or are either
unusual or nonrecurring (including any gain from the sale or other disposition
of assets outside the ordinary course of business or from the issuance or sale
of any Capital Stock), (b) the net income, if positive, of any Person, other
than a Consolidated Subsidiary, in which such Person or any of its Consolidated
Subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in cash to such Person or a
Consolidated Subsidiary of such Person during such period, but in any case (i)
not in excess of such Person's pro rata share of such Person's net income for
such period, (c) the net income or loss of any Person acquired in a pooling of
interests transaction for any period prior to the date of such Acquisition, (d)
the net income, if positive, of any of such Person's Consolidated Subsidiaries
in the event and solely to the extent that the declaration or payment of
dividends or similar distributions is not at the time permitted by operation of
the terms of its charter or bylaws or any other agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
such Consolidated Subsidiary, (e) the effects of changes in accounting
principles, (f) any non-cash compensation expense in connection with the
exercise of, grant to or repurchase from officers, directors and employees of
stock, stock options or stock equivalents, (g) any non-cash charge or expense
associated with the write-off of deferred debt issuance costs associated with
the Credit Agreement, the Principal Subsidiary Notes or the Debentures, and (h)
costs, fees and expenses incurred in connection with the Transactions.
"Consolidated Net Worth" of any Person at any date means the aggregate
consolidated stockholders' equity of such Person (plus amounts of equity
attributable to preferred stock) and its Consolidated Subsidiaries, as would be
shown on the consolidated balance sheet of such Person prepared in accordance
with GAAP, adjusted to exclude (to the extent included in calculating such
equity), (a) the amount of any such stockholders' equity attributable to
Disqualified Capital Stock or treasury stock of such Person
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<PAGE> 17
and its Consolidated Subsidiaries, (b) all upward revaluations and other
write-ups in the book value of any asset of such Person or a Consolidated
Subsidiary of such Person subsequent to the Issue Date, and (c) all investments
in subsidiaries that are not Consolidated Subsidiaries and in Persons that are
not Subsidiaries.
"Consolidated Subsidiary" means, for any Person, each Subsidiary of such
Person (whether now existing or hereafter created or acquired) the financial
statements of which are consolidated for financial statement reporting purposes
with the financial statements of such Person in accordance with GAAP.
"Corporate Trust Office" means the principal office of the Trustee in at
Goodwin Square, 225 Asylum Street, Hartford, Connecticut at which at any
particular time its corporate trust business shall be administered.
"corporation" means a corporation, association, company, joint-stock
company or business trust.
"Credit Agreement" means the one or more credit agreements (including,
without limitation, the Revolving Credit Facility) entered into by and among
the Company, certain of its Subsidiaries (if any) and certain financial
institutions, which provide for in the aggregate one or more term loans and/or
revolving credit and letter of credit facilities, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, as such credit agreement and/or related documents may be
amended, restated, supplemented, renewed, replaced or otherwise modified from
time to time whether or not with the same agent, trustee, representative
lenders or holders, and, subject to the proviso to the next succeeding
sentence, irrespective of any changes in the terms and conditions thereof.
Without limiting the generality of the foregoing, the term "Credit Agreement"
shall include any amendment, amendment and restatement, renewal, extension,
restructuring, supplement or modification to any such credit agreement and all
refundings, refinancings and replacements of any such credit agreement,
including any agreement (i) extending the maturity of any Indebtedness incurred
thereunder or contemplated thereby, (ii) adding or deleting borrowers or
guarantors thereunder, so long as borrowers and issuers include one or more of
the Company and its Subsidiaries and their respective successors and assigns,
(iii) increasing
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<PAGE> 18
the amount of Indebtedness incurred thereunder or available to be borrowed
thereunder, provided that on the date such Indebtedness is incurred it would
not be prohibited by Section 1008 or (iv) otherwise altering the terms and
conditions thereof in a manner not prohibited by the terms hereof.
"Debenture Register" and "Debentures Registrar" have the respective
meanings specified in Section 305.
"Debentures" means, collectively, the Initial Debentures and, when and if
issued as provided in the Registration Rights Agreement, the Exchange
Debentures.
"Debentures Custodian" means the Trustee, as custodian with respect to the
Debentures in global form, or any successor entity thereto.
"Debt Incurrence Ratio" has the meaning set forth in Section 1008.
"Default" has the meaning set forth in Section 602.
"Defaulted Interest" has the meaning specified in Section 307.
"Definitive Debentures" means Debentures that are in the form of Debenture
as set forth in Annex A hereof that do not include the information called for
by footnotes 1 and 6 thereof.
"Depositary" has the meaning set forth in Section 201.
"Disqualified Capital Stock" means (a) except as set forth in (b), with
respect to any Person, any Equity Interest of such Person that, by its terms or
by the terms of any security into which it is convertible, exercisable or
exchangeable, is, or upon the happening of an event or the passage of time or
both would be, required to be redeemed or repurchased (including at the
option of the holder thereof) by such Person or any of its Subsidiaries, in
whole or in part, on or prior to the Stated Maturity of the Debentures and (b)
with respect to any Subsidiary of such Person (including with respect to any
Subsidiary of the Company), any Equity Interests other than any common equity
with no preference, privileges, or redemption or repayment
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<PAGE> 19
provisions and preferred equity owned by the Company or one of its Subsidiaries.
"Equity Interest" of any Person means any shares, interests,
participations or other equivalents (however designated) in such Person's
equity, and shall in any event include any Capital Stock issued by, or
partnership or membership interests in, such Person.
"Euroclear" has the meaning set forth in Section 201.
"Event of Default" has the meaning specified in Section 501.
"Event of Loss" means, with respect to any property or asset, any (i)
loss, destruction or damage of such property or asset or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"Exchange Act" refers to the Securities Exchange Act of 1934 as it may be
amended and any successor act thereto.
"Exchange Debentures" means the 11 5/8% Senior Discount Debentures due
2009, as supplemented from time to time in accordance with the terms hereof, to
be issued pursuant to this Indenture in connection with the offer to exchange
Debentures for the Initial Debentures that may be made by the Company pursuant
to the Registration Rights Agreement.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Excluded Person" means Green Equity Investors, L.P. and its Related
Parties.
"Exempted Affiliate Transaction" means (a) compensation, indemnification
and other benefits paid or made available (x) pursuant to the employment
agreements between the Company and members of its senior management, or (y) for
or in connection with services actually rendered to the Company and comparable
to those generally paid or made available by entities engaged in the same or
similar businesses (including reimbursement or advancement of
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<PAGE> 20
reasonable out-of-pocket expenses, directors' and officers' liability
insurance and loans to officers, directors and employees (i) in the ordinary
course of business and (ii) to purchase Holdings Common Stock in an amount not
to exceed $1.0 million), (b) transactions, expenses and payments in connection
with the Transactions, (c) any Restricted Payments or other payments or
transactions expressly permitted under Section 1009, (d) payments to LGP for
management services under the Management Agreement in an amount not to exceed
$1.5 million in any fiscal year, plus reimbursement of reasonable out-of-pocket
costs and expenses, (e) payments to LGP for reasonable and customary fees and
expenses for financial advisory and investment banking services provided to the
Company in connection with major financial transactions, and (f) transactions
between or among the Company and its Subsidiaries or between or among
Subsidiaries of the Company, provided that any ownership interest in any such
Subsidiary which is not beneficially owned directly or indirectly by the
Company or any of its Subsidiaries is not beneficially owned by an Affiliate of
the Company other than by virtue of the direct or indirect ownership interest
in such Subsidiary held (in the aggregate) by the Company and/or one or more of
its Subsidiaries.
"GAAP" means United States 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 approved by a significant segment of the
accounting profession in the United States as in effect on the Issue Date.
"Global Debenture" means a Debenture (including a Rule 144A Global
Debenture or a Regulation S Global Debenture) that contains the information
referred to in footnotes 1 and 6 to the form of Debenture as set forth in Annex
A hereof.
"Holder" means a Person in whose name a Debenture is registered in the
Debenture Register.
"Holdings Common Stock" means the Common Stock, par value $0.01 per share,
of the Company.
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<PAGE> 21
"Indebtedness" of any Person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such any Person, to
the extent such liabilities and obligations would appear as a liability upon
the consolidated balance sheet of such Person in accordance with GAAP, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii)
evidenced by bonds, notes, debentures or similar instruments, (iii)
representing the balance deferred and unpaid of the purchase price of any
property or services, except those incurred in the ordinary course of its
business that would constitute ordinarily a trade payable to trade creditors;
(b) all liabilities and obligations, contingent or otherwise, of such Person
(i) evidenced by bankers' acceptances or similar instruments issued or accepted
by banks, (ii) relating to any Capitalized Lease Obligation, or (iii) evidenced
by a letter of credit or a reimbursement obligation of such Person with respect
to any letter of credit; (c) all net obligations of such Person under Interest
Swap and Hedging Obligations; (d) all liabilities and obligations of others of
the kind described in the preceding clauses (a), (b) or (c) that such Person
has guaranteed or that is otherwise its legal liability or which are secured by
one or more Liens on any assets or property of such Person; provided that if
the liabilities or obligations which are secured by a Lien have not been
assumed in full by such Person or are not such Person's legal liability in
full, the amount of such Indebtedness for the purposes of this definition shall
be limited to the lesser of the amount of such Indebtedness secured by such
Lien or the fair market value of the assets or property securing such Lien; (e)
any and all deferrals, renewals, extensions, refinancing and refundings
(whether direct or indirect) of, or amendments, modifications or supplements
to, any liability of the kind described in any of the preceding clauses (a),
(b), (c) or (d), or this clause (e), whether or not between or among the same
parties; and (f) all Disqualified Capital Stock of such Person (measured at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends). For purposes hereof, the "maximum fixed
repurchase price" of any Disqualified Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant
to the Indenture, and if such price is based upon, or measured by, the Fair
Market Value of such
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<PAGE> 22
Disqualified Capital Stock, such Fair Market Value to be determined in good
faith by the board of directors of the issuer (or managing general partner of
the issuer) of such Disqualified Capital Stock.
"Incurrence Date" has the meaning set forth in Section 1008.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, including,
for all purposes of this instrument and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a part of and
govern this instrument and any such supplemental indenture, respectively.
"Initial Debentures" means the 11 5/8% Senior Discount Debentures due
2009, as supplemented from time to time in accordance with the terms hereof,
issued under this Indenture that contain the information referred to in
footnotes 1, 5 and 7 to the form of Debenture as set forth in Annex A hereof.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette Securities
Corporation, Citicorp Securities, Inc., BT Alex.Brown and Chase Securities Inc.
(each an "Initial Purchaser").
"Interest Payment Date" means each February 1 and August 1, commencing
August 1, 2003.
"Interest Swap and Hedging Obligation" means any obligation of any Person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such Person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such Person calculated by applying a
fixed or floating rate of interest on the same notional amount.
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<PAGE> 23
"Investment" by any Person in any other Person means (without duplication)
(a) the acquisition (whether by purchase, merger, consolidation or otherwise)
by such Person (whether for cash, property, services, securities or otherwise)
of capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities, including any options or warrants, of such other
Person or any agreement to make any such acquisition; (b) the making by such
Person of any deposit with, or advance, loan or other extension of credit to,
such other Person (including the purchase of property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell
such property to such other Person) or any commitment to make any such advance,
loan or extension (but excluding accounts receivable, endorsements for
collection or deposits arising in the ordinary course of business); (c) other
than guarantees of Indebtedness of the Company or any Subsidiary to the extent
permitted by the Section 1008, the entering into by such Person of any
guarantee of, or other credit support or contingent obligation with respect to,
Indebtedness or other liability of such other Person; (d) the making of any
capital contribution by such Person to such other Person; and (e) the
designation by the Board of Directors of the Company of any Person to be an
Unrestricted Subsidiary. The Company shall be deemed to make an Investment in
an amount equal to the fair market value of the net assets of any subsidiary
(or, if neither the Company nor any of its Subsidiaries has theretofore made an
Investment in such subsidiary, in an amount equal to the Investments being
made), at the time that such subsidiary is designated an Unrestricted
Subsidiary, and any property transferred to an Unrestricted Subsidiary from the
Company or a Subsidiary of the Company shall be deemed an Investment valued at
its fair market value at the time of such transfer. The amount of any such
Investment shall be reduced by any liabilities or obligations of the Company or
any of its Subsidiaries to be assumed or discharged in connection with such
Investment by an entity other than the Company or any of its Subsidiaries. For
purposes of clarification and greater certainty, the designation of a newly
formed subsidiary as an Unrestricted Subsidiary shall not constitute an
Investment.
"Issue Date" means the date of first issuance of the Debentures under the
Indenture.
"Issue Price" means $50,521,740.
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<PAGE> 24
"Leverage Ratio" on any date of determination (the "Transaction Date")
means the ratio, on a pro forma basis, of (a) the aggregate amount of
Indebtedness of the Company and its Subsidiaries on a consolidated basis to (b)
the aggregate amount of Consolidated EBITDA of the Company attributable to
continuing operations and businesses (exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of) for the
Reference Period; provided, that for purposes of calculating Consolidated
EBITDA for this definition, (i) Acquisitions which occurred during the
Reference Period or subsequent to the Reference Period and on or prior to the
Transaction Date shall be assumed to have occurred on the first day of the
Reference Period, (ii) transactions giving rise to the need to calculate the
Leverage Ratio shall be assumed to have occurred on the first day of the
Reference Period, (iii) the incurrence of any Indebtedness or issuance of any
Disqualified Capital Stock during the Reference Period or subsequent to the
Reference Period and on or prior to the Transaction Date (and the application
of the proceeds therefrom to the extent used to refinance or retire other
Indebtedness) shall be assumed to have occurred on the first day of the
Reference Period, and (iv) the Consolidated Fixed Charges of such Person
attributable to interest on any Indebtedness or dividends on any Disqualified
Capital Stock bearing a floating interest (or dividend) rate shall be computed
on a pro forma basis as if the average rate in effect from the beginning of the
Reference Period to the Transaction Date had been the applicable rate for the
entire period, unless such Person or any of its Subsidiaries is a party to an
Interest Swap or Hedging Obligation (which shall remain in effect for the
12-month period immediately following the Transaction Date) that has the effect
of fixing the interest rate on the date of computation, in which case such rate
(whether higher or lower) shall be used.
"LGP" means Leonard Green & Partners, L.P.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired.
"Liquidated Damages" shall have the meaning specified in the Registration
Rights Agreement.
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<PAGE> 25
"Management Agreement" means the management agreement, dated as of the
Issue Date, between the Principal Subsidiary on one hand and LGP on the other
hand substantially as in effect on the Issue Date.
"Maturity", when used with respect to any Debenture, means the date on
which the principal of such Debenture becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Net Cash Proceeds" means the aggregate amount of cash or Cash Equivalents
received by the Company in the case of a sale of Qualified Capital Stock and by
the Company and its Subsidiaries in respect of an Asset Sale plus, in the case
of an issuance of Qualified Capital Stock upon any exercise, exchange or
conversion of securities (including options, warrants, rights and convertible
or exchangeable debt) of the Company that were issued for cash on or after the
Issue Date, the amount of cash originally received by the Company upon the
issuance of such securities (including options, warrants, rights and
convertible or exchangeable debt) less, in each case, the sum of all payments,
fees, commissions and (in the case of Asset Sales, reasonable and customary)
expenses (including, without limitation, the fees and expenses of legal counsel
and investment banking fees and expenses) incurred in connection with such
Asset Sale or sale of Qualified Capital Stock, and, in the case of an Asset
Sale only, less (i) the amount (estimated reasonably and in good faith by the
Company) of income, franchise, sales and other applicable taxes required to be
paid by the Company or any of its respective Subsidiaries in connection with
such Asset Sale, (ii) the amounts of any repayments of Indebtedness secured,
directly or indirectly, by Liens on the assets which are the subject of such
Asset Sale or Indebtedness associated with such assets which is due by reason
of such Asset Sale (i.e., such disposition is permitted by the terms of the
instruments evidencing or applicable to such Indebtedness, or by the terms of a
consent granted thereunder, on the condition that the proceeds (or portion
thereof) of such disposition be applied to such Indebtedness), and other
fees, expenses and other expenditures, in each case, reasonably incurred as a
consequence of such repayment of Indebtedness (whether or not such fees,
expenses or expenditures are then due and payable or made, as the case may be);
(iii) all amounts deemed appropriate by the Company (as evidenced by a signed
certificate of the Chief Financial Officer of the Company
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<PAGE> 26
delivered to the Trustee) to be provided as a reserve, in accordance with
GAAP, against any liabilities associated with such assets which are the subject
of such Asset Sale; and (iv) with respect to Asset Sales by Subsidiaries of the
Company, the portion of such cash payments attributable to Persons holding a
minority interest in such Subsidiary.
"Offering Memorandum" means the offering memorandum, dated January 15,
1998, as supplemented on January 20, 1998, relating to the offering of the
Debentures.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary, of the Company, and
delivered to the Trustee. One of the officers signing an Officer's Certificate
given pursuant to Section 1018 shall be the principal executive, financial or
accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Outstanding", when used with respect to Debentures, means, as of the date
of determination, all Debentures theretofore authenticated and delivered under
this Indenture, except:
(i) Debentures theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Debentures for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by
the Company (if the Company shall act as its own Paying Agent) for the
Holders of such Debentures; provided that, if such Debentures are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been made;
and
(iii) Debentures which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Debentures have been authenticated
and delivered pursuant to this Indenture, other than any such
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<PAGE> 27
Debentures in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Debentures are held by a bona fide
purchaser in whose hands such Debentures are valid obligations of the
Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Debentures have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Debentures owned
by the Company or any other obligor upon the Debentures or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Debentures which the Trustee knows to be so owned shall
be so disregarded. Debentures so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction
of the Trustee the pledgee's right so to act with respect to such Debentures
and that the pledgee is not the Company or any other obligor upon the
Debentures or any Affiliate of the Company or of such other obligor.
"pari passu", when used with respect to the ranking of any Indebtedness of
any Person in relation to other Indebtedness of such Person, means that each
such Indebtedness (a) either (i) is not subordinated in right of payment to any
other Indebtedness of such Person or (ii) is subordinate in right of payment to
the same Indebtedness of such Person as is the other and is so subordinate to
the same extent and (b) is not subordinate in right of payment to the other or
to any Indebtedness of such Person as to which the other is not so subordinate.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest (and Liquidated Damages, if any)
on any Debentures on behalf of the Company.
"Permitted Indebtedness" means any of the following:
(a) that the Company may incur Indebtedness evidenced by the Debentures
and represented by this Indenture up to the amounts specified therein as of
the date thereof and the Principal Subsidiary and its
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<PAGE> 28
Subsidiaries may incur Indebtedness evidenced by the Principal
Subsidiary Notes and the guarantees thereof and represented by the
Principal Subsidiary Indenture up to the amounts specified therein as of
the date thereof;
(b) that the Company and its Subsidiaries, as applicable, may incur
Refinancing Indebtedness with respect to any Indebtedness or Disqualified
Capital Stock, as applicable, that was permitted by this Indenture to be
incurred and any Indebtedness of the Principal Subsidiary outstanding on
the Issue Date after giving effect to the Transactions;
(c) the Company and its Subsidiaries may incur Indebtedness solely
in respect of bankers's acceptances and letters of credit (in addition to
any such Indebtedness incurred under the Credit Agreement in accordance
with the Indenture) (to the extent that such incurrence does not result
in the incurrence of any obligation to repay any obligation relating to
borrowed money of others), all in the ordinary course of business in
accordance with customary industry practices, in amounts and for the
purposes customary in the Company's industry; provided, that the
aggregate principal amount outstanding of such Indebtedness (including
any Indebtedness issued to refinance, refund or replace such
Indebtedness) shall not exceed $5.0 million;
(d) the Company and the Subsidiaries may incur Indebtedness arising
from tender, bid, performance or government contract bonds, other
obligations of like nature, or warranty or contractual service
obligations of like nature, in any case, incurred by the Company or its
Subsidiaries in the ordinary course of business;
(e) the Company and its Subsidiaries may incur Interest Swap and
Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate or currency risk with respect to any fixed or
floating rate Indebtedness that is permitted by the Indenture to be
outstanding or any receivable or liability the payment of which is
determined by reference to a foreign currency; provided, that the
notional amount of any such Interest Swap and Hedging Obligation does not
exceed the principal amount of Indebtedness to which such Interest Swap
and Hedging Obligation relates; and
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<PAGE> 29
(f) the Company may incur Indebtedness to any Subsidiary, and any
Subsidiary may incur Indebtedness to any other Subsidiary or to the
Company; provided, that, in the case of Indebtedness of the Company, such
obligations shall be unsecured and subordinated in all respects to the
Company's obligations pursuant to the Debentures and the date of any event
that causes such Subsidiary no longer to be a Subsidiary shall be an
Incurrence Date.
"Permitted Investment" means Investments in (a) any of the Debentures; (b)
Cash Equivalents; (c) intercompany notes to the extent permitted under clause
(f) of the definition of "Permitted Indebtedness," provided that Indebtedness
under any such notes of a Subsidiary shall be deemed to be a Restricted
Investment if such Person ceases to be a Subsidiary; (d) Investments in the
form of promissory notes of members of the Company's management not to exceed
$1.0 million in principal amount at any time outstanding solely in
consideration of the purchase by such Persons of Qualified Capital Stock of the
Company; (e) Investments by the Company or any Subsidiary in any Person that is
or immediately after such Investment becomes a Subsidiary, or immediately after
such Investment merges or consolidates into the Company or any Subsidiary in
compliance with the terms of the Indenture, provided that such Person is
engaged in all material respects in a Related Business; (f) Investments in the
Company by any Subsidiary, provided that in the case of Indebtedness of the
Company constituting any such Investment, such Indebtedness shall be unsecured
and subordinated in all respects to the Company's obligations under the
Debentures; (g) Investments in securities of trade creditors or customers
received in settlement of obligations that arose in the ordinary course of
business or pursuant to any plan of reorganization or similar arrangement upon
the bankruptcy or insolvency of such trade creditors or customers; (h)
Investments by the Company outstanding on the Issue Date; (i) transactions or
arrangements with officers or directors of the Company or any Subsidiary
entered into in the ordinary course of business (including compensation or
employee benefit arrangements with any officer or director of the Company or
any Subsidiary permitted under Section 1012; (j) Investments in Persons (other
than Affiliates of the Company) received as consideration from Asset Sales to
the extent not prohibited by Section 1013; (k) additional Investments at any
time outstanding not to exceed the sum of (i) $5.0 million and (ii) the
cumulative gain (net of taxes and all
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payments, fees, commissions and expenses incurred in such sale or
disposition) realized by the Company and its Subsidiaries in cash or Cash
Equivalents on the sale or other disposition after the Issue Date of
Investments (including Permitted Investments and Restricted Investments) made
after the Issue Date in accordance with this Indenture (but only to the extent
that such gain is excluded from the net income of the Company and the
Consolidated Subsidiaries by the definition of Consolidated Net Income); and
(l) the acquisition of Equity Interests of a Person engaged in a Related
Business, other than a Person described in clause (e), through the issuance of
Holdings Common Stock.
"Permitted Lien" means (a) Liens existing on the Issue Date; (b) Liens
imposed by governmental authorities for taxes, assessments or other charges not
yet subject to penalty or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP; (c) statutory
liens of carriers, warehousemen, mechanics, materialmen, landlords, repairmen
or other like Liens arising by operation of law in the ordinary course of
business provided that (i) the underlying obligations are not overdue for a
period of more than 60 days, or (ii) such Liens are being contested in good
faith and by appropriate proceedings and adequate reserves with respect thereto
are maintained on the books of the Company in accordance with GAAP; (d) Liens
securing the performance of bids, trade contracts (other than borrowed money),
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business;
(e) easements, rights-of-way, zoning, similar restrictions and other similar
encumbrances or title defects which, singly or in the aggregate, do not in any
case materially detract from the value of the property subject thereto (as such
property is used by the Company or any of its Subsidiaries) or interfere with
the ordinary conduct of the business of the Company or any of its Subsidiaries;
(f) Liens arising by operation of law in connection with judgments, only
to the extent, for an amount and for a period not resulting in an Event of
Default with respect thereto; (g) pledges or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security legislation; (h) Liens securing
the Debentures; (i) Liens securing Indebtedness of a Person existing at the
time such Person becomes a Subsidiary or is merged with or into the Company
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or a Subsidiary or Liens securing Indebtedness incurred in connection with
an Acquisition, provided that such Liens were in existence prior to the date of
such Acquisition, were not incurred in anticipation thereof, and do not extend
to any other assets; (j) Liens arising from Purchase Money Indebtedness
permitted to be incurred under paragraph (a) of Section 1008 provided such
Liens relate solely to the property which is subject to such Purchase Money
Indebtedness; (k) leases or subleases granted to other Persons in the ordinary
course of business not materially interfering with the conduct of the business
of the Company or any of its Subsidiaries or materially detracting from the
value of the assets of the Company or any Subsidiary; (1) Liens arising from
precautionary Uniform Commercial Code financing statement filings regarding
operating leases entered into by the Company or any of its Subsidiaries in the
ordinary course of business; (m) Liens securing Refinancing Indebtedness
incurred to refinance any Indebtedness that was previously so secured in
accordance with the Indenture; (n) Liens securing Indebtedness incurred under
the Credit Agreement in accordance with the Indenture; (o) Liens securing
Indebtedness incurred under paragraph (b) of Section 1008; and (p) any interest
or title of a lessor under any lease, whether or not characterized as capital
or operating, provided that such Liens do not extend to any property or assets
which is not leased property subject to such lease.
"Permitted Payments" means, without duplication, (a) the payments provided
for by clauses (a), (d) and (e) of the definition of "Exempted Affiliate
Transaction"; provided that in the case of clause (d) of such definition, no
Default or Event of Default shall have occurred or be continuing and the
obligation to pay such amounts has been subordinated to the payment of the
Debentures; (b) the repurchase of common stock, stock options and stock
equivalents of the Company held by former directors, officers or employees of
the Company or any of its Subsidiaries in an aggregate amount not to exceed in
any fiscal year $1.0 million plus the aggregate Net Cash Proceeds received by
the Company from the sale of Holdings Common Stock to directors, officers or
employees of the Company; provided, that any amount not so paid in any fiscal
year may be paid in future fiscal years; and (c) Restricted Payments in an
aggregate amount not to exceed $4.0 million.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated orga-
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nization or government or any agency or political subdivision thereof.
"Predecessor Debenture" of any particular Debenture means every previous
Debenture evidencing all or a portion of the same debt as that evidenced by
such particular Debenture; and, for the purposes of this definition, any
Debenture authenticated and delivered under Section 306 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Debenture shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Debenture.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of
such Person, to shares of Capital Stock of any other class of such Person.
"Principal Subsidiary" means Liberty Group Operating, Inc., a Delaware
corporation.
"Principal Subsidiary Indenture" means the Indenture, dated January 27,
1998, among Principal Subsidiary, the Subsidiary guarantors named therein, and
State Street Bank and Trust Company, as amended from time to time, and any
indenture in connection with any Refinancing Indebtedness incurred in
connection with the Principal Subsidiary Notes.
"Principal Subsidiary Notes" means the 9 3/8% Senior Subordinated Notes
due 2008 of Principal Subsidiary and any Refinancing Indebtedness incurred in
connection with such Principal Subsidiary Notes.
"pro forma" includes, with respect to an Acquisition or the incurrence of
Indebtedness in connection therewith, all adjustments, permitted or required to
be included pursuant to Article 11 of Regulation S-X and subject to
agreed-upon procedures to be performed by the Company's independent accountants
to determine whether the pro forma calculations are made in accordance with
Article 11 of Regulation S-X.
"Public Equity Offering" means an underwritten offering of common stock of
the Company or a Subsidiary for
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cash pursuant to an effective registration statement under the Securities
Act, provided at the time of or upon consummation of such offering, such common
stock of the Company or a Subsidiary is listed on a national securities
exchange or quoted on the national market system of the Nasdaq Stock Market.
"Purchase Date" means the settlement date specified by the Company in an
Asset Sale Offer or Change of Control Offer, which shall be within three
business days of the expiration date specified in such offer.
"Purchase Money Indebtedness" of any Person means any Indebtedness of such
Person to any seller or other Person incurred to finance the acquisition or
construction (including in the case of a Capitalized Lease Obligation, the
lease) of any business or real or personal tangible property (or, in each case,
any interest therein) acquired or constructed after the Issue Date which, in
the reasonable good faith judgment of the Board of Directors of the Company, is
related to a Related Business of the Company and which is incurred concurrently
with, or within 180 days of, such acquisition or the completion of such
construction and, if secured, is secured only by the assets so financed.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Qualified Exchange" means any legal defeasance, redemption, retirement,
repurchase or other acquisition of Capital Stock or Indebtedness of the Company
issued on or after the Issue Date with the Net Cash Proceeds received by the
Company from the substantially concurrent sale of its Qualified Capital Stock
or any exchange of Qualified Capital Stock of the Company for any Capital Stock
or Indebtedness of the Company issued on or after the Issue Date.
"Redemption Date", when used with respect to any Debenture to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Debenture to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Reference Period" with regard to any Person means the four full fiscal
quarters (or such lesser period during which such Person has been in existence)
ended immediately
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preceding any date upon which any determination is to be made pursuant to
the terms of the Debenture or the Indenture; provided that "Reference Period"
with regard to the Company shall include periods prior to the Acquisition of
its predecessors.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital
Stock (a) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the
case of Disqualified Capital Stock, liquidation preference, not to exceed
(after deduction of the amount of fees, consents, premiums, prepayment
penalties and reasonable expenses incurred in connection with such Refinancing)
the lesser of (i) the principal amount or, in the case of Disqualified Capital
Stock, liquidation preference, of the Indebtedness or Disqualified Capital
Stock so Refinanced and (ii) if such Indebtedness being Refinanced was issued
with an original issue discount, the accreted value thereof (as determined in
accordance with GAAP) at the time of such Refinancing; provided, that (A) such
Refinancing Indebtedness of any Subsidiary of the Company shall only be used to
Refinance outstanding Indebtedness or Disqualified Capital Stock of such
Subsidiary, (B) such Refinancing Indebtedness shall (x) not have an Average
Life shorter than the Indebtedness or Disqualified Capital Stock to be so
refinanced at the time of such Refinancing and (y) in all respects, be no less
subordinated or junior, if applicable, to the rights of Holders of the
Debentures than was the Indebtedness or Disqualified Capital Stock to be
refinanced, (C) such Refinancing Indebtedness shall have a final stated
maturity or redemption date, as applicable, no earlier than the final stated
maturity or redemption date, as applicable, of the Indebtedness or Disqualified
Capital Stock to be so refinanced, and (D) such Refinancing Indebtedness shall
be secured (if secured) in a manner no more adverse to the Holders of the
Debentures than the terms of the Liens (if any) securing such refinanced
Indebtedness, including, without limitation, the amount of Indebtedness secured
shall not be increased (except by the amount of fees, consents, premiums,
prepayment penalties and reasonable expenses incurred in connection with such
Refinancing). For purposes
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of clarification and greater certainty, if Indebtedness permitted by the
terms of this Indenture (including clauses (a), (b) and (c) of the second
paragraph of Section 1008) is repaid, redeemed, defeased, refunded, refinanced,
discharged or otherwise retired for value from the proceeds of Refinancing
Indebtedness, the maximum amount of such Refinancing Indebtedness shall be
determined in accordance with the provisions of this definition, and the amount
of such Refinancing Indebtedness in excess of the amount of such Indebtedness
(as permitted by this definition) shall not reduce the amount of Indebtedness
permitted by the terms of this Indenture (including, without limitation, not
reducing or counting towards the amounts set forth in such clauses (a), (b) and
(c)).
"Registration Rights Agreement" means the registration rights agreement
made and entered into as of the Issue Date among the Company and the Initial
Purchasers.
"Regular Record Date" means each January 15 and July 15.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Certificate" has the meaning set forth in Section 305.
"Regulation S Debenture" has the meaning set forth in Section 201.
"Regulation S Global Debenture" has the meaning set forth in Section 201.
"Regulation S Permanent Global Debenture" has the meaning set forth in
Section 201.
"Regulation S Temporary Global Debenture" has the meaning set forth in
Section 201.
"Related Business" means the business conducted (or proposed to be
conducted, including the activities referred to as being contemplated by the
Company, as described or referred to in the Offering Memorandum) by the Company
as of the Issue Date and any and all businesses that in the good faith judgment
of the Board of Directors of the Company are reasonably related businesses,
including reasonably related extensions thereof.
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"Related Party" means any partnership or corporation which is managed by
or controlled by LGP or any Affiliate thereof.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the president, any
vice president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any trust officer or
assistant trust officer, the controller or any assistant controller 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 Investment" means, in one or a series of related transactions,
any Investment, other than investments in Cash Equivalents and other Permitted
Investments; provided, however, that a merger of another Person with or into
the Company or a Subsidiary in accordance with the terms of this Indenture
shall not be deemed to be a Restricted Investment so long as the surviving
entity is the Company or a direct wholly owned Subsidiary.
"Restricted Payment" means, with respect to any Person, (a) the
declaration or payment of any dividend or other distribution in respect of
Equity Interests of such Person or any Subsidiary of such Person, (b) any
payment on account of the purchase, redemption or other acquisition or
retirement for value of Equity Interests of such Person or any Subsidiary of
such Person, (c) other than with the proceeds from the substantially concurrent
sale of, or in exchange for, Refinancing Indebtedness, any purchase,
redemption, or other acquisition or retirement for value of, any payment in
respect of any amendment of the terms of or any defeasance of, any Subordinated
Indebtedness, directly or indirectly, by such Person or any Subsidiary of such
Person prior to the scheduled maturity, any scheduled repayment of principal, or
scheduled sinking fund payment, as the case may be, of such Indebtedness, (d)
any Restricted Investment by such Person and (e) any payment provided for by
clause (d) of the definition of "Exempted Affiliate Transaction"; provided,
however, that the term "Restricted Payment" does not include (i) any dividend,
distribution or other payment on or with respect to Equity Interests of the
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Company to the extent payable solely in shares of Qualified Capital Stock
of the Company; (ii) any dividend, distribution or other payment to the
Company, or to any of its Subsidiaries, by the Company or any of its
Subsidiaries; (iii) payments made pursuant to the Transactions; (iv) Permitted
Investments; or (v) pro rata dividends and other distributions on Equity
Interests of any Subsidiary by such Subsidiary.
"Revolving Credit Facility" means the Principal Subsidiary's revolving
credit facility under a credit agreement with Citicorp USA, Inc., as lender or
as administrative agent, up to an amount not exceeding $175,000,000.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Debentures" has the meaning set forth in Section 201.
"Rule 144A Global Debenture" has the meaning set forth in Section 201.
"Sale and Leaseback Transaction" means any transaction by which the
Company or a Subsidiary, directly or indirectly, becomes liable as a lessee or
as a guarantor or other surety with respect to any lease of any property
(whether real or personal or mixed), whether now owned or hereafter acquired
that the Company or any Subsidiary has sold or transferred or is to sell or
transfer to any other Person in a substantially concurrent transaction with
such assumption of liability.
"Significant Subsidiary" shall have the meaning provided under Regulation
S-X of the Securities Act, as in effect on the Issue Date.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity," when used with respect to any Debenture means February
1, 2009.
"Subordinated Indebtedness" means Indebtedness of the Company or a
Subsidiary that is subordinated in right of payment by its terms or the terms
of any document or
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instrument or instrument relating thereto to the Debentures in any respect
or has a final stated maturity after the Stated Maturity.
"Subsidiary," with respect to any Person, means (i) a corporation a
majority of whose Equity Interests with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or
by one or more Subsidiaries of such Person, (ii) any other Person (other than a
corporation) in which such Person, one or more Subsidiaries of such Person, or
such Person and one or more Subsidiaries of such Person, directly or
indirectly, at the date of determination thereof has at least majority
ownership interest, or (iii) a partnership in which such Person or a Subsidiary
of such Person is, at the time, a general partner. Notwithstanding the
foregoing, an Unrestricted Subsidiary shall not be a Subsidiary of the Company
or of any Subsidiary of the Company. Unless the context requires otherwise,
Subsidiary means each direct and indirect Subsidiary of the Company.
"Transaction Date" has the meaning set forth in the definition of
"Leverage Ratio."
"Transactions" has the meaning set forth in the Offering Memorandum.
"Transfer Restricted Debentures" means Debentures that bear or are
required to bear the legend set forth in Section 305(g)(i).
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this instrument until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall
mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Unrestricted Subsidiary" means any subsidiary of the Company that does
not own any Capital Stock of, or own
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or hold any Lien on any property of, the Company or any other Subsidiary
of the Company and that, at the time of determination, shall be an Unrestricted
Subsidiary (as designated by the Board of Directors of the Company); provided,
that (i) such subsidiary shall not engage, to any substantial extent, in any
line or lines of business activity other than a Related Business, (ii) neither
immediately prior thereto nor after giving pro forma effect to such designation
would there exist a Default or Event of Default and (iii) immediately after
giving pro forma effect thereto, the Company could incur at least $1.00 of
Indebtedness pursuant to the Debt Incurrence Ratio of Section 1008. The Board
of Directors of the Company may designate any Unrestricted Subsidiary to be a
Subsidiary, provided that (i) no Default or Event of Default is existing or
will occur as a consequence thereof and (ii) immediately after giving effect to
such designation, on a pro forma basis, the Company could incur at least $1.00
of Indebtedness pursuant to the Debt Incurrence Ratio of Section 1008. Each
such designation shall be evidenced by filing with the Trustee a certified copy
of the resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions.
"U.S. Government Obligations" means direct non-callable obligations of, or
noncallable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee such certificates and opinions as it may reasonably request or as may
be required under the Trust Indenture Act. Each such certificate or opinion
shall be given in the form of an Officers' Certificate, if to be given by an
officer of the Company, or an Opinion of Counsel, if to be given by counsel,
and shall comply with the requirements of the Trust
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Indenture Act and any other requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel
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may be based, insofar as it relates to factual matters, upon a certificate
or opinion of, or representations by, an officer or officers of the Company
stating that the information with respect to such factual matters is in the
possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders; Record Date.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders in person or by agent duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and (subject to Section 601) conclusive in favor of the Trustee
and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the execution
thereof. Where such execution is by a signer acting in a capacity other than
his individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument or writing, or
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the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining
the Holders entitled to give or take any request, demand, authorization,
direction, notice, consent, waiver or other action, or to vote on any action,
authorized or permitted to be given or taken by Holders. If not set by the
Company prior to the first solicitation of a Holder made by any Person in
respect of any such action, or, in the case of any such vote, prior to such
vote, the record date for any such action or vote shall be the 30th day (or, if
later, the date of the most recent list of Holders required to be provided
pursuant to Section 701) prior to such first solicitation or vote, as the case
may be. With regard to any record date, only the Holders on such date (or
their duly designated proxies) shall be entitled to give or take, or vote on,
the relevant action.
(d) The ownership of Debentures shall be proved by the Debentures
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Debenture shall bind every future
Holder of the same Debenture and the Holder of every Debenture issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made
upon such Debenture.
SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, or
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(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each Holder
affected by such event, at his address as it appears in the Debenture Register,
not later than the latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. In any case where notice
to Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by
Holders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified
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or excluded, the latter provision shall be deemed to apply to this Indenture
as so modified or to be excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Debentures 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 111. Benefits of Indenture.
Nothing in this Indenture or in the Debentures, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder and the Holders of Debentures, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
THIS INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Purchase
Date or Stated Maturity of any
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Debenture shall not be a Business Day, then (notwithstanding any other
provision of this Indenture or of the Debentures) payment of interest or
principal (and premium, if any) need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if made
on the Interest Payment Date, Redemption Date or Purchase Date, or at the
Stated Maturity, provided that no interest shall accrue for the period from and
after such Interest Payment Date, Redemption Date, Purchase Date or Stated
Maturity, as the case may be.
SECTION 114. No Personal Liability of Partners, Stockholders, Officers,
Directors.
No direct or indirect stockholder, employee, officer or director, as such,
past, present or future of the Company, the Subsidiaries or any successor
entity shall have any personal liability in connection with this Indenture or
the Debentures solely by reason of his or its status as such stockholder,
employee, officer or director. Each Holder of Debentures by accepting a
Debenture waives and releases all such liability, acknowledges and consents to
the transactions described under "The Acquisition" in the Offering Memorandum
and further acknowledges the waiver and release are part of the consideration
for the issuance of the Debentures.
ARTICLE TWO
Debenture Forms
SECTION 201. Forms Generally.
The Debentures (including the Trustee's certificates of authentication)
shall be in substantially the form set forth in Annex A, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Debentures,
as evidenced by their execution of the Debentures.
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The Definitive Debentures shall be printed, lithographed or engraved or
produced by any combination of these methods on steel engraved borders or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Debentures may be listed, all as determined by the
officers executing such Debentures, as evidenced by their execution of such
Debentures.
The Initial Debentures are being offered and sold to qualified
institutional buyers in reliance on Rule 144A ("Rule 144A Debentures") or in
offshore transactions in reliance on Regulation S ("Regulation S Debentures").
Rule 144A Debentures initially will be represented by one or more
Debentures in registered global form without interest coupons (collectively,
the "Rule 144A Global Debenture"). The Rule 144A Global Debenture will be
deposited upon issuance with the Trustee as custodian for The Depository Trust
Company (the "Depositary"), in New York, New York and registered in the name of
the Depositary or its nominee, in each case for credit to an account of a
direct or indirect participant in the Depositary.
Regulation S Debentures initially will be represented by one or more
temporary Debentures in registered global form without interest coupons
(collectively, the "Regulation S Temporary Global Debenture"). The Regulation
S Temporary Global Debenture will be deposited on behalf of the subscribers
thereof with a custodian for the Depositary. The Regulation S Temporary Global
Debenture will be registered in the name of a nominee of the Depositary for
credit to the subscribers' respective accounts at Euroclear System
("Euroclear") and Cedel Bank, S.A. ("CEDEL"). Beneficial interests in the
Regulation S Temporary Global Debenture may be held only through Euroclear or
CEDEL.
Within a reasonable period of time after the expiration of the "40-day
restricted period" (within the meaning of Rule 903(c)(3) of Regulation S under
the Securities Act) (the "40-day restricted period"), the Regulation S Temporary
Global Debenture will be exchanged for one or more permanent Debentures in
registered global form without interest coupons (the "Regulation S Permanent
Global Debentures" and, together with the Regulation S Temporary Global
Debenture, the "Regulation S Global Debenture") upon delivery to the Trustee of
certification as provided in Section 305(f) hereof. During the 40-day
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restricted period, beneficial interests in the Regulation S Temporary
Global Debenture may be held only through Euroclear or CEDEL (as indirect
participants in the Depositary), and, pursuant to the Depositary's procedures,
beneficial interests in the Regulation S Temporary Global Debenture may not be
transferred to a Person that takes delivery thereof in the form of an interest
in the Rule 144A Global Debenture. After the 40-day restricted period, (i)
beneficial interests in the Regulation S Permanent Global Debentures may be
transferred to a Person that takes delivery in the form of an interest in the
Rule 144A Global Debenture and (ii) beneficial interests in the Rule 144A
Global Debenture may be transferred to a Person that takes delivery in the form
of an interest in the Regulation S Permanent Global Debentures, provided, that
the certification requirements described in Section 305(e) hereof are complied
with.
ARTICLE THREE
The Debentures
SECTION 301. Title and Terms.
The aggregate principal amount of Debentures which may be authenticated
and delivered under this Indenture is limited to $89,000,000, except for
Debentures authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Debentures pursuant to Section 304, 305,
306, 906 or 1108 or in connection with an Asset Sale Offer or Change of Control
Offer pursuant to Sections 1013 or 1015.
The Debentures shall be known and designated as the "11 5/8% Senior
Discount Debentures due 2009" of the Company. Their Stated Maturity shall be
February 1, 2009 and they shall bear interest at 11 5/8% from February 1, 2003
or from the most recent Interest Payment Date to which interest has been paid
or duly provided for, as the case may be, payable semi-annually on February 1
and August 1, commencing August 1, 2003, until the principal thereof is
paid or made available for payment. Until February 1, 2003, no cash interest
will accrue on the Debentures, but the Accreted Value will increase
(representing amortization of original issue discount) between the Issue Date
and February 1, 2003, on a semi-annual bond equivalent basis using a 360-day
year comprised of twelve 30-day months, such
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that the Accreted Value shall be equal to the full principal amount at
maturity of the Debentures on February 1, 2003.
The principal of (and premium, if any) and interest (and Liquidated
Damages, if any) on the Debentures shall be payable at the office or agency of
the Company in the Borough of Manhattan, The City of New York maintained for
such purpose and at any other office or agency maintained by the Company for
such purpose; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Debenture Register.
The Debentures shall be subject to repurchase by the Company pursuant to
an Asset Sale Offer or Change of Control Offer, respectively, as provided in
Sections 1013 and 1015.
The Debentures shall be subject to defeasance at the option of the Company
as provided in Article Twelve.
SECTION 302. Denominations.
The Debentures shall be issuable only in registered form without coupons
and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Debentures shall be executed on behalf of the Company by its Chairman
of the Board, its President or one of its Vice Presidents, and attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Debentures may be manual or facsimile.
Debentures bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Debentures or did not
hold such offices at the date of such Debentures.
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At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Debentures executed by the Company to the
Trustee for authentication, together with a Company Order for the
authentication and delivery of such Debentures; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Debentures as in
this Indenture provided and not otherwise.
Each Debenture shall be dated the date of its authentication.
No Debenture shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Debenture a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Debenture shall be conclusive evidence, and the only evidence, that such
Debenture has been duly authenticated and delivered hereunder.
SECTION 304. Temporary Debentures.
Pending the preparation of Definitive Debentures, the Company may execute,
and upon Company Order the Trustee shall authenticate and deliver, temporary
Debentures which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the Definitive Debentures in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Debentures may determine, as evidenced by their
execution of such Debentures.
If temporary Debentures are issued, the Company will cause Definitive
Debentures to be prepared without unreasonable delay. After the preparation of
Definitive Debentures, the temporary Debentures shall be exchangeable
for Definitive Debentures upon surrender of the temporary Debentures at any
office or agency of the Company designated pursuant to Section 1002, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Debentures the Company shall execute and upon receipt of a Company
Order the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of Definitive Debentures of authorized denominations. Until
so exchanged the temporary Debentures shall in all respects be entitled
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to the same benefits under this Indenture as Definitive Debentures.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Debenture Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Debentures and of transfers of Debentures. The Trustee is
hereby appointed "Debenture Registrar" for the purpose of registering
Debentures and transfers of Debentures as herein provided.
Upon surrender for registration of transfer of any Debenture at an office
or agency of the Company designated pursuant to Section 1002 for such purpose,
the Company shall execute, and upon receipt of a Company Order the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Debentures of any authorized denominations and of
a like aggregate principal amount.
At the option of the Holder, Debentures may be exchanged for other
Debentures of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Debentures to be exchanged at such office or
agency. Whenever any Debentures are so surrendered for exchange, the Company
shall execute, and upon receipt of a Company Order the Trustee shall
authenticate and deliver, the Debentures which the Holder making the exchange
is entitled to receive.
All Debentures issued upon any registration of transfer or exchange of
Debentures shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the
Debentures surrendered upon such registration of transfer or exchange.
(a) Transfer and Exchange of Definitive Debentures. When Definitive
Debentures are presented to the Debenture Registrar with a request (x) to
register the
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transfer of such Definitive Debentures or (y) to exchange such Definitive
Debentures for an equal principal amount of Definitive Debentures of other
authorized denominations, the Debenture Registrar shall register the transfer
or make the exchange as requested if its reasonable requirements for such
transaction are met; provided, however, that the Definitive Debentures
surrendered for registration of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company and
the Debenture Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing; and
(ii) in the case of Transfer Restricted Debentures that are
Definitive Debentures, shall be accompanied by the following additional
information and documents, as applicable:
(A) if such Transfer Restricted Debenture is being
delivered to the Debenture Registrar by a Holder for registration
in the name of such Holder, without transfer, a certification from
such Holder to that effect (in substantially the form set forth on
the reverse of the Debenture); or
(B) if such Transfer Restricted Debenture is being
transferred to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) that is aware that any sale of
Debentures to it will be made in reliance on Rule 144A under the
Securities Act and that is acquiring such Transfer Restricted
Debenture for its own account or for the account of another such
"qualified institutional buyer," a certification from such Holder
to that effect (in substantially the form set forth on the
reverse of the Debenture); or
(C) if such Transfer Restricted Debenture is being
transferred pursuant to an exemption from registration in
accordance with Rule 144, or outside the United States in an
offshore transaction in compliance with Rule 904 under the
Securities Act, or pursuant to an effective registration statement
under the
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Securities Act, a certification from such Holder to that effect
(in substantially the form set forth on the reverse of the
Debenture); or
(D) if such Transfer Restricted Debenture is being
transferred in reliance on another exemption from the
registration requirements of the Securities Act and with all
applicable securities laws of the States of the United States, a
certification from such Holder to that effect (in substantially
the form set forth on the reverse of the Debenture) and an Opinion
of Counsel from the Holder reasonably acceptable to the Company,
the Trustee and to the Debenture Registrar to the effect that such
transfer is in compliance with the Securities Act.
(b) Restrictions on Transfer of a Definitive Debenture for a
Beneficial Interest in a Global Debenture. A Definitive Debenture may not
be exchanged for a beneficial interest in a Global Debenture except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee
of a Definitive Debenture, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Trustee, together with:
(i) if such Definitive Debenture is a Transfer Restricted
Debenture, certification, in substantially the form set forth on
the reverse of the Debenture, that such Definitive Debenture is being
transferred to a "qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A under the
Securities Act; and
(ii) whether or not such Definitive Debenture is a Transfer
Restricted Debenture, written instructions directing the Trustee to make,
or to direct the Debentures Custodian to make, an endorsement on the
Global Debenture to reflect an increase in the aggregate principal
amount of the Debentures represented by the Global Debenture,
then the Trustee shall cancel such Definitive Debenture and cause, or direct
the Debentures Custodian to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Debentures Custodian,
the aggregate principal amount of Debentures represented by the Global
Debenture to be increased
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accordingly. If no Global Debentures are then outstanding, the Company shall
issue and upon receipt of a Company Order the Trustee shall authenticate a new
Global Debenture in the appropriate principal amount.
(c) Transfer and Exchange of Global Debentures. The transfer and
exchange of Global Debentures or beneficial interests therein shall be
effected through the Depositary, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the
procedures of the Depositary therefor. Except as set forth in clause (d)
through (f), a Global Debenture may not be transferred as a whole except by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary.
(d) Transfer of a Beneficial Interest in a Global Debenture for a
Definitive Debenture.
(i) A Global Debenture is exchangeable for Definitive
Debentures in registered certificated form if (A) the Depositary (x)
notifies the Company that it is unwilling or unable to continue as
depositary for the Global Debenture and the Company thereupon fails to
appoint a successor depositary or (y) has ceased to be a clearing agency
registered under the Exchange Act, (B) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of
the Debentures in certificated form or (C) there shall have occurred and
be continuing an Event of Default or any event which after notice or
lapse of time or both would be an Event of Default with respect to the
Debentures. In all cases, Definitive Debentures delivered in exchange
for any Global Debenture or beneficial interests therein will be
registered in the names, and issued in any approved denominations,
requested by or on behalf of the Depositary (in accordance with its
customary procedures) and will bear the applicable restrictive legend,
unless the Company determines otherwise in compliance with applicable
law.
(ii) Upon receipt by the Trustee of written instructions or
such other form of instructions as is customary for the Depositary, from
the Depositary or its nominee on behalf of any Person having a beneficial
interest in a Global Debenture, and upon receipt by the
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Trustee of a written instruction or such other form of instructions as is
customary for the Depositary or the Person designated by the Depositary
as having such a beneficial interest in a Transfer Restricted Debenture
only, the following additional information and documents (all of which
may be submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the beneficial owner,
a certification from the transferor to that effect (in
substantially the form set forth on the reverse of the Debenture);
or
(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) that is aware that any sale of Debentures to it
will be made in reliance on Rule 144A under the Securities Act and
that is acquiring such beneficial interest in the Transfer
Restricted Debenture for its own account or the account of another
such "qualified institutional buyer", a certification to that
effect from the transferor (in substantially the form set forth on
the reverse of the Debenture); or
(C) if such beneficial interest is being transferred
pursuant to an exemption from registration in accordance with Rule
144, or outside the United States in an offshore transaction in
compliance with Rule 904 under the Securities Act, or pursuant to
an effective registration statement under the Securities Act, a
certification from the transferor to that effect (in substantially
the form set forth on the reverse of the Debenture); or
(D) if such beneficial interest in being transferred in
reliance on another exemption from the registration
requirements of the Securities Act and in accordance with all
applicable securities laws of the States of the United States, a
certification to that effect from the transferor (in substantially
the form set forth on the reverse of the Debenture) and an Opinion
of Counsel from the transferee or transferor reasonably acceptable
to the Company
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and to the Debenture Registrar to the effect that such transfer is
in compliance with the Securities Act,
then the Trustee shall cause, or direct the Debentures Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Debentures Custodian, the aggregate principal amount of the
Global Debenture to be reduced accordingly and, following such reduction, the
Company will execute and, upon receipt of a Company Order, the Trustee will
authenticate and deliver to the transferee a Definitive Debenture in the
appropriate principal amount.
(e) Exchanges between Regulation S Debentures and Rule 144A
Debentures. Prior to the expiration of the 40-day restricted period,
beneficial interests in the Regulation S Temporary Global Debenture may not be
transferred to a Person who takes delivery in the form of an interest in a Rule
144A Global Debenture. After the expiration of the 40-day restricted period,
beneficial interests in Regulation S Permanent Global Debentures may be
transferred to a Person who takes delivery in the form of an interest in a Rule
144A Global Debenture. Upon receipt by the Trustee of written instructions or
such other form of instructions as is customary for the Depositary, from the
Depositary or its nominee on behalf of any Person having a beneficial interest
in the Regulation S Global Debenture, then the Trustee shall cause, or direct
the Debentures Custodian to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Debentures Custodian,
the aggregate principal amount at maturity of the Regulation S Global Debenture
to be decreased and the aggregate principal amount at maturity of the Rule 144A
Global Debenture to be increased by the principal amount at maturity of the
beneficial interest in the Regulation S Global Debenture to be exchanged, to
credit, or cause to be credited, to the account of the transferor a beneficial
interest in the Rule 144A Global Debenture equal to the reduction in the
aggregate principal amount at maturity of the Regulation S Global Debenture,
and to debit, or cause to be debited, from the account of the transferor the
beneficial interest in the Regulation S Global Debenture that is being
exchanged or transferred.
Prior to the expiration of the 40-day restricted period, beneficial
interests in the Rule 144A Global Debenture may not be transferred to any
Person that takes
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delivery thereof in the form of an interest in the Regulation S Temporary
Global Debenture. After the expiration of the 40-day restricted period,
Beneficial interests in the Rule 144A Global Debenture may be transferred to a
Person who takes delivery in the form of an interest in the Regulation S
Permanent Global Debenture only upon receipt by the Trustee of a written
certification from the transferor to the effect that such transfer is being
made in accordance with Rule 904 of Regulation S.
Upon receipt by the Trustee of written instructions or such other form of
instructions as is customary for the Depositary, from the Depositary or its
nominee on behalf of any Person having a beneficial interest in the Rule 144A
Global Debenture, then the Trustee shall cause, or direct the Debentures
Custodian to cause, in accordance with the standing instructions and procedures
existing between the Depositary and the Debentures Custodian, the aggregate
principal amount at maturity of the Rule 144A Global Debenture to be decreased
and the aggregate principal amount at maturity of the Regulation S Global
Debenture to be increased by the principal amount at maturity of the beneficial
interest in the Rule 144A Global Debenture to be exchanged, to credit, or cause
to be credited, to the account of the transferor a beneficial interest in the
Regulation S Global Debenture equal to the reduction in the aggregate principal
amount at maturity of the Rule 144A Global Debenture, and to debit, or cause to
be debited, from the account of the transferor the beneficial interest in the
Rule 144A Global Debenture that is being exchanged or transferred.
(f) Restrictions on Transfer and Exchange of Regulation S Temporary
Global Debentures. A holder of a beneficial interest in a Regulation S
Temporary Global Debenture must provide Euroclear or CEDEL, as the case may be,
with a certificate in the form set forth in Annex B certifying that the
beneficial owner of the interest in the Regulation S Temporary Global Debenture
is either not a U.S. Person (as defined below) or has purchased such interest
in a transaction that is exempt from the registration requirements under the
Securities Act (the "Regulation S Certificate"), and Euroclear or CEDEL, as the
case may be, must provide to the Trustee (or to the Paying Agent if other than
the Trustee) a certificate in the form set forth in Annex B prior to (i) the
payment of interest or principal with respect to such holder of beneficial
interests in the Regulation S Temporary Global Debenture and (ii) any
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exchange of such beneficial interest for a beneficial interest in a Regulation
S Permanent Global Debenture. "U.S. Person" means (i) any individual resident
in the United States, (ii) any partnership or corporation organized or
incorporated under the laws of the United States, (iii) any estate of which an
executor or administrator is a U.S. Person (other than an estate governed by
foreign law and of which at least one executor or administrator is a non-U.S.
Person who has sole or shared investment discretion with respect to its
asset(s)), (iv) any trust of which any trustee is a U.S. Person (other than a
trust of which at least one trustee is a non-U.S. Person who has sole or shared
investment discretion with respect to its assets and no beneficiary of the
trust (and no settlor if the trust is revocable) is a U.S. Person), (v) any
agency or branch of a foreign entity located in the United States, (vi) any
non-discretionary or similar account (other than an estate or trust) held by a
dealer or other fiduciary for the benefit or account of a U.S. Person, (vii)
any discretionary or similar account (other than an estate or trust) held by a
dealer or other fiduciary organized, incorporated or (if an individual)
resident in the United States (other than such an account held for the benefit
or account of a non-U.S. Person), (viii) any partnership or corporation
organized or incorporated under the laws of a foreign jurisdiction and formed
by a U.S. Person principally for the purpose of investing in securities not
registered under the Securities Act (unless it is organized or incorporated and
owned, by accredited investors within the meaning of Rule 501 (a) under the
Securities Act who are not natural persons, estates or trusts); provided,
however, that the term "U.S. Person" shall not include (A) a branch or agency
of a U.S. Person that is located and operating outside the United States for
valid business purposes as a locally regulated branch or agency engaged in the
banking or insurance business, (B) any employee benefit plan established and
administered in accordance with the law, customary practices and documentation
of a foreign country and (C) the international organizations set forth in
Section 902(o)(7) of Regulation S under the Securities Act and any other
similar international organizations, and their agencies, affiliates and
pension plans.
(g) Legends.
(i) Except as permitted by the following paragraphs (ii), (iii),
(iv) and (v), each Debenture certificate evidencing the Global Debentures
and the
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Definitive Debentures (and all Debentures issued in exchange therefor or
substitution thereof) shall bear a legend in substantially the following
form:
THE DEBENTURES (OR THEIR PREDECESSORS) EVIDENCED HEREBY WERE 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
DEBENTURES EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE DEBENTURES 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. THE HOLDER OF THE DEBENTURES
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH DEBENTURES
MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (a) INSIDE THE
UNITED STATES TO A PERSON WHOM 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) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (c) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (d) TO THE
COMPANY, (e) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR (f) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS) 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 DEBENTURES EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE.
(ii) Except as permitted by the following paragraphs (iii), (iv)
and (v), each Regulation S Temporary Global Debenture (and all Debentures
issued in exchange therefor or substitution thereof) shall bear a legend in
substantially the form set forth in the form of Debenture attached to this
Indenture.
(iii) Except as permitted by the following paragraphs (iv) and
(v), each Regulation S Permanent Global Debenture (and all Debentures issued
in exchange therefor or substitution thereof) shall bear a legend in
substantially
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the form set forth in the form of Debenture attached to this Indenture.
(iv) Upon any sale or transfer of a Transfer Restricted
Debenture (including any Transfer Restricted Debenture represented by a
Global Debenture) pursuant to Rule 144 under the Act or an effective
registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Debenture,
the Debenture Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Debenture for a Definitive
Debenture that does not bear the legend set forth in (i), (ii) or
(iii) above and rescind any restriction on the transfer of such
Transfer Restricted Debenture; and
(B) any such Transfer Restricted Debenture represented by a
Global Debenture shall not be subject to the provisions set forth
in (i), (ii) or (iii) above (such sales or transfers being subject
only to the provisions of Section 305(c) hereof); provided,
however, that with respect to any request for an exchange of a
Transfer Restricted Debenture that is represented by a Global
Debenture for a Definitive Debenture that does not bear a legend,
which request is made in reliance upon Rule 144, the Holder
thereof shall certify in writing to the Debenture Registrar that
such request is being made pursuant to Rule 144 (such
certification to be in substantially the form set forth on the
reverse of the Debenture).
(iv) Any Exchange Debentures issued in connection with the
Exchange Offer shall not bear the legend set forth in (i), (ii) or (iii)
above and the Trustee shall rescind any restriction on the transfer of
such Exchange Debentures.
(h) Cancellation and/or Adjustment of Global Debenture. At such
time as all beneficial interests in a Global Debenture have either been
exchanged for Definitive Debentures or beneficial interests in other Global
Debentures, redeemed, repurchased or canceled, such Global Debenture shall be
returned to or retained and canceled by the Trustee. At any time prior to such
cancellation, if any beneficial interest in a Global Debenture is exchanged for
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Definitive Debentures or a beneficial interest in another Global Debenture,
redeemed, repurchased or canceled, the principal amount of Debentures
represented by such Global Debenture shall be reduced and an endorsement shall
be made on such Global Debenture, by the Trustee or the Debentures Custodian,
at the direction of the Trustee, to reflect such reduction.
(i) Obligations with respect to Transfers and Exchanges of Definitive
Debentures. To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Definitive Debentures and
Global Debentures at the Debenture Registrar's request.
(j) General. No service charge shall be made for any registration of
transfer or exchange of Debentures, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Debentures, other than exchanges pursuant to Section 304, 906 or 1108 or in
accordance with any Asset Sale Offer or Change of Control Offer pursuant to
Section 1013 or 1015 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer of
or exchange any Debenture during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Debentures
selected for redemption under Section 1104 and ending at the close of business
on the day of such mailing, or (ii) to register the transfer of or exchange any
Debenture so selected for redemption in whole or in part, except the unredeemed
portion of any Debenture being redeemed in part.
The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any
interest in any Debenture (including any transfers between or among Depositary
participants or beneficial owners of interests in any Global Debenture) other
than to require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when expressly
required by the terms of, this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements thereof.
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Prior to due presentment for the registration of a transfer of any
Debenture, the Trustee and the Company may deem and treat the Person in whose
name any Debenture is registered as the absolute power of such Debenture for
all purposes, and none of the Trustee or the Company shall be affected by
notice to the contrary.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Debentures.
If any mutilated Debenture is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Debenture of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Debenture and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Debenture has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Debenture, a new Debenture of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Debenture has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Debenture, pay such Debenture.
Upon the issuance of any new Debenture under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith.
Every new Debenture issued pursuant to this Section in lieu of any
destroyed, lost or stolen Debenture shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Debenture shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this
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Indenture equally and proportionately with any and all other Debentures
duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Debentures.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Debenture which is payable in cash, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the Person
in whose name that Debenture (or one or more Predecessor Debentures) is
registered at the close of business on the Regular Record Date immediately
preceding such Interest Payment Date.
Any interest on any Debenture which is payable in cash, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Debentures (or their respective
Predecessor Debentures) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed
in the following manner. The Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Debenture and
the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or shall
make arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in trust
for the benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days
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prior to the date of the proposed payment and not less than 10 days after the
receipt by the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date and, in the
name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder at his address as it
appears in the Debenture Register, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed, such
Defaulted Interest shall be paid to the Persons in whose names the Debentures
(or their respective Predecessor Debentures) are registered at the close of
business on such Special Record Date and shall no longer be payable pursuant
to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Debentures may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Debenture
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Debenture shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Debenture.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Debenture for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Debenture is registered as the owner of such
Debenture for the purpose of receiving payment of principal of (and premium, if
any) and (subject to Section 307) interest (and Liquidated Damages, if any) on
such Debenture and for all other purposes whatsoever, whether or not such
Debenture be overdue, and neither the Company, the Trustee
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nor any agent of the Company or the Trustee shall be affected by notice to
the contrary.
SECTION 309. Cancellation.
All Debentures surrendered for payment, redemption, registration of
transfer or exchange or any Asset Sale Offer or Change of Control Offer
pursuant to Section 1013 or 1015 shall, if surrendered to any Person other than
the Trustee, be delivered to the Trustee and shall be promptly canceled by it.
The Company may at any time deliver to the Trustee for cancellation any
Debentures previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Debentures so delivered
shall be promptly canceled by the Trustee. No Debentures shall be
authenticated in lieu of or in exchange for any Debentures canceled as provided
in this Section, except as expressly permitted by this Indenture. All canceled
Debentures held by the Trustee shall be disposed of as directed by a Company
Order.
SECTION 310. Computation of Accretion and Interest.
Accretion and interest on the Debentures shall be computed on the basis of
a 360-day year of twelve 30-day months.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Debentures herein
expressly provided for), and the Trustee, on demand of and at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Debentures theretofore authenticated and delivered (other
than (i) Debentures which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306
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and (ii) Debentures for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company and
thereafter repaid to the Company or discharged from such trust, as
provided in Section 1003) have been delivered to the Trustee for
cancellation; or
(B) all such Debentures not theretofore delivered to the Trustee for
cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for the purpose an amount sufficient to pay and discharge the entire
indebtedness on such Debentures not theretofore delivered to the Trustee
for cancellation, for principal (and premium, if any) and interest (and
Liquidated Damages, if any) to the date of such deposit (in the case of
Debentures which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under
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Section 402 and the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Debentures and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) the failure by the Company to pay any installment of interest
(or Liquidated Damages, if any) on the Debentures as and when the same
becomes due and payable and the continuance of any such failure for 30 days;
(2) the failure by the Company to pay all or any part of the principal,
or premium, if any, on the Debentures when and as the same becomes due and
payable at maturity, redemption, by acceleration or otherwise, including,
without limitation, payment of the Change of Control Purchase Price or the
Asset Sale Offer Price, or otherwise;
(3) the failure by the Company or any Subsidiary of the Company
to observe or perform any other covenant
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or agreement contained in the Debentures or the Indenture and the
continuance of such failure for a period of 30 days after written notice is
given to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in aggregate principal amount of the Debentures
outstanding, specifying such Default;
(4) the entry by a court having jurisdiction in the premises of (A)
a decree or order for relief in respect of the Company or any Significant
Subsidiary of the Company in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or (B) a decree or order adjudging the Company or any such
Subsidiary a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company or any such Subsidiary under any applicable Federal or
State law, or appointing a custodian, receiver, liquidator, assignee,
trustee, sequestrator or other similar official of the Company or any such
Subsidiary or of any substantial part of the property of the Company or any
such Subsidiary, or ordering the winding up or liquidation of the affairs of
the Company or any such Subsidiary, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect for
a period of 60 consecutive days;
(5) the commencement by the Company or any Significant Subsidiary of the
Company of a voluntary case or proceeding under any applicable Federal
or State bankruptcy, insolvency, reorganization or other similar law or of
any other case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by the Company or any such Subsidiary to the entry of a decree or
order for relief in respect of the Company or any Significant Subsidiary of
the Company in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar law
or to the commencement of any bankruptcy or insolvency case or proceeding
against the Company or any Significant Subsidiary of the Company, or the
filing by the Company or any such Subsidiary of a petition or answer or
consent seeking reorganization or relief under any applicable Federal or
State law, or the consent by the Company or any such Subsidiary to
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the filing of such petition or to the appointment of or taking possession by
a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company or any Significant Subsidiary of the Company or of
any substantial part of the property of the Company or any Significant
Subsidiary of the Company, or the making by the Company or any Significant
Subsidiary of the Company of an assignment for the benefit of creditors, or
the admission by the Company or any such Subsidiary in writing of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Company or any such Subsidiary in furtherance of any
such action;
(6) a default in any Indebtedness of the Company or its
Subsidiaries, with an aggregate principal in excess of $15 million (a)
resulting from the failure to pay principal at maturity or (b) as a
result of which the maturity of such Indebtedness has been accelerated
prior to its stated maturity; or
(7) a final unsatisfied judgment or final unsatisfied judgments not
covered by insurance for the payment of money are entered against the
Company or any Subsidiary of the Company in an aggregate amount in excess
of $15 million by a court or courts of competent jurisdiction, which
judgments remain unstayed, undischarged or unbonded for a period (during
which execution shall not be effectively stayed) of 60 days.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 501(4) or (5)) occurs and is continuing, then and in every such case
either the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Outstanding Debentures may declare all the Debentures to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders). If an Event of Default specified in Section
501(4) or (5) occurs, the Debentures then Outstanding will be immediately due
and payable without any declaration or other Act on the part of the Trustee or
any Holder.
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Upon any acceleration of maturity of the Debentures, all principal of and
accrued interest and Liquidated Damages, if any, on (if on or after February 1,
2003) or Accreted Value of and accrued Liquidated Damages, if any, on (if prior
to February 1, 2003) the Debentures shall be due and payable immediately.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in aggregate principal amount of the Outstanding Debentures, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if and except on default with respect to any provision requiring a
supermajority approval to amend, which may only be waived by such
supermajority, all existing Events of Default, other than the non-payment of
the principal of, premium, if any, and interest (and Liquidated Damages, if
any) on the Debentures which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent Default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest (and Liquidated
Damages, if any) on any Debenture when such interest (and Liquidated
Damages, if any) becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Debenture at the Maturity thereof or, with respect to any
Debenture required to have been purchased pursuant to an Asset Sale Offer
or Change of Control Offer made by the Company, at the Purchase Date
thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Debentures, the whole amount then due and payable on such
Debentures for principal
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(and premium, if any) and interest (and Liquidated Damages, if any), and, to
the extent that payment of such interest shall be legally enforceable, interest
on any overdue principal (and premium, if any) and on any overdue interest and
Liquidated Damages, at the rate provided by the Debentures, and, in addition
thereto, 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.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Debentures and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Debentures, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any other
obligor upon the Debentures), its property or its creditors, the Trustee shall
be entitled and empowered, by intervention in such proceeding or otherwise, to
take any and all actions authorized under the Trust Indenture Act in order to
have claims of the Holders and the Trustee allowed in any such proceeding.
In particular, the Trustee shall be authorized to collect and receive any
moneys or other property payable or deliverable on any such claims and to
distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official 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
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to the making of such payments directly to the Holders, to pay to the
Trustee any amount due 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 607.
No provision of this Indenture 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 Debentures
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Debentures.
All rights of action and claims under this Indenture or the Debentures may
be prosecuted and enforced by the Trustee without the possession of any of the
Debentures or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Debentures in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest (or Liquidated Damages, if any), upon presentation of the
Debentures and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and
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interest (and Liquidated Damages, if any) on the Debentures in respect
of which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due and
payable on such Debentures for principal (and premium, if any) and interest
(and Liquidated Damages, if any), respectively.
SECTION 507. Limitation on Suits.
No Holder of any Debenture shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Debentures shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Debentures;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
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SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Indenture, the Holder of any
Debenture shall have the right, which is absolute and unconditional, to receive
payment of the principal of (and premium, if any) and (subject to Section 307)
interest (and Liquidated Damages, if any) on such Debenture on the respective
Stated Maturities expressed in such Debenture (or, in the case of redemption,
on the Redemption Date or in the case of an Asset Sale Offer or Change of
Control Offer made by the Company and required to be accepted as to such
Debenture, on the Purchase Date) and to institute suit for the enforcement of
any such payment, and such rights shall not be impaired without the consent of
such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Holder, then and in every such case, subject to any determination in
such proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Debentures in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
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SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Debenture to
exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Debentures shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or with
this Indenture, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount of
the Outstanding Debentures may on behalf of the Holders of all the Debentures
waive any past Default hereunder and its consequences, except a default with
respect to any provision requiring a supermajority to amend, which default may
only be waived by such a supermajority, except a Default
(1) in the payment of the principal of (or premium, if any) or
interest (or Liquidated Damages, if any) on any Debenture (including any
Debenture which is required to have been purchased pursuant to an Asset
Sale Offer or Change of Control Offer which has been made by the
Company), or
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(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Debenture affected.
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 514. 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, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit
to file an undertaking to pay the costs of such suit, and may assess costs
against any such party litigant, in the manner and to the extent provided in
the Trust Indenture Act; provided, that neither this Section nor the Trust
Indenture Act shall be deemed to authorize any court to require such an
undertaking or to make such an assessment in any suit instituted by the
Company.
SECTION 515. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE SIX
The Trustee
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SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by the
Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection
to the Trustee shall be subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any Default hereunder, to the
extent it has knowledge of such Default, as and to the extent provided by the
Trust Indenture Act. The term "Default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party
or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company
Order and any resolution of the Board of Directors may be
sufficiently evidenced by a Board Resolution;
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(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its
part, rely upon an Officers' Certificate;
(d) 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 protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in
reliance thereon;
(e) 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 pursuant to this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of
the Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder.
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SECTION 604. Not Responsible for Recitals or
Issuance of Debentures.
The recitals contained herein and in the Debentures, except the Trustee's
certificates of authentication, shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Debentures. The Trustee shall not be accountable for the
use or application by the Company of the Debentures or the proceeds thereof.
SECTION 605. May Hold Debentures.
The Trustee, any Paying Agent, any Debenture Registrar or any other agent
of the Company, in its individual or any other capacity, may become the owner
or pledgee of Debentures and, subject to Sections 608 and 613, may otherwise
deal with the Company with the same rights it would have if it were not
Trustee, Paying Agent, Debenture Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under
no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered
by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an
express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in
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accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this trust,
including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance
of any of its powers or duties hereunder.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000 and a Corporate Trust
Office in the Borough of Manhattan, The City of New York. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
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SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written notice thereof
to the Company. If an instrument of acceptance by a successor Trustee shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of a
majority in principal amount of the Outstanding Debentures, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has
been a bona fide Holder of a Debenture for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the
Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or
of its property shall be appointed or any public officer shall
take charge or control of the Trustee or of its property
or affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Debenture for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
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(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee.
If, within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in principal amount of the Outstanding Debentures
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a bona fide Holder of a Debenture for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor Trustee to all Holders in the
manner provided in Section 106. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder. Upon request of any such successor Trustee, the Company
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all such rights, powers and trusts.
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No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Debentures shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Debentures so authenticated with the same
effect as if such successor Trustee had itself authenticated such Debentures.
SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Debentures), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular Record
Date, commencing July
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15, 2003, a list, in such form as the Trustee may reasonably require, of
the names and addresses of the Holders as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days prior
to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Debenture Registrar.
SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Debenture
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with respect
to their rights under this Indenture or under the Debentures and the
corresponding rights and duties of the Trustee, shall be provided by the Trust
Indenture Act.
(c) Every Holder of Debentures, by receiving and holding the same, agrees
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of any
disclosure of information as to the names and addresses of Holders made
pursuant to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
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(b) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which the
Debentures are listed, with the Commission and with the Company. The Company
will notify the Trustee when the Debentures are listed on any stock exchange.
SECTION 704. Reports by Company.
Whether or not the Company is subject to the reporting requirement of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee and to each Holder and to prospective purchasers of Debentures
identified to the Company by an Initial Purchaser within 15 days after it is or
would have been (if it were subject to such reporting obligations) required to
file such with the Commission, annual and quarterly financial statements
substantially equivalent to financial statements that would have been included
in reports filed with the Commission, if the Company were subject to the
requirements of Section 13 or 15(d) of the Exchange Act, including, with
respect to annual information only, a report thereon by the Company's certified
independent public accountants as such would be required in such reports to the
Commission, and, in each case, together with a management's discussion and
analysis of financial condition and results of operations which would be so
required and, unless the Commission will not accept such reports, file with the
Commission the annual, quarterly and other reports which it is or would have
been required to file with the Commission.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Limitation on Merger, Sale or Consolidation.
The Company shall not consolidate with or merge with or into another
Person or, directly or indirectly, sell, lease, convey or transfer all or
substantially all of its assets (computed on a consolidated basis), whether in
a single transaction or a series of related transactions, to another Person or
group of affiliated Persons or adopt a plan of liquidation, unless:
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(1) either (a) the Company is the continuing entity or (b) the
resulting, surviving or transferee entity or, in the case of a plan of
liquidation, the entity which receives the greatest value from such plan
of liquidation is a corporation organized under the laws of the United
States, any state thereof or the District of Columbia and expressly
assumes by supplemental indenture all of the obligations of the Company
in connection with the Debentures and this Indenture;
(2) no Default or Event of Default shall exist or shall occur
immediately after giving effect on a pro forma basis to such transaction;
(3) immediately after giving effect to such transaction on a pro
forma basis, the Consolidated Net Worth of the consolidated, resulting,
surviving or transferee entity or, in the case of a plan of liquidation,
the entity which receives the greatest value from such plan of
liquidation is at least equal to the Consolidated Net Worth of the
Company immediately prior to such transaction; and
(4) immediately after giving effect to such transaction on a pro
forma basis, the consolidated, resulting, surviving or transferee entity
or, in the case of a plan of liquidation, the entity which receives the
greatest value from such plan of liquidation would immediately thereafter
be permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Debt Incurrence Ratio set forth in Section 1008.
SECTION 802. Successor Substituted.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company or consummation of a plan of liquidation in
accordance with the foregoing, the successor corporation formed by such
consolidation or into which the Company is merged or to which such transfer is
made or, in the case of a plan of liquidation, the entity which receives the
greatest value from such plan of liquidation shall succeed to and (except in
the case of a lease) be substituted for, and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
corporation had been named therein as the Company, and (except in the case of a
lease) the Company shall be released from the
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obligations under the Debentures and the Indenture except with respect to any
obligations that arise from, or are related to, such transaction.
SECTION 803. Transfer of Subsidiary Assets.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise) of all or substantially all of the properties and assets of one or
more Subsidiaries, the Company's interest in which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company
herein and in the Debentures; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(3) to secure the Debentures pursuant to the requirements of Section
1011 or otherwise; or
(4) to comply with any requirements of the Commission in order to
effect and maintain the qualification of this Indenture under the Trust
Indenture Act; or
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(5) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the provisions
of this Indenture, provided such action pursuant to this clause (5) shall
not adversely affect the interests of the Holders in any material
respect.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Debentures, by Act of said Holders
delivered to the Company and the Trustee, the Company, when authorized by a
Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of amending or supplementing this Indenture
or any supplemental indenture or modifying the rights of the Holders; provided,
however, that no such modification may, without the consent of Holders of at
least 66 2/3% in aggregate principal amount of Debentures at the time
outstanding, modify the provisions (including the defined terms used therein)
of Section 1015 in a manner adverse to the Holders; and provided that no such
modification may, without the consent of each Holder thereby:
(1) change the Stated Maturity on any Debenture, or reduce the
principal amount thereof or modify the calculation on the Accreted Value
so as to reduce the amount of Accreted Value of the Debentures or the
rate of accretion on the Debentures, or reduce the rate (or extend the
time for payment) of interest thereon or any premium payable upon the
redemption at the option of the Company thereof, or change the place of
payment where, or the coin or currency in which, any Debenture or any
premium or interest (or Liquidated Damages, if any) thereon is payable,
or impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case of
redemption at the option of the Company, on or after the Redemption
Date), or reduce the Change of Control Purchase Price or the Asset Sale
Offer Price of alter the provisions (including the defined terms used
therein) regarding the right of the Company to redeem
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the Debentures at its option in a manner adverse to the Holders, or
(2) reduce the percentage in principal amount of the Outstanding
Debentures, the consent of whose Holders is required for any such
amendment, supplemental indenture or waiver provided for in this
Indenture, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1019 except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Debenture affected
thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Debentures theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
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Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Debentures to Supplemental Indentures.
Debentures authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so
determine, new Debentures so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Debentures.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of (and premium, if
any) and any interest (and Liquidated Damages, if any) on the Debentures in
accordance with the terms of the Debentures and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Debentures may be presented or surrendered for
payment, where Debentures may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Debentures and this Indenture may be served. The Company will give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain
any such required office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and demands may be
made or served at the Corporate Trust
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Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other offices
or agencies (in or outside the Borough of Manhattan, The City of New York)
where the Debentures may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company will give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
SECTION 1003. Money for Debenture Payments to be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will, on
or before each due date of the principal of (and premium, if any) or interest
(and Liquidated Damages, if any) on any of the Debentures, segregate and hold
in trust for the benefit of the Persons entitled thereto a sum sufficient to
pay the principal (and premium, if any) or interest (and Liquidated Damages, if
any) so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will, prior
to each due date of the principal of (and premium, if any) or interest (and
Liquidated Damages, if any) on any Debentures, deposit with a Paying Agent a
sum sufficient to pay the principal (and premium, if any) or interest (and
Liquidated Damages, if any) so becoming due, such sum to be held in trust for
the benefit of the Persons entitled to such principal, premium, interest or
Liquidated Damages, and (unless such Paying Agent is the Trustee) the Company
will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the
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Trustee, subject to the provisions of this Section, that such Paying Agent
will:
(1) hold all sums held by it for the payment of the principal of
(and premium, if any) or interest (and Liquidated Damages, if any) on
Debentures in trust for the benefit of the Persons entitled thereto until
such sums shall be paid to such Persons or otherwise disposed of as
herein provided;
(2) give the Trustee notice of any Default by the Company (or any
other obligor upon the Debentures) in the making of any payment of
principal (and premium, if any) or interest (and Liquidated Damages, if
any); and
(3) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of (and premium, if any)
or interest (and Liquidated Damages, if any) on any Debenture and remaining
unclaimed for two years after such principal (and premium, if any) or interest
has become due and payable shall be paid to the Company on Company Request, or
(if then held by the Company) shall be discharged from such trust; and the
Holder of such Debenture shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Company 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 Company cause to be published once, in a newspaper
published in the English language, customarily published on
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each Business Day and of general circulation in The City of New York, 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 publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
SECTION 1004. Existence.
Subject to Article Eight and Section 1013, the Company and its
Subsidiaries will do or cause to be done all things necessary to preserve and
keep in full force and effect their existence, rights (charter and statutory)
and franchises; provided, however, that the Company and its Subsidiaries shall
not be required to preserve any such right or franchise if the Board of
Directors in good faith shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company or its
Subsidiaries and that the loss thereof is not disadvantageous in any material
respect to the Holders.
SECTION 1005. Maintenance of Properties.
The Company will cause all properties used or useful in the conduct of its
business or the business of any Subsidiary of the Company to be maintained and
kept in good condition, repair and working order and supplied with all
necessary equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, as determined by the Board of Directors in good faith,
desirable in the conduct of its business or the business of any Subsidiary and
not disadvantageous in any material respect to the Holders.
SECTION 1006. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied
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or imposed upon the Company or any of its Subsidiaries or upon the income,
profits or property of the Company or any of its Subsidiaries, and (2) all
lawful claims for labor, materials and supplies which, if unpaid, might by law
become a lien upon the property of the Company or any of its Subsidiaries;
provided, however, that the Company shall not be required to pay or discharge
or cause to be paid or discharged any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings.
SECTION 1007. Maintenance of Insurance.
The Company shall, and shall cause its Subsidiaries to, keep at all times
all of their properties which are of an insurable nature insured against loss
or damage with insurers believed by the Company to be responsible to the extent
that property of similar character is usually so insured by corporations
similarly situated and owning like properties in accordance with good business
practice.
SECTION 1008. Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, issue, assume, guaranty, incur, become directly or
indirectly liable with respect to (including as a result of an Acquisition) or
otherwise become responsible for, contingently or otherwise (individually and
collectively, to "incur" or, as appropriate an "incurrence"), any
Indebtedness(including Acquired Indebtedness) other than Permitted
Indebtedness.
Notwithstanding the foregoing, if (i) no Default or Event of Default
shall have occurred and be continuing at the time of, or would occur after
giving effect on a pro forma basis to, such incurrence of Indebtedness or
Disqualified Capital Stock and (ii) on the date of such incurrence (the
"Incurrence Date"), after giving effect on a pro forma basis to such incurrence
of such Indebtedness or Disqualified Capital Stock and the use of proceeds
thereof, the Leverage Ratio shall not exceed 7.5 to 1(the "Debt Incurrence
Ratio"), then the Company and its Subsidiaries may incur such Indebtedness or
Disqualified Capital Stock.
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In addition, the foregoing limitations will not apply to:
(a) the incurrence by the Company or any of its Subsidiaries of
Purchase Money Indebtedness on or after the Issue Date, provided, that
(i) the aggregate principal amount of such Indebtedness incurred on or
after the Issue Date and outstanding at any time pursuant to this
paragraph (a) (including any Indebtedness issued to refinance, replace or
refund such Indebtedness) shall not exceed $15.0 million, and (ii) in
each case, such Indebtedness as originally incurred shall not constitute
more than 100% of the cost (determined in accordance with GAAP) to the
Company or such Subsidiary, as applicable, of the property so purchased
or leased;
(b) the incurrence by the Company or any Subsidiary of Indebtedness
in an aggregate principal amount outstanding at any time (including
Indebtedness incurred to refinance, replace, or refund such Indebtedness)
of up to $10.0 million (which may be incurred pursuant to the Credit
Agreement); and
(c) the incurrence by the Company or any Subsidiary of Indebtedness
pursuant to the Credit Agreement up to an aggregate principal amount
outstanding at any time (including any Indebtedness incurred to
refinance, replace or refund such Indebtedness) of $175.0 million, minus
the amount of any such Indebtedness retired with the Net Cash Proceeds
from any Asset Sale or assumed by a transferee in an Asset Sale.
Indebtedness or Disqualified Capital Stock of any Person which is
outstanding at the time such Person becomes a Subsidiary of the Company
(including upon designation of any subsidiary or other Person as a Subsidiary)
or is merged with or into or consolidated with the Company or a Subsidiary of
the Company shall be deemed to have been incurred at the time such Person
becomes such a Subsidiary of the Company or is merged with or into or
consolidated with the Company or a Subsidiary of the Company, as applicable.
Notwithstanding anything to the contrary contained in this Indenture, the
Company shall not, and shall not permit any of its Subsidiaries to, incur any
Indebtedness
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that is contractually subordinate to any other Indebtedness of the Company
unless such Indebtedness is at least as subordinate to the Debentures.
SECTION 1009. Limitation on Restricted Payments.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, make any Restricted Payment if, after giving effect to
such Restricted Payment on a pro forma basis:
(1) a Default or an Event of Default shall have occurred and be
continuing,
(2) The Company is not permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt Incurrence Ratio in Section
1008, or
(3) The aggregate amount of all Restricted Payments made by the
Company and its Subsidiaries, including after giving effect to such
proposed Restricted Payment, from and after the Issue Date, would exceed
the sum of:
(a) (i) Consolidated EBITDA of the Company for the
period (taken as one accounting period), commencing on the
first day of the first fiscal quarter commencing on or prior
to the Issue Date, to and including the last day of the
fiscal quarter ended immediately prior to the date of each
such calculation (or, in the event Consolidated EBITDA for
such period is a deficit, then minus of such deficit) less
(ii) 150% of Consolidated Fixed Charges for such period, plus
(b) the aggregate Net Cash Proceeds received by the Company from
the sale of the Company's Qualified Capital Stock (other than
in each case (i) to a Subsidiary of the Company, (ii) to the
extent applied in connection with a Qualified Exchange and
(iii) to the extent applied to repurchase Capital Stock
pursuant to clause (b) of the definition of Permitted
Payments) after the Issue Date.
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The provisions of the immediately preceding paragraph will not prohibit
or be violated by reason of (A) a Qualified Exchange; (B) the payment or making
of any Restricted Payment within 60 days after the date of declaration thereof
or the making of any binding commitment in respect thereof, if at said date of
declaration or commitment, such Restricted Payment would have complied with the
provisions contained in clauses (1), (2) and (3) of the immediately preceding
paragraph; and (C) Permitted Payments. The full amount of any Restricted
Payment made pursuant to the foregoing clause (B) (but not pursuant to clauses
(A) or (C)) of the immediately preceding sentence, however, will be deducted in
the calculation of the aggregate amount of Restricted Payments available to be
made referred to in clause (3) of the immediately preceding paragraph.
For purposes of this covenant, the amount of any Restricted Payment, if
other than in cash, shall be the fair market value thereof, as determined in
the good faith reasonable judgment of the Board of Directors of the Company.
SECTION 1010. Limitations on Dividends and Other Payment Restrictions Affecting
Subsidiaries.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, assume or suffer to exist any consensual
restriction on the ability of any Subsidiary of the Company to pay dividends or
make other distributions to or on behalf of, or to pay any obligation to or on
behalf of, or otherwise to transfer assets or property to or on behalf of, or
make or pay loans or advances to or on behalf of, the Company or any Subsidiary
of the Company, except:
(a) restrictions imposed by the Debentures or this Indenture or by
other Indebtedness of the Company ranking pari passu with the Debentures,
provided such restrictions are not materially more restrictive than those
imposed by this Indenture and the Debentures,
(b) restrictions imposed by applicable law,
(c) existing restrictions under Indebtedness outstanding on the
Issue Date,
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(d) restrictions under any Acquired Indebtedness not incurred in
violation of this Indenture or any agreement relating to any property,
asset, or business acquired by the Company or any of its Subsidiaries,
which restrictions in each case existed at the time of Acquisition, were
not put in place in connection with or in anticipation of such
Acquisition and are not applicable to any Person, other than the Person
acquired, or to any property, asset or business, other than the property,
assets and business so acquired,
(e) any such restriction or requirement imposed by Indebtedness
incurred under the Credit Agreement in accordance with this Indenture,
provided such restriction or requirement is not materially more
restrictive than that imposed by the Revolving Credit Facility as of the
Issue Date,
(f) restrictions with respect solely to a Subsidiary of the Company
imposed pursuant to a binding agreement which has been entered into for
the sale or disposition of all or substantially all of the Equity
Interests or assets of such Subsidiary, provided such restrictions apply
solely to the Equity Interests or assets of such Subsidiary which are
being sold,
(g) restrictions on transfer contained in Purchase Money
Indebtedness incurred pursuant to paragraph (a) of Section 1008, provided
such restrictions relate only to the transfer of the property acquired
with the proceeds of such Purchase Money Indebtedness, and
(h) in connection with and pursuant to permitted Refinancings,
replacements of restrictions imposed pursuant to clauses (a), (c), (d),
(e), or (g) of this section that are not materially more restrictive than
those being replaced and do not apply to any other Person or assets than
those that would have been covered by the restrictions in the
Indebtedness so refinanced.
Notwithstanding the foregoing, neither (a) customary provisions
restricting subletting or assignment of any lease entered into in the ordinary
course of business, consistent with industry practice, nor (b) Liens permitted
under the terms of this Indenture shall in and of themselves be considered a
restriction on the ability of the applicable
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Subsidiary to transfer such agreement or assets, as the case may be.
SECTION 1011. Limitation on Liens Securing Indebtedness.
The Company will not, and will not permit any of its Subsidiaries to,
create, incur, assume or suffer to exist, to secure any Indebtedness, any Lien
of any kind, other than Permitted Liens, upon any of its respective assets now
owned or acquired on or after the date of this Indenture or upon any income or
profits therefrom unless the Company provides, and causes its Subsidiaries to
provide, concurrently therewith or immediately thereafter, that the Debentures
are equally and ratably so secured for so long as such Indebtedness so secured
remains outstanding; provided that, if such Indebtedness is Subordinated
Indebtedness, the Lien securing such Subordinated Indebtedness shall be
subordinate and junior to the Lien securing the Debentures with the same
relative priority as such Subordinated Indebtedness shall have with respect to
the Debentures.
SECTION 1012. Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly enter into any contract, agreement, arrangement or
transaction with any Affiliate (an "Affiliate Transaction"), or any series of
related Affiliate Transactions (other than Exempted Affiliate Transactions),
unless the terms of such Affiliate Transaction are fair and reasonable to the
Company or such Subsidiary, as the case may be, and are at least as favorable
as the terms which could reasonably be expected to be obtained by the Company
or such Subsidiary, as the case may be, in a comparable transaction made on an
arm's length basis with Persons who are not Affiliates.
Without limiting the foregoing, in connection with any Affiliate
Transaction or series of related Affiliate Transactions (other than Exempted
Affiliate Transactions) (1) involving consideration to either party in excess
of $1.5 million, the Company must deliver an Officers' Certificate to the
Trustee, stating that the terms of such Affiliate Transaction are fair and
reasonable to the Company, and no less favorable to the Company than could
reasonably be expected to have been obtained in an arm's length transaction
with a non-Affiliate, and (2) involving
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consideration to either party in excess of $7.5 million, the Company must also,
prior to the consummation thereof, obtain a favorable written opinion as to
the fairness of such transaction to the Company from a financial point of view
from an independent investment banking firm of national reputation or, if
pertaining to a matter for which such investment banking firms do not
customarily render such opinions, an appraisal or valuation firm of national
reputation; provided, that this sentence shall not apply to the sale or
purchase of products or services by the Company or its Subsidiaries to or from
any Affiliate of LGP or any Related Party thereof, which sale or purchase is in
the ordinary course of business and in accordance with industry practice.
SECTION 1013. Limitation on Sale of Assets and Subsidiary Stock.
The Company shall not, and shall not permit any of its Subsidiaries to, in
one or a series of related transactions, convey, sell, transfer, assign or
otherwise dispose of, directly or indirectly, any of its property, business or
assets (other than cash or Cash Equivalents), including by merger or
consolidation, and including any sale or other transfer or issuance of any
Equity Interests (other than directors qualifying shares) of any Subsidiary of
the Company, whether by the Company or a Subsidiary of the Company, and
including (except as provided in clause (vi) of the third paragraph of this
section) any Sale and Leaseback Transaction (any of the foregoing, an "Asset
Sale"), unless:
(1) (a) within 360 days after the date of such Asset
Sale, the Net Cash Proceeds therefrom (the "Asset Sale Offer
Amount") are applied to the optional redemption of the
Debentures in accordance with the terms of this Indenture and
other Indebtedness of the Company ranking on a parity with
the Debentures from time to time outstanding with similar
provisions requiring the Company to make an offer to purchase
or redeem such Indebtedness with the proceeds of asset sales,
pro rata in proportion to the respective principal amounts
(or accreted values in the case of Indebtedness issued with
an original issue discount) of the Debentures and such other
Indebtedness then outstanding or to the repurchase of the
Debentures and such other Indebtedness pursuant to a cash
offer (subject only to conditions required by applicable law,
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if any, pro rata in proportion to the respective principal
amounts or accreted values in the case of Indebtedness issued
with an original issue discount) of the Debentures and such
other Indebtedness then outstanding) (the "Asset Sale Offer")
at a purchase price of 100% of the principal amount thereof
(or the Accreted Value thereof, in the case of Indebtedness
issued with an original issue discount) (the "Asset Sale
Offer Price") together with accrued and unpaid interest and
Liquidated Damages, if any, to the date of payment, made with
in 360 days of such Asset Sale, or
(b) within 360 days following such Asset Sale, the
Asset Sale Offer Amount is used (i) to make one or more
Acquisitions or invested in assets and property (other than
notes, bonds, obligations and securities) which in the good
faith reasonable judgment of the Board of Directors of the
Company will constitute or be a part of a Related Business of
the Company or such Subsidiary (if it continues to be a
Subsidiary) immediately following such transaction or (ii) to
retire permanently Indebtedness incurred under the Credit
Agreement pursuant to paragraph (c) of Section 1008
(including that in the case of a revolver or similar
arrangement that makes credit available, such commitment is
so permanently reduced by such amount), the Principal
Subsidiary Notes or other Indebtedness ranking on a parity
with either of the foregoing Indebtedness or other
Indebtedness incurred pursuant to paragraph (b) of Section
1008,
(2) at least 75% of the consideration for such Asset
Sale or series of related Asset Sales consists of cash or
Cash Equivalents, provided that (x) the amount of any
liabilities (as shown on the Company's most recent
consolidated balance sheet) of the Company or any Subsidiary
(other than Subordinated Indebtedness) that are assumed by
the transferee in such Asset Sale (provided that the Company
and its Subsidiaries are released from all obligations in
respect thereof) and (y) any notes or other obligations
received by the Company or any such Subsidiary from such
transferee that are promptly (but in no event more than 90
days after receipt) converted by the Company or such
Subsidiary into cash or Cash Equivalents (to the extent of
the cash or Cash Equivalents, as the case may be, received),
shall be deemed to be cash or Cash Equivalents, as the case
may be, for purposes of this
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provision, and such cash and Cash Equivalents shall be deemed
to be Net Cash Proceeds received from the Asset Sale of the
related property sold for such notes or other obligations,
for purposes of this covenant, and, provided, further, this
clause (2) shall not apply to the sale or disposition of
assets as a result of a foreclosure (or a secured party
taking ownership of such assets in lieu of foreclosure) or as
a result of an involuntary proceeding in which the Company
cannot, directly or through its Subsidiaries, direct the type
of proceeds received, and
(3) with respect to any Asset Sale or series of related
Asset Sales, the Net Cash Proceeds of which exceed $2.0
million, the Board of Directors of the Company determines in
good faith that the Company or such Subsidiary, as applicable,
receives fair market value for such Asset Sale.
An acquisition of Debentures pursuant to an Asset Sale Offer may be
deferred until the accumulated Net Cash Proceeds from Asset Sales not applied to
the uses set forth in clause (1)(b) above (the "Excess Proceeds") exceeds $10.0
million and that each Asset Sale Offer shall remain open for 20 Business Days
following its commencement (the "Asset Sale Offer Period"). Upon expiration of
the Asset Sale Offer Period, the Company shall apply the Asset Sale Offer Amount
plus an amount equal to accrued and unpaid interest and Liquidated Damages, if
any, to the purchase of all Indebtedness properly tendered (on a pro rata basis
if the Asset Sale Offer Amount is insufficient to purchase all Indebtedness so
tendered) at the Asset Sale Offer Price (together with accrued interest and
Liquidated Damages, if any). To the extent that the aggregate amount of
Indebtedness tendered pursuant to an Asset Sale Offer is less than the Asset
Sale Offer Amount, the Company may use any remaining Net Cash Proceeds for
general corporate purposes as otherwise permitted by the Indenture and
following each Asset Sale Offer the Excess Proceeds amount shall be reset to
zero.
Notwithstanding the foregoing provisions of this covenant, the following
transactions shall not be deemed Asset Sales:
(i) the Company and each of its Subsidiaries may convey, sell,
lease, transfer, assign or otherwise dispose of property in the ordinary
course of business;
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(ii) the Company and each of its Subsidiaries may (x) convey, sell,
lease, transfer, assign or otherwise dispose of assets pursuant to and in
accordance with the limitation on mergers, sales or consolidations
provisions in the Indenture, (y) make Restricted Payments permitted by
Section 1009 and (z) engage in Exempted Affiliate Transactions;
(iii) the Company and each of its Subsidiaries may convey, sell,
transfer, assign or otherwise dispose of assets or issue Capital Stock to
the Company or any of the Subsidiaries;
(iv) the Company and each of its Subsidiaries may sell or dispose of
damaged, worn out or other obsolete property in the ordinary course of
business so long as such property is no longer necessary for the proper
conduct of the business of the Company or such Subsidiary, as applicable;
(v) the Company and each of its Subsidiaries may exchange assets
held by the Company or a Subsidiary for assets held by any Person or
entity; provided that (i) the assets received by the Company or a
Subsidiary in any such exchange in the good faith reasonable judgment of
the Board of Directors of the Company will immediately constitute, be a
part of, or be used in, a Related Business, (ii) the Board of Directors
of the Company has determined that the terms of any exchange are fair and
reasonable, and (iii) any such exchange shall be deemed to be an Asset
Sale to the extent that the Company or any Subsidiary receive cash or
Cash Equivalents in such exchange;
(vi) the Company and each of its Subsidiaries may engage in Sale and
Leaseback Transactions with respect to property acquired after the Issue
Date (other than property acquired in exchange for or with the proceeds
from the sale or other disposition of property held by the Company or any
Subsidiary on the Issue Date);
(vii) the Company and each of its Subsidiaries may liquidate Cash
Equivalents in the ordinary course of business;
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(viii) the Company and each of its Subsidiaries may create or assume
Liens (or permit any foreclosure thereon) not prohibited by the
Indenture;
(ix) the Company and each of its Subsidiaries may surrender or waive
contract rights or the settlement, release or surrender of contract, tort
or other claims of any kind; and
(x) the Company and its Subsidiaries, collectively, may convey,
sell, transfer, assign or otherwise dispose of assets having an aggregate
fair market value not exceeding $2.0 million in any fiscal year.
All Net Cash Proceeds from an Event of Loss (other than the proceeds of
any business interruption insurance) shall be invested or otherwise used as
provided in clause (1) of the first paragraph of this Section, all within 18
months from the occurrence of such Event of Loss.
Any Asset Sale Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable Federal and state
securities laws and any provisions of the Indenture which conflict with such
laws shall be deemed to be superseded by the provisions of such laws.
If the payment date in connection with an Asset Sale Offer hereunder is
on or after an interest payment Record Date and on or before the associated
Interest Payment Date, any accrued and unpaid interest (and Liquidated Damages,
if any, due on such Interest Payment Date) will be paid to the Person in whose
name a Debenture is registered at the close of business on such Record Date, and
such interest (and Liquidated Damages, if applicable) will not be payable to
Holders who tender Debentures pursuant to such Asset Sale Offer.
The Company and the Trustee shall perform their respective obligations
specified in the Asset Sale Offer. On or prior to the Purchase Date, the
Company shall (i) accept for payment (on a pro rata basis, if necessary)
Debentures or portions thereof tendered pursuant to the Offer, (ii) deposit with
the paying agent (or, if the Company is acting as its own paying agent,
segregate and hold in trust as provided in Section 1003) money sufficient
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to pay the purchase price of all Debentures or portions thereof so accepted and
(iii) deliver or cause to be delivered to the Trustee all Debentures so
accepted together with an Officers' Certificate stating the Debentures or
portions thereof accepted for payment by the Company. The paying agent (or the
Company, if so acting) shall promptly mail or deliver to Holders of Debentures
so accepted payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail or deliver to such Holders a new Debenture
equal in principal amount to any unpurchased portion of the Debenture
surrendered. Any Debenture not accepted for payment shall be promptly mailed or
delivered by the Company to the Holder thereof.
SECTION 1014. Limitation on Issuances and Sales of
Capital Stock of Wholly Owned Subsidiaries.
The Company will not sell, and its Subsidiaries will not issue or sell,
any shares of Capital Stock (other than directors qualifying shares) of any
Subsidiary of the Company to any Person other than the Company or a wholly
owned Subsidiary of the Company, except for shares of common stock with no
preferences or special rights or privileges and with no redemption or
prepayment provisions. Notwithstanding the foregoing, (a) the Company and its
Subsidiaries may consummate an Asset Sale of all of the Capital Stock owned by
the Company and its Subsidiaries of any Subsidiary and (b) the Company or any
Subsidiary may pledge, hypothecate or otherwise grant a Lien on any Capital
Stock of any Subsidiary to the extent not prohibited under Section 1011.
SECTION 1015. Repurchase of Debentures at the Option of the Holder Upon a
Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of
Debentures will have the right, at such Holder's option, pursuant to an offer
(subject only to conditions required by applicable law, if any) by the Company
(the "Change of Control Offer"), to require the Company to repurchase all or any
part of such Holder's Debentures (provided, that the principal amount of such
Debentures must be $1,000 or an integral multiple thereof) on a date (the
"Change of Control Purchase Date") that is no later than 45 days after the
occurrence of such Change of Control, at a cash price equal to 101% of the
Accreted Value thereof plus accrued and unpaid Liquidated Damages, if any, to
the Change
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of Control Purchase Date in the case of any such purchase prior to February 1,
2003, or 101% of the principal amount at Maturity thereof plus
accrued and unpaid interest and Liquidated Damages, if any, to the Change of
Control Purchase Date in the case of any such purchase on or after February 1,
2003 (the "Change of Control Purchase Price"). The Change of Control Offer
shall be made within 15 business days following a Change of Control and shall
remain open for 20 Business Days following its commencement (the "Change of
Control Offer Period"). Upon expiration of the Change of Control Offer Period,
the Company promptly shall purchase all Debentures properly tendered in response
to the Change of Control Offer.
(b) As used herein, a "Change of Control" means:
(i) any merger or consolidation of the Company with or into any
Person or any sale, transfer or other conveyance, whether direct or
indirect, of all or substantially all of the assets of the Company on a
consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction(s),
any "Person" or "group" (as such terms are used for purposes of Sections
13(d) and 14(d) of the Exchange Act, whether or not applicable), other
than any Excluded Person or Excluded Persons, is or becomes the
Beneficial Owner, directly or indirectly, of more than 50% of the total
voting power in the aggregate normally entitled to vote in the election
of directors, managers or trustees, as applicable, of the transferee(s)
or surviving entity or entities,
(ii) any "Person" or "group," other than any Excluded Person or
Excluded Persons, becomes the Beneficial Owner, directly or indirectly,
of more than 50% of the total voting power in the aggregate of all classes
of Capital Stock of the Company then outstanding normally entitled to vote
in elections of directors, or
(iii) during any period of 12 consecutive months after the Issue
Date, individuals who at the beginning of any such 12-month period
constituted the Board of Directors of the Company (together, in each case,
with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved
by LGP or a Related Party of LGP or by the Excluded Persons or by a vote
of a majority of the directors then still in office
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who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors of the
Company then in office, as applicable.
(c) On or before the Change of Control Purchase Date, the Company will
(i) accept for payment Debentures or portions thereof properly tendered pursuant
to the Change of Control Offer, (ii) deposit with the Paying Agent cash
sufficient to pay the Change of Control Purchase Price (together with accrued
and unpaid interest and Liquidated Damages, if any) of all Debentures so
tendered and (iii) deliver to the Trustee Debentures so accepted together with
an Officers' Certificate listing the Debentures or portions thereof being
purchased by the Company. The Paying Agent (or the Company, if so acting)
promptly will pay the Holders of Debentures so accepted an amount equal to the
Change of Control Purchase Price (together with accrued and unpaid interest and
Liquidated Damages, if any), and the Trustee promptly will authenticate and
deliver to such Holders a new Debenture equal in principal amount to any
unpurchased portion of the Debenture surrendered. Any Debentures not so
accepted will be delivered promptly by the Company to the Holder thereof. The
Company publicly will announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Purchase Date.
(d) Any Change of Control Offer will be made in compliance with all
applicable laws, rules and regulations, including, if applicable, Regulation
14E under the Exchange Act and the rules thereunder and all other applicable
Federal and state securities laws and any provisions of the Indenture which
conflict with such laws shall be deemed to be superseded by the provisions of
such laws.
(e) If the Change of Control Purchase Date hereunder is on or after an
interest payment Record Date and on or before the associated Interest Payment
Date, any accrued and unpaid interest (and Liquidated Damages, if any) due on
such Interest Payment Date will be paid to the Person in whose name a Debenture
is registered at the close of business on such Record Date, and such interest
(and Liquidated Damages, if applicable) will not be payable to Holders who
tender the Debentures pursuant to such Change of Control Offer.
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(f) Prior to making a Change of Control Offer pursuant to paragraph
(a), but in any event within 90 days following such Change of Control, the
Company will (i) obtain any required consents under the Credit Agreement and the
Principal Subsidiary Notes to permit the making of the Change of Control Offer
and the purchase of Debentures pursuant to this Section 1015, or (ii) repay all
or a portion of the outstanding Indebtedness of its Subsidiaries to the extent
necessary (including, if necessary, payment in full of such Indebtedness and
payment of any prepayment premiums, fees, expenses or penalties) to permit the
repurchase of the Debentures pursuant to this Section 1015 without such consent.
(g) The obligations with respect to Change of Control Offer shall be
satisfied to the extent actually performed by a third party in accordance with
the terms of this Indenture.
SECTION 1016. Investment Company.
The Company will not, and will not permit any of its Subsidiaries to, be
required to register as an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended), or otherwise become subject to
registration under the Investment Company Act.
SECTION 1017. Limitation on Lines of Business.
Neither the Company nor any of its Subsidiaries will directly or
indirectly engage to any substantial extent in any line or lines of business
activity other than that which, in the reasonable good faith judgment of the
Board of Directors of the Company, is a Related Business.
SECTION 1018. Statement by Officers as to
Default; Compliance Certificates.
(a) The Company will deliver to the Trustee, within 90 days after the
end of each fiscal year, and within 60 days after the end of each fiscal quarter
(other than the fourth fiscal quarter), of the Company ending after the date
hereof an Officers' Certificate, stating whether or not to the best knowledge of
the signers thereof the Company is in
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default in the performance and observance of any of the terms, provisions and
conditions of Section 801 or Sections 1004 to 1017, inclusive, and if the
Company shall be in default, specifying all such Defaults and the nature and
status thereof of which they may have knowledge.
(b) The Company shall deliver to the Trustee, as soon as possible and in
any event within 10 days after the Company becomes aware or should reasonably
become aware of the occurrence of a Default or an Event of Default, an
Officers' Certificate setting forth the details of such Default or Event of
Default, and the action which the Company proposes to take with respect
thereto.
(c) The Company shall deliver to the Trustee within 90 days after the end
of each fiscal year a written statement by the Company's independent public
accountants stating (A) that their audit examination has included a review of
the terms of this Indenture and the Debentures as they relate to accounting
matters, and (B) whether, in connection with their audit examination, any
Default has come to their attention and, if such a Default has come to their
attention, specifying the nature and period of the existence thereof.
SECTION 1019. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Section 801 and Sections 1004 to 1017, if
before the time for such compliance the Holders of at least a majority in
principal amount of the Outstanding Debentures shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance
with such covenant or condition, but no such waiver shall extend to or affect
such covenant or condition except to the extent so expressly waived, and, until
such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such covenant or condition shall remain
in full force and effect; provided, however, with respect to any provision
requiring a supermajority approval to waive, such provision may only be waived
by such a supermajority, and with respect to a covenant or provision which
cannot be modified or amended without the consent of the Holder of each
outstanding Debenture affected, such provision may only be waived by the consent
of each and every Holder of outstanding Debenture affected.
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ARTICLE ELEVEN
Redemption of Debentures
SECTION 1101. Right of Redemption.
The Company will not have the right to redeem any Debentures prior to
February 1, 2003 (other than out of the Net Cash Proceeds of a Public Equity
Offering, as described below). The Debentures will be redeemable at the option
of the Company, in whole or in part, at any time on or after February 1, 2003,
at the Redemption Prices specified in the form of Debenture hereinbefore set
forth together with any applicable accrued interest and Liquidated Damages, if
any, thereon to the Redemption Date. At any time on or prior to February 1,
2001, the Company may redeem, on one or more occasions, up to an aggregate of
35% of the aggregate principal amount at Maturity of the Debentures originally
outstanding at a redemption price equal to 111.625% of the Accreted Value
thereof, together with accrued and unpaid Liquidated Damages, if any, to the
date of redemption, with cash from the Net Cash Proceeds to the Company of one
or more Public Equity Offerings; provided, that at least 65% of the aggregate
principal amount of the Debentures originally outstanding remain outstanding
immediately after the occurrence of each such redemption; provided, further,
that such notice of redemption shall be sent within 30 days after the date of
closing of any such Public Equity Offering, and such redemption shall occur
within 60 days after the date such notice is sent.
SECTION 1102. Applicability of Article.
Redemption of Debentures at the election of the Company, as permitted by
any provision of this Indenture, shall be made in accordance with such
provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Debentures pursuant to Section
1101 shall be evidenced by a Board Resolution. In case of any redemption at
the election of the Company of less than all the Debentures, the Company shall,
at least 30 days prior to the Redemption Date fixed by
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the Company (unless a shorter notice shall be satisfactory to the Trustee),
notify the Trustee of such Redemption Date and of the principal amount of
Debentures to be redeemed.
SECTION 1104. Selection by Trustee of Debentures to Be
Redeemed.
If less than all the Debentures are to be redeemed, the particular
Debentures to be redeemed shall be selected not more than 30 days prior to the
Redemption Date by the Trustee, from the Outstanding Debentures not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $1,000 or any integral multiple thereof) of the principal amount of
Debentures of a denomination larger than $1,000.
The Trustee shall promptly notify the Company and each Debenture Registrar
in writing of the Debentures selected for redemption and, in the case of any
Debentures selected for partial redemption, the principal amount thereof to be
redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Debentures shall relate, in the
case of any Debentures redeemed or to be redeemed only in part, to the portion
of the principal amount of such Debentures which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Debentures to be redeemed, at his address appearing in the
Debenture Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Debentures are to be redeemed,
the identification (and, in the case
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of partial redemption, the principal amounts) of the particular Debentures
to be redeemed, and in the case of partial redemption, a statement as to
the effect that upon surrender of such Debentures, a new Debenture in a
principal amount equal to the unredeemed portion thereof will be issued,
(4) that on the Redemption Date the Redemption Price will become
due and payable upon each such Debenture to be redeemed, and
(5) the place or places where such Debentures are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Debentures to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company if the Company gives
notice to the Trustee at least 45 days prior to the Redemption Date.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the Trustee
or with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1003) an amount of money
sufficient to pay the Redemption Price of, and any applicable accrued interest
and Liquidated Damages on, all the Debentures which are to be redeemed on that
date.
SECTION 1107. Debentures Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Debentures so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price any applicable
accrued interest) such Debentures shall not bear interest. Upon surrender of
any such Debenture for redemption in accordance with said notice, such
Debenture shall be paid by the Company at the Redemption Price, together with
any applicable accrued interest and Liquidated Damages to the Redemption Date;
provided, however, that installments of interest whose Interest Payment Date is
on or prior to the Redemption Date shall be payable to the Holders of such
Debentures, or one or more Predecessor Debentures,
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registered as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 307.
If any Debenture called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate provided by the Debenture.
SECTION 1108. Debentures Redeemed in Part.
Any Debenture which is to be redeemed only in part shall be surrendered at
an office or agency of the Company designated for that purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Debenture without service
charge, a new Debenture or Debentures, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Debenture so
surrendered.
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. Company's Option to Effect Defeasance or
Covenant Defeasance.
The Company may, at its option, elect to have its obligations discharged
with respect to the Outstanding Debentures upon compliance with the conditions
set forth below in this Article Twelve.
SECTION 1202. Defeasance and Discharge.
Upon the Company's exercise of the option provided in Section 1201
applicable to this Section, the Company shall be deemed to have paid and
discharged the entire indebtedness represented, and this Indenture shall cease
to be of further effect as to all outstanding Debentures ("Legal Defeasance"),
except as to(i) rights of Holders to receive
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payments in respect of the principal of, premium, if any, and interest (and
Liquidated Damages, if any) on such Debentures when such payments are due from
the trust funds; (ii) the Company's obligations with respect to such Debentures
concerning issuing temporary Debentures, registration of Debentures, mutilated,
destroyed, lost or stolen Debentures, and the maintenance of an office or agency
for payment and money for security payments held in trust; (iii) the rights,
powers, trust, duties, and immunities of the Trustee, and the Company's
obligations in connection therewith; and (iv) the Legal Defeasance provisions of
this Article Twelve, all of which shall survive until otherwise terminated or
discharged hereunder. Subject to compliance with this Article Twelve, the
Company may exercise its option under this Section 1202 notwithstanding the
prior exercise of its option under Section 1203.
SECTION 1203. Covenant Defeasance.
Upon the Company's exercise of the option provided in Section 1201
applicable to this Section, the Company may, at its option and at any time,
elect to have the obligations of the Company released with respect to its (i)
obligations under Sections 1005 through 1017, inclusive, and clauses (3) and
(4) of Section 801 and (ii) the occurrence of an event specified in Sections
501(3), (with respect to any of Sections 1005 through 1017, inclusive), 501(6)
and 501(7) shall not be deemed to be an Event of Default on and after the date
the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"). For this purpose, such covenant defeasance means that the
Company may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such Section or clause, whether
directly or indirectly by reason of any reference elsewhere herein to any such
Section or clause or by reason of any reference in any such Section or clause
to any other provision herein or in any other document, but the remainder of
this Indenture and such Debentures shall be unaffected thereby.
SECTION 1204. Conditions to Defeasance or
Covenant Defeasance.
The following shall be the conditions to application of either Section
1202 or Section 1203 to the then Outstanding Debentures:
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(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 609 who shall agree to comply with the provisions
of this Article Twelve applicable to it) as trust funds in trust for the
purpose of making the following payments, specifically pledged as security
for, and dedicated solely to, the benefit of the Holders of such
Debentures, (A) U.S. legal tender in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and interest
in respect thereof in accordance with their terms will provide, not later
than one day before the due date of any payment, money in an amount, or
(C) a combination thereof, sufficient, in the opinion of a nationally
recognized firm of independent public accountants or investment bankers
expressed in a written certification thereof delivered to the Trustee, to
pay and discharge, and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge, the principal of, premium, if
any, and interest (and Liquidated Damages, if any) on such Debentures on
the stated date for payment thereof or on the redemption date of such
principal or installment of principal of, premium, if any, or interest (or
Liquidated Damages, if any) on such Debentures. The Holders of Debentures
must have a valid, perfected, exclusive security interest in such trust.
For this purpose, "U.S. Government Obligations" means securities that are
(x) direct obligations of the United States of America for the payment of
which its full faith and credit is pledged or (y) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of
the United States of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act of
1933, as amended) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such
U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt, provided that (except as required by
law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount
received by the custodian in respect of the
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U.S. Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such depository
receipt.
(2) In the case of an election of Legal Defeasance under Section
1202, before the date that is one year prior to the Stated Maturity, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States stating that (x) the Company has received from, or there
has been published by the Internal Revenue Service, a ruling or (y) since
the date of this Indenture there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of the Outstanding
Debentures will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit, defeasance and discharge and will
be subject to Federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred.
(3) In the case of an election of Covenant Defeasance under Section
1203, before the date that is one year prior to the Stated Maturity, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States, reasonably acceptable to such Trustee, to the effect that
the Holders of the Outstanding Debentures will not recognize income, gain
or loss for Federal income tax purposes as a result of such deposit and
Covenant Defeasance and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would have been the
case if such deposit and covenant defeasance had not occurred.
(4) The Company shall have delivered to the Trustee an Officer's
Certificate to the effect that the Debentures, if then listed on any
Debentures exchange, will not be delisted as a result of such deposit.
(5) Such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest as defined in Section 608 and for
purposes of the Trust Indenture Act with respect to any Debentures of the
Company.
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(6) No Default or Event of Default which with notice or lapse of
time or both would become an Event of Default shall have occurred and be
continuing on the date of such deposit.
(7) Such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a Default under, this Indenture
or any other material agreement or instrument to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound.
(8) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
interest of preferring the Holders of such Debentures over any other
creditors of the Company or with the intent of defeating, hindering, or
delaying or defrauding any other creditors of the Company or others.
(9) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the Legal Defeasance under
Section 1202 or the Covenant Defeasance under Section 1203 (as the case
may be) have been complied with.
(10) Such defeasance or covenant defeasance shall not result in the
trust arising from such deposit constituting an investment company as
defined in the Investment Company Act of 1940, as amended, or such trust
shall be qualified under such act or exempt from regulation thereunder.
SECTION 1205. Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee--collectively, for
purposes of this Section 1205, the "Trustee") pursuant to Section 1204 in
respect of the Debentures shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Debentures and this Indenture, to the
payment, either
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directly or through any Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the Holders of such Debentures,
of all sums due and to become due thereon in respect of principal (and premium,
if any) and interest, but such money need not be segregated from other funds
except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1204 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 Debentures.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 1204 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance.
SECTION 1206. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 1202 or 1203 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, or if a Default from a bankruptcy or insolvency event occurs
at any time during the period ending on the 91st day after the date of a
deposit by the Company hereunder, then the Company's obligations under this
Indenture and the Debentures shall be revived and reinstated as though no
deposit had occurred pursuant to this Article Twelve until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1202 or 1203; provided, however, that if the Company makes any payment
of principal of (and premium, if any) or interest (and Liquidated Damages, if
any) on any Debenture following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Debentures to
receive such payment from the money held by the Trustee or the Paying Agent.
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This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
LIBERTY GROUP PUBLISHING, INC.
By /s/ Kenneth L. Serota
______________________________
Name: Kenneth L. Serota
Title: President and Chief
Executive Officer
Attest:
/s/ Elizabeth M. Lyons
__________________________
Name: Elizabeth M. Lyons
Title: Assistant Secretary
STATE STREET BANK AND TRUST COMPANY
By /s/ Michael Hopkins
______________________________
Name: Michael Hopkins
Title: Vice President
Attest:
/s/ Susan C. Merker
___________________________
Name: Susan C. Merker
Title: Assistant Vice President
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STATE OF ILLINOIS ) ss.:
COUNTY Of COOK)
On the 26th day of January, 1998, before me personally came Kenneth L.
Serota, to me known, who, being by me duly sworn, did depose and say that he is
the President and Chief Executive Officer of Liberty Group Publishing, Inc., one
of the corporations described in and which executed the foregoing instrument,
and that he signed his name to the foregoing instrument in his authorized
capacity.
/s/ Shelia E. Pyburn
______________________________
STATE OF CONNECTICUT ) ss.:
COUNTY OF HARTFORD )
On the 23rd day of January, 1998, before me personally came Michael
Hopkins, to me known, who, being by me duly sworn, did depose and say that he is
Vice President of State Street Bank and Trust Company, one of the business
entities described in and which executed the foregoing instrument, and that he
signed his name to the foregoing instrument in his authorized capacity.
/s/ Dawn P. Heintz
______________________________
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Annex A
[FORM OF DEBENTURE]
Unless and until it is exchanged in whole or in part for Debentures in
definitive form, this Debenture may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. Unless this
certificate is presented by an authorized representative of The Depositary
Trust Company (55 Water Street, New York, New York)(the "Depositary"), to the
Company or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name
as requested by an authorized representative of the Depositary (and any payment
is made to Cede & Co. or such other entity as is requested by an authorized
representative of the Depositary), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein. (1)
FOR PURPOSES OF SECTIONS 1272, 1273 and 1275 OF THE UNITED STATES INTERNAL
REVENUE CODE OF 1986, AS AMENDED, AND PURSUANT TO SECTION 1.1275-3(b), THIS
DEBENTURE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT, THE ISSUE PRICE OF THIS
DEBENTURE IS 56.766% OF ITS PRINCIPAL AMOUNT, THE AMOUNT OF ORIGINAL ISSUE
DISCOUNT ON THIS DEBENTURE IS $1129.84 PER $1,000 OF STATED FACE AMOUNT, THE
ISSUE DATE IS JANUARY 27, 1998 AND THE YIELD TO MATURITY IS 11.625%.
THE DEBENTURES (OR THEIR PREDECESSORS) EVIDENCED HEREBY WERE 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
DEBENTURES EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE DEBENTURES 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. THE HOLDER OF THE DEBENTURES
EVIDENCED HEREBY
_____________________
(1) This paragraph should only be added if the Debenture is issued in global
form.
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AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH DEBENTURES MAY BE OFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (a) INSIDE THE UNITED STATES TO A
PERSON WHOM 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) OUTSIDE THE UNITED STATES TO A FOREIGN
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904
OF REGULATION S UNDER THE SECURITIES ACT, (c) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (d) TO THE COMPANY, (e)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR (f) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS) 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 DEBENTURES
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.(2)
THIS DEBENTURE IS A REGULATION S TEMPORARY GLOBAL DEBENTURE AS SPECIFIED
IN THE INDENTURE. EXCEPT IN THE CIRCUMSTANCES DESCRIBED IN SECTION 305 OF THE
INDENTURE, NO TRANSFER OR EXCHANGE OF AN INTEREST IN THIS REGULATION S
TEMPORARY GLOBAL DEBENTURE MAY BE MADE FOR AN INTEREST IN A REGULATION S
PERMANENT GLOBAL DEBENTURE OR A RULE 144A GLOBAL DEBENTURE DURING THE 40-DAY
RESTRICTED PERIOD.(3)
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND MAY
NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, UNLESS THIS DEBENTURE IS REGISTERED
UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
THEREOF IS AVAILABLE.(4)
LIBERTY GROUP PUBLISHING, INC.
__________________
(2) This paragraph should be included only for the Transfer Restricted
Debentures.
(3) This paragraph should be included only for Regulation S Temporary Global
Debentures.
(4) This paragraph should be included only for Regulation S Permanent Global
Debentures.
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LIBERTY GROUP PUBLISHING, INC.
11 5/8% SENIOR DISCOUNT DEBENTURES DUE 2009
CUSIP No. 530553AA4
No. $89,000,000
Liberty Group Publishing, Inc., a corporation duly organized and
existing under the laws of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to ____________________, or registered
assigns, the principal sum of eighty-nine million dollars on February 1, 2009,
and to pay interest thereon from February 1, 2003 or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually on February 1 and August 1 in each year, commencing August 1,
2003, at 11 5/8% until the principal hereof is paid or made available for
payment, and (to the extent that the payment of such interest shall be legally
enforceable) at the rate of 13 5/8% per annum on any overdue principal and
premium and on any overdue installment of interest and Liquidated Damages, if
any, until paid as specified on the reverse hereof. Until February 1, 2003, no
cash interest will accrue on the Debentures, but the Accreted Value will
increase (representing amortization of original issue discount) between the
Issue Date and February 1, 2003, on a semi-annual bond equivalent basis using a
360-day year compromised of twelve 30-day months, such that the Accreted Value
shall be equal to the full principal amount at maturity of the Debentures on
February 1, 2003.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Debenture (or one or more Predecessor Debentures) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the January 15 or July 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Debenture (or one or more Predecessor Debentures) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Debentures not less than
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10 days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Debentures may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.
Payment of the principal of (and premium, if any) and interest (and
Liquidated Damages, if any) on this Debenture will be made at the office or
agency of the Company maintained for that purpose in the Borough of Manhattan,
The City of New York, in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts; provided, however, that at the option of the Company payment of interest
may be made by check mailed to the address of the Person entitled thereto as
such address shall appear in the Debenture Register.
Reference is hereby made to the further provisions of this Debenture set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Debenture
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
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<PAGE> 124
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated:
LIBERTY GROUP PUBLISHING, INC.
By_______________________
Name:
Title:
Attest:
______________________________
Name:
Title:
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<PAGE> 125
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debentures referred to in the within-mentioned
Indenture.
Dated:
STATE STREET BANK AND TRUST COMPANY
as Trustee
By ________________________________
Authorized Officer
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<PAGE> 126
This [Rule 144A] [Regulation S Temporary] [Regulation S Permanent]
[Global] Debenture is one of a duly authorized issue of Debentures of the
Company designated as its 11 5/8% Senior Discount Debentures due 2009 (herein
called the "Debentures"), limited in aggregate principal amount at maturity to
$89,000,000, issued and to be issued under an Indenture, dated as of January 27,
1998 (herein called the "Indenture"), between the Company and State Street Bank
and Trust Company, as Trustee (herein called the "Trustee", which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Debentures and of the terms upon
which the Debentures are, and are to be, authenticated and delivered.
The Debentures are subject to redemption upon not less than 30 nor more
than 60 days' notice by mail, at any time on or after February 1, 2003, as a
whole or in part, at the election of the Company, at a Redemption Price which,
if during the twelve month period beginning February 1, 2003 is equal to
105.813% of the principal amount of this Debenture; if during the twelve month
period beginning February 1, 2004 is equal to 103.875% of the principal amount
of this Debenture; if during the twelve month period beginning February 1, 2005
is equal to 101.938% of the principal amount of this Debenture; and thereafter
is equal to 100% of the principal amount of this Debenture, in each case plus
interest thereon accruing from February 1, 2003 or the most recent Interest
Payment Date to which interest has been paid or duly provided for, at the rate
of 11 5/8% per annum, provided that interest installments whose Stated Maturity
is on or prior to such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at the close of
business on the relevant Record Dates referred to on the face hereof, all as
provided in the Indenture.
Notwithstanding the foregoing, at any time prior to February 1, 2001,
the Company may give notice of redemption, on one or more occasions, for up to
an aggregate of 35% of the aggregate principal amount at Maturity of this
Debenture at a Redemption Price equal to 111.625% of the Accreted Value of this
Debenture plus accrued and unpaid Liquidated Damages, if any, to the date of
redemption, with cash from the Net cash Proceeds to the Company of one or more
Public Equity Offerings; provided, that at least 65% of the aggregate
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<PAGE> 127
principal amount of the Debentures originally outstanding remain outstanding
immediately after the occurrence of each such redemption; provided, further,
that such notice of redemption shall be sent within 30 days after the date of
closing of any such Public Equity Offering, and such redemption shall occur
within 60 days after the date such notice is sent.
The Debentures do not have the benefit of any sinking fund obligations.
In the event of redemption or purchase pursuant to an Asset Sale Offer
or Change of Control Offer of this Debenture in part only, a new Debenture or
Debentures for the unredeemed portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, there may be
declared due and payable the Debentures, in the manner and with the effect
provided in the Indenture. Upon any acceleration of maturity of the Debentures,
all principal of and accrued interest and Liquidated Damages, if any, on (if on
or after February 1, 2003) or Accreted Value of and accrued Liquidated Damages,
if any, on (if prior to February 1, 2003) the Debentures shall be due and
payable immediately.
The Indenture provides that, subject to certain conditions, if (i)
certain Net Cash Proceeds are available to the Company as a result of Asset
Sales or (ii) a Change of Control occurs, the Company shall be required to make
an Asset Sale Offer or Change of Control Offer, respectively, for all of the
Debentures.
The Indenture contains provisions for defeasance at any time of (i) the
entire indebtedness of this Debenture or (ii) certain restrictive covenants and
Events of Default with respect to this Debenture, in each case upon compliance
with certain conditions set forth therein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Debentures under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Debentures at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified
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<PAGE> 128
percentages in aggregate principal amount of the Debentures at the time
Outstanding, on behalf of the Holders of all the Debentures, to waive
compliance by the Company with certain provisions of the Indenture and certain
past Defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Debenture shall be conclusive and binding upon
such Holder and upon all future Holders of this Debenture and of any Debenture
issued upon the registration of transfer hereof or in exchange herefor or in
lieu hereof, whether or not notation of such consent or waiver is made upon
this Debenture.
No reference herein to the Indenture and no provision of this Debenture
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest (and Liquidated Damages, if any) on this Debenture at the times, place
and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Debenture is registrable in the Debenture
Register, upon surrender of this Debenture for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York and at any other office or agency maintained by the Company for such
purpose, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Debenture Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon one
or more new Debentures, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Debentures are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Debentures are
exchangeable for a like aggregate principal amount of Debentures of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
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<PAGE> 129
Prior to due presentment of this Debenture for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Debenture is registered as the owner hereof for
all purposes, whether or not this Debenture be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
Accretion and interest on this Debenture shall be computed on the basis
of a 360-day year of twelve 30-day months.
No direct or indirect stockholder, employee, officer or director, as
such, past, present or future of the Company, the Subsidiaries or any successor
entity shall have any personal liability in connection with this Debenture
solely by reason of his or its status as such stockholder, employee, officer or
director. Each Holder by accepting this Debenture waives and releases all such
liability, acknowledges and consents to the transactions described under "The
Acquisition" in the Offering Memorandum and further acknowledges the waiver and
release are part of the consideration for the issuance of this Debenture.
All terms used in this Debenture which are defined in the Indenture
shall have the meanings assigned to them in the Indenture. In addition to the
rights provided to Holders of the Debentures under the Indenture, Holders of
Debentures shall have all the rights set forth in the Registration Rights
Agreement.(5)
The Indenture and this Debenture shall be governed by and construed in
accordance with the laws of the State of New York.
___________________
(5) This sentence should be included only for the Initial Debentures.
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<PAGE> 130
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Debenture purchased in its entirety by
the Company pursuant to Section 1013 or 1015 of the Indenture, check the box:
[ ]
If you want to elect to have only a part of this Debenture purchased by
the Company pursuant to Section 1013 or 1015 of the Indenture, state the
amount: $
Dated: Your Signature:____________________
(Sign exactly as name appears on the other side
of this Debenture)
Signature Guarantee:___________________________________
(Signature must be guaranteed by
a member firm of the New York Stock
Exchange or a commercial bank or
trust company)
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<PAGE> 131
SCHEDULE OF EXCHANGES(6)
The following exchanges relating to this Global Debenture have been made:
<TABLE>
<S> <C> <C> <C> <C>
Principal
Amount of Amount of Signature of
Amount of increase in this Global authorized
decrease in Principal Debenture officer of
Principal Amount of following Trustee or
Date of Amount of this this Global such decrease Debentures
Exchange Global Debenture Debenture (or increase) Custodian
_______________________________________________________________________________
</TABLE>
(6) This schedule should only be added if the Debenture is issued in global
form.
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<PAGE> 132
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
TRANSFER RESTRICTED DEBENTURES(7)
Re: 11 5/8% SENIOR DISCOUNT DEBENTURES DUE 2009 OF LIBERTY GROUP PUBLISHING,
INC.
This Certificate relates to $____ principal amount of Debentures held in
(check applicable space) _____ book-entry or _____ definitive form by
_________________ (the "Transferor").
The Transferor (check applicable box):
[ ] has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Debenture held by the Depositary a
Debenture or Debentures in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Debenture (or the portion thereof indicated above); or
[ ] has requested the Trustee by written order to exchange or register the
transfer of a Debenture or Debentures.
In connection with such request and in respect of each such Debenture,
the Transferor does hereby certify that Transferor is familiar with the
Indenture relating to the above-captioned Debentures and as provided in Section
305 of such Indenture, the transfer of this Debenture does not require
registration under the Securities Act (as defined below) because:
[ ] Such Debenture is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 305(a)(ii)(A) or Section 305(d)
(ii)(A) of the Indenture).
[ ] Such Debenture is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A promulgated under the Securities Act) that is
aware that any sale of Debentures to it will be made in reliance on Rule 144A
under the Securities Act and that is acquiring such Transfer Restricted
Debenture for its own account, or
________________________
(7) This Certificate shall be included only for Initial Debentures.
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<PAGE> 133
[ ] for the account of another such "qualified institutional buyer" (in
satisfaction of Section 305(a)(ii)(B) or Section 305(d)(ii)(B) of the
Indenture).
[ ] Such Debenture is being transferred pursuant to an exemption from
registration in accordance with Rule 144, or outside the United States in an
Offshore Transaction in compliance with Rule 904 under the Securities Act, or
pursuant to an effective registration statement under the Securities Act (in
satisfaction of Section 305(a)(ii)(C) or Section 305(d)(ii)(C) of the
Indenture).
[ ] Such Debenture is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act and
in accordance with applicable securities laws of the states of the United
States, other than as provided in the immediately preceding paragraph. An
Opinion of Counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate (in
satisfaction of Section 305(a)(ii)(D) or Section 305(d)(ii)(D) of the
Indenture).
______________________________
[INSERT NAME OF TRANSFEROR]
By:___________________________
Date:_____________________
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<PAGE> 134
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
DEBENTURES(8)
Re: 11 5/8% SENIOR DISCOUNT DEBENTURES DUE 2009 OF LIBERTY GROUP PUBLISHING,
INC.
This Certificate relates to $_____ principal amount of Debentures held
in (check applicable box) _____ book-entry or _____ definitive form by
___________ (the "Transferor").
The Transferor (check applicable box):
[ ] has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Debenture held by the Depositary a
Debenture or Debentures in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Debenture (or the portion thereof indicated above); or
[ ] has requested the Trustee by written order to exchange or register the
transfer of a Debenture or Debentures.
_____________________________
[INSERT NAME OF TRANSFEROR]
By:___________________________
Date:______________________
_________________________
(8) This certificate shall be included only for the Exchange Debentures.
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<PAGE> 135
Annex B
[FORM OF REGULATION S CERTIFICATE FOR HOLDER]
CERTIFICATE TO BE DELIVERED BY THE HOLDER UPON RECEIPT OF PAYMENT OF PRINCIPAL
OR INTEREST WITH RESPECT TO A REGULATION S TEMPORARY GLOBAL DEBENTURE OR THE
EXCHANGE OF A REGULATION S TEMPORARY GLOBAL DEBENTURE FOR REGULATION S
PERMANENT GLOBAL DEBENTURE
Re: 11 5/8% SENIOR DISCOUNT DEBENTURES DUE 2009 OF LIBERTY GROUP PUBLISHING,
INC.
The undersigned as the Holder of a beneficial interest in a Regulation S
Temporary Global Debenture is delivering this certificate concurrently
with(check one):
[ ] the receipt of a payment of interest or principal with respect to its
beneficial interest in the Regulation S Temporary Global Debenture; or
[ ] its written order to Euroclear or CEDEL, as the case may be, to
exchange its beneficial interest in the Regulation S Temporary Global
Debenture for beneficial interest in a Regulation S Permanent Global Debenture.
In connection with the above, the undersigned hereby certifies that:
[ ] the undersigned as the Holder of the beneficial interest in the
Regulation S Temporary Global Debenture is not a U.S. Person (as defined in
Section 305); or
[ ] the undersigned has purchased its interest in the Regulation S
Temporary Global Debenture in a transaction that is exempt from the registration
requirements under the Securities Act.
______________________________
[INSERT NAME OF HOLDER]
By:___________________________
Date:_____________________
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<PAGE> 136
[FORM OF REGULATION S CERTIFICATE FOR EUROCLEAR AND CEDEL]
CERTIFICATE TO BE DELIVERED UPON RECEIPT OF PAYMENT OF PRINCIPAL OR INTEREST
WITH RESPECT TO A REGULATION S TEMPORARY GLOBAL DEBENTURE OR THE EXCHANGE OF A
REGULATION S TEMPORARY GLOBAL DEBENTURE FOR REGULATION S PERMANENT GLOBAL
DEBENTURE
Re: 11 5/8% SENIOR DISCOUNT DEBENTURES DUE 2009 OF LIBERTY GROUP PUBLISHING,
INC.
The undersigned is delivering this certificate concurrently with(check
one):
[ ] the receipt of a payment of interest or principal with respect to a
Regulation S Temporary Global Debenture; or
[ ] the exchange of a Regulation S Temporary Global Debenture for a
Regulation S Permanent Global Debenture.
In connection with the above, the undersigned hereby certifies that:
[ ] None of the holders of beneficial interests in the Regulation S
Temporary Global Note is a U.S. Person (as defined in Section 305); or
[ ] Each of the holders of beneficial interests in the Regulation S
Temporary Global Note has purchased its interest in a transaction that is
exempt from the registration requirements under the Securities Act.
______________________________________
[MORGAN STANLEY TRUST COMPANY OF NEW
YORK, BRUSSELS OFFICE, AS OPERATOR OF
THE EUROCLEAR CLEARANCE SYSTEM]
[CEDEL BANK, SOCIETE ANONYME
By:___________________________
Date:_____________________
B-2
<PAGE> 1
EXHIBIT 4.2
LIBERTY GROUP PUBLISHING, INC.
CERTIFICATE OF DESIGNATIONS OF THE POWERS
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND OTHER SPECIAL RIGHTS OF
SERIES A 14 3/4% SENIOR REDEEMABLE EXCHANGEABLE
CUMULATIVE PREFERRED STOCK,
AND
SERIES B 10% JUNIOR REDEEMABLE CUMULATIVE PREFERRED STOCK,
AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
------------------------------------------------
Liberty Group Publishing, Inc. (the "Company"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, does
hereby certify that, pursuant to authority conferred upon the board of directors
of the Company (the "Board of Directors") or any committee of the Board of
Directors (the "Board Committee") by its Certificate of Incorporation (the
"Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, the Board of Directors,
by unanimous written consent dated as of January 22, 1998, duly approved and
adopted the following resolution (the "Resolution"):
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by its Certificate of Incorporation, the Board of Directors
does hereby create, authorize and provide for the issue of the following
series of Preferred Stock:
(i) Series A 14 3/4% Senior Redeemable Exchangeable Cumulative
Preferred Stock (the "Series A Senior Preferred Stock"), par value $0.01
per share, with a liquidation preference of $25 per share, consisting of
21,000,000 shares; and
(ii) Series B 10% Junior Redeemable Cumulative Preferred Stock
(the "Junior Preferred Stock"), par value $0.01 per share, with a
liquidation preference of $1,000 per share, consisting of 175,000
shares;
each of the foregoing series of preferred stock to have the
powers, designations and preferences, the relative,
participating, optional and other special rights and the
qualifications, limitations and restrictions thereof that are set
forth in the Certificate of Incorporation and in this Resolution
as follows:
<PAGE> 2
1. DESIGNATIONS OF THE COMPANY'S SERIES A 14 3/4% SENIOR REDEEMABLE
EXCHANGEABLE CUMULATIVE PREFERRED STOCK.
(a) Designations.
There is hereby created out of the authorized and unissued shares of
preferred stock of the Company a series of preferred stock designated as
the "Series A 14 3/4% Senior Redeemable Exchangeable Cumulative
Preferred Stock". The number of shares constituting such series shall be
21,000,000 shares of Senior Preferred Stock, consisting of an initial
issuance of 1,800,000 shares of Senior Preferred Stock plus additional
shares of Senior Preferred Stock which may be issued, including to pay
dividends on the Senior Preferred Stock if the Company elects to pay
dividends in additional shares of Senior Preferred Stock (in lieu of
cash). The liquidation preference of the Senior Preferred Stock shall be
$25 per share.
(b) Rank.
The Senior Preferred Stock shall, with respect to dividend distributions
and distributions upon the liquidation, winding up and dissolution of
the Company, rank senior to all classes of common stock of the Company,
the Junior Preferred Stock and to each other class of capital stock or
series of preferred stock hereafter created by the Board of Directors
the terms of which do not expressly provide that it ranks senior to or
on a parity with the Senior Preferred Stock as to dividend distributions
and distributions upon the liquidation, winding up and dissolution of
the Company (collectively referred to with the common stock and Junior
Preferred Stock of the Company as "Junior Securities"). The Senior
Preferred Stock shall, with respect to dividend distributions and
distributions upon the liquidation, winding up and dissolution of the
Company, rank on a parity with any class of capital stock or series of
preferred stock hereafter created which expressly provides that it ranks
on a parity with the Senior Preferred Stock as to dividend distributions
and distributions upon the liquidation, winding up and dissolution of
the Company ("Parity Securities"), provided that any such Parity
Securities that were not approved by the Holders of Senior Preferred
Stock in accordance with paragraph (f)(ii)(A) hereof shall be deemed to
be Junior Securities and not Parity Securities. The Senior Preferred
Stock shall, with respect to dividend distributions and distributions
upon the liquidation, winding up and dissolution of the Company, rank
junior to each class of capital stock or series of preferred stock
hereafter created which has been approved by the Holders of Senior
Preferred Stock in accordance with paragraph (f)(ii)(B) hereof and which
expressly provides that it ranks senior to the Senior Preferred Stock as
to dividend distributions or distributions upon the liquidation, winding
up and dissolution of the Company ("Senior Securities").
(c) Dividends.
(i) Beginning on the date of issuance of shares of the Senior
Preferred Stock, the Holders of the outstanding shares of Senior
Preferred Stock shall be entitled to receive,
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<PAGE> 3
when, as and if declared by the Board of Directors, out of funds legally
available therefor, distributions in the form of cash dividends on each
share of Senior Preferred Stock, at a rate per annum equal to 14 3/4% of
the liquidation preference per share of the Senior Preferred Stock,
payable quarterly. All dividends shall be cumulative, whether or not
earned or declared, on a daily basis from the Preferred Stock Issue Date
and shall be payable quarterly in arrears on each Dividend Payment Date,
commencing on May 1, 1998, provided that if any dividend payable on any
Dividend Payment Date is not declared and paid in full in cash on such
Dividend Payment Date, the amount payable as dividends on such Dividend
Payment Date that is not paid in cash on such Dividend Payment Date
shall be paid by the Company in additional fully paid and non-assessable
shares (including fractional shares, if applicable) of Senior Preferred
Stock having an aggregate liquidation preference equal to the amount of
such dividends (rounded to the nearest whole cent), it being understood
that dividends shall begin to accrue from such Dividend Payment Date on
such additional shares of Senior Preferred Stock whether such additional
shares of Senior Preferred Stock are issued on such date or any later
date or are never issued. The payment by the Company in such additional
shares of Senior Preferred Stock shall constitute full payment of such
dividend. Each distribution in the form of a dividend (whether in cash
or in additional shares of Senior Preferred Stock) shall be payable to
the Holders of Senior Preferred Stock of record as they appear on the
stock books of the Company on such record dates, not less than 10 nor
more than 45 days preceding the related Dividend Payment Date, as shall
be fixed by the Board of Directors. Dividends shall cease to accumulate
in respect of shares of the Senior Preferred Stock on the Exchange Date
or on the date of their earlier redemption unless the Company shall have
failed to issue the appropriate aggregate principal amount of Exchange
Debentures (as defined in paragraph (g)(i)(A) hereof) in respect of the
Senior Preferred Stock on the Exchange Date or shall have failed to pay
the relevant redemption price on the date fixed for redemption.
(ii) All dividends paid with respect to shares of the Senior
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to
the Holders thereof entitled thereto.
(iii) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of Directors
to declare, or the Company to pay or set apart for payment, any
dividends on shares of the Senior Preferred Stock at any time.
(iv) Dividends on account of arrears for any past Dividend
Period and dividends in connection with any optional redemption pursuant
to paragraph (e)(i) may be declared and paid at any time, without
reference to any regular Dividend Payment Date, to Holders of Senior
Preferred Stock of record on such date, not more than 45 days prior to
the payment thereof, as may be fixed by the Board of Directors.
(v) No full dividends shall be declared by the Board of
Directors or paid or funds set apart for payment of dividends by the
Company on any Parity Securities for any period unless full cumulative
dividends shall have been or contemporaneously are declared and paid in
full, or declared and (in the case of dividends payable in cash) a sum
in cash set apart
3
<PAGE> 4
sufficient for such payment, on the Senior Preferred Stock for all
Dividend Periods terminating on or prior to the date of payment of such
full dividends on such Parity Securities. If any dividends are not paid
in full, as aforesaid, upon the shares of the Senior Preferred Stock and
any other Parity Securities, all dividends declared upon shares of the
Senior Preferred Stock and any other Parity Securities shall be declared
pro rata based on the relative liquidation preference of the Senior
Preferred Stock and such Parity Securities. So long as any shares of the
Senior Preferred Stock are outstanding, the Company shall not make any
payment on account of, or set apart for payment money for a sinking or
other similar fund for, the purchase, redemption or other retirement of,
any of the Parity Securities or any warrants, rights, calls or options
exercisable for or convertible into any of the Parity Securities, and
shall not permit any corporation or other entity directly or indirectly
controlled by the Company to purchase or redeem any of the Parity
Securities or any such warrants, rights, calls or options unless full
dividends determined in accordance herewith on the Senior Preferred
Stock shall have been paid or contemporaneously are declared and paid in
full.
(vi) (A) Except as permitted by paragraph (m)(i)hereof,
Holders of shares of the Senior Preferred Stock shall be entitled
to receive the dividends provided for in paragraph (c)(i) hereof
in preference to and in priority over any dividends upon any of
the Junior Securities.
(B) So long as any shares of Senior Preferred Stock are
outstanding, and except as permitted by paragraph (m)(i) hereof,
the Company shall not (1) declare, pay or set apart for payment
any dividend on any of the Junior Securities or make any payment
on account of, or set apart for payment money for a sinking or
other similar fund for, the purchase, redemption or other
retirement of, any of the Junior Securities or any warrants,
rights, calls or options exercisable for or convertible into any
of the Junior Securities (other than the repurchase, redemption
or other acquisition or retirement for value of Junior Securities
(and any warrants, rights, calls or options exercisable for or
convertible into such Junior Securities) held by certain
employees of or consultants or advisors to the Company or any of
its Subsidiaries, which repurchase, redemption or other
acquisition or retirement shall have been approved by a majority
of the Board of Directors, provided that such Junior Securities
may only be repurchased, redeemed or otherwise acquired or
retired either in exchange for Junior Securities or upon the
termination, retirement, death or disability of such employee,
consultant or advisor), or (2) make any distribution in respect
thereof, either directly or indirectly, and whether in cash,
obligations or shares of the Company or other property (other
than distributions or dividends in Junior Securities to the
holders of Junior Securities), or (3) permit any corporation or
other entity directly or indirectly controlled by the Company to
purchase or redeem any of the Junior Securities or any such
warrants, rights, calls or options, unless in any such case full
cumulative dividends determined in accordance herewith have been
paid in full in cash on the Senior Preferred Stock (such payment
to include the redemption of all shares of Senior Preferred Stock
previously issued as payment
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<PAGE> 5
for dividends) and all other redemption or repayment obligations
in respect of the Senior Preferred Stock have been paid in full
in cash.
(vii) Dividends payable on shares of the Senior Preferred Stock
for any period less than a year shall be computed on the basis of a
360-day year of twelve 30-day months and the actual number of days
elapsed in the period for which payable. If any Dividend Payment Date
occurs on a day that is not a Business Day, any accrued dividends
otherwise payable on such Dividend Payment Date shall be paid on the
next succeeding Business Day.
(d) Liquidation Preference.
(i) Upon any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Company, the Holders of shares of
Senior Preferred Stock then outstanding shall be entitled to be paid,
out of the assets of the Company available for distribution to its
stockholders, $25 per share of Senior Preferred Stock plus an amount in
cash equal to accumulated and unpaid dividends thereon to the date fixed
for liquidation, dissolution or winding up (including an amount equal to
a prorated dividend for the period from the last Dividend Payment Date
to the date fixed for liquidation, dissolution or winding up) before any
payment shall be made or any assets distributed to the holders of any of
the Junior Securities, including, without limitation, common stock of
the Company. Except as provided in the preceding sentence, Holders of
shares of Senior Preferred Stock shall not be entitled to any
distribution in the event of liquidation, dissolution or winding up of
the affairs of the Company. If the assets of the Company are not
sufficient to pay in full the liquidation payments payable to the
Holders of outstanding shares of the Senior Preferred Stock and all
Parity Securities, then the holders of all such shares shall share
equally and ratably in such distribution of assets of the Company in
accordance with the amounts which would be payable on such distribution
if the amount to which the Holders of outstanding shares of Senior
Preferred Stock and the holders of outstanding shares of all Parity
Securities are entitled were paid in full.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities
or other consideration) of all or substantially all of the property or
assets of the Company nor the consolidation or merger of the Company
with or into one or more corporations or other entities shall be deemed
to be a liquidation, dissolution or winding up of the affairs of the
Company (unless such sale, conveyance, exchange or transfer is in
connection with a liquidation, dissolution or winding up of the business
of the Company).
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<PAGE> 6
(e) Redemption.
(i) Optional Redemption.
(A) The Company may (subject to contractual and other
restrictions with respect thereto, including without limitation,
restrictions imposed by the Credit Agreement and the Debenture
Indenture, and the legal availability of funds therefor), at the
option of the Company, redeem at any time or from time to time on
or after February 1, 1999, from any source of funds legally
available therefor, in whole or in part, in the manner provided
in paragraph (e)(iii) hereof, any or all of the shares of the
Senior Preferred Stock, at a redemption price equal to the
following percentages of the liquidation preference per share
plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends per share (including an amount
in cash equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Redemption Date to
the Redemption Date) (the "Optional Redemption Price"), in each
case beginning on February 1 of the year indicated:
1999 105%
2000 104%
2001 103%
2002 102%
2003 101%
2004 and thereafter 100%;
provided that no optional redemption pursuant to this paragraph
(e)(i)(A) shall be authorized or made at any time when the
Company is making or required to make within the next 30 days, or
purchasing shares of Senior Preferred Stock under a Change of
Control Offer in accordance with the provisions of paragraph (h)
hereof and provided, further, that no optional redemption of only
a portion of the then outstanding shares of Senior Preferred
Stock shall be authorized or made at any time when full
cumulative dividends on the Senior Preferred Stock for all past
Dividend Periods have not been declared and paid in full.
(B) In the event of a redemption pursuant to paragraph
(e)(i)(A) hereof of only a portion of the then outstanding shares
of the Senior Preferred Stock, the Company shall effect such
redemption as it determines, pro rata according to the number of
shares held by each Holder of Senior Preferred Stock or by lot,
as may be determined by the Company in its sole discretion.
(ii) Mandatory Redemption. On February 1, 2010, the Company
shall redeem, subject to contractual and other restrictions with respect
thereto, including without limitation, restrictions imposed by the
Credit Agreement and the Debenture Indenture, from any source of funds
legally available therefor, in the manner provided in paragraph (e)(iii)
hereof, all of the shares of the Senior Preferred Stock then outstanding
at a redemption price equal to 100% of the liquidation preference per
share, plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends per share (including an amount equal
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<PAGE> 7
to a prorated dividend for the period from the Dividend Payment Date
immediately prior to the Redemption Date to the Redemption Date) (the
"Mandatory Redemption Price").
(iii) Procedures for Redemption.
(A) At least 15 days and not more than 60 days prior to
the date fixed for any redemption of the Senior Preferred Stock,
written notice (the "Redemption Notice") shall be given by
first-class mail, postage prepaid, to each Holder of Senior
Preferred Stock of record on the record date fixed for such
redemption of the Senior Preferred Stock at such Holder's address
as the same appears on the stock register of the Company,
provided that no failure to give such notice nor any deficiency
therein shall affect the validity of the procedure for the
redemption of any shares of Senior Preferred Stock to be redeemed
except as to the Holder or Holders to whom the Company has failed
to give said notice or except as to the Holder or Holders whose
notice was defective. The Redemption Notice shall state: (1)
whether the redemption is pursuant to paragraph (e)(i) or (e)(ii)
hereof; (2) the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be; (3) whether all or less
than all the outstanding shares of the Senior Preferred Stock are
to be redeemed and the total number of shares of the Senior
Preferred Stock being redeemed; (4) the number of shares of
Senior Preferred Stock held, as of the appropriate record date,
by the Holder that the Company intends to redeem; (5) the date
fixed for redemption; (6) that the Holder is to surrender to the
Company, at the place or places where certificates for shares of
Senior Preferred Stock are to be surrendered for redemption, in
the manner and at the price designated, his certificate or
certificates representing the shares of Senior Preferred Stock to
be redeemed; and (7) that dividends on the shares of the Senior
Preferred Stock to be redeemed shall cease to accrue on such
Redemption Date unless the Company defaults in the payment of the
Optional Redemption Price or the Mandatory Redemption Price, as
the case may be.
(B) Each Holder of Senior Preferred Stock shall
surrender the certificate or certificates representing such
shares of Senior Preferred Stock to the Company, duly endorsed,
in the manner and at the place designated in the Redemption
Notice, and on the Redemption Date the full Optional Redemption
Price or Mandatory Redemption Price, as the case may be, for such
shares shall be payable in cash to the Person whose name appears
on such certificate or certificates as the owner thereof, and
each surrendered certificate shall be canceled and retired. In
the event that less than all of the shares represented by any
such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(C) Unless the Company defaults in the payment in full
of the applicable redemption price, dividends on the Senior
Preferred Stock called for redemption shall cease to accumulate
on the Redemption Date, and the Holders of such redemption shares
shall cease to have any further rights with respect thereto on
the
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<PAGE> 8
Redemption Date, other than the right to receive the Optional
Redemption Price or the Mandatory Redemption Price, as the case
may be, without interest.
(f) Voting Rights.
(i) The Holders of shares of the Senior Preferred Stock, except
as otherwise required under Delaware law or as set forth in paragraphs
(ii) and (iii) below, shall not be entitled or permitted to vote on any
matter required or permitted to be voted upon by the stockholders of the
Company.
(ii) (A) So long as any shares of the Senior Preferred Stock
are outstanding, the Company shall not authorize any class of
Parity Securities without the affirmative vote or consent of
Holders of at least a majority of the outstanding shares of
Senior Preferred Stock, voting or consenting, as the case may be,
separately as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting,
except that without the approval of Holders of Senior Preferred
Stock, the Company may authorize and issue shares of Parity
Securities in exchange for, or the proceeds of which are used to
redeem or repurchase, any or all shares of Senior Preferred Stock
then outstanding, provided that, in the case of Parity Securities
issued in exchange for, or the proceeds of which are used to
redeem or repurchase, less than all shares of Senior Preferred
Stock then outstanding, (1) the aggregate liquidation preference
of such Parity Securities shall not exceed the aggregate
liquidation preference of, premium and accrued and unpaid
dividends on, and expenses in connection with the refinancing of,
the Senior Preferred Stock so exchanged, redeemed or repurchased,
(2) such Parity Securities shall not be Disqualified Capital
Stock and (3) the Company may pay dividends on such Parity
Securities in the form of cash or such Parity Securities.
(B) So long as any shares of the Senior Preferred Stock
are outstanding, the Company shall not authorize any class of
Senior Securities without the affirmative vote or consent of
Holders of at least a majority of the outstanding shares of
Senior Preferred Stock, voting or consenting, as the case may be,
separately as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting.
(C) So long as any shares of the Senior Preferred Stock
are outstanding, the Company shall not amend this Section 1 so as
to affect adversely the specified rights, preferences, privileges
or voting rights of Holders of shares of Senior Preferred Stock
or to authorize the issuance of any additional shares of Senior
Preferred Stock (other than in payment of dividends on the Senior
Preferred Stock) without the affirmative vote or consent of
Holders of at least a majority of the outstanding shares of
Senior Preferred Stock, voting or consenting, as the case may be,
separately as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting.
The affirmative vote or consent
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<PAGE> 9
of Holders of at least a majority of the outstanding shares of
Senior Preferred Stock, voting or consenting, as the case may be,
separately as one class, whether voting in person or by proxy,
either in writing or by resolution adopted at an annual or
special meeting, may waive compliance with any provision of this
Section 1.
(D) Prior to the exchange of Senior Preferred Stock for
Exchange Debentures, the Company shall not amend or modify the
Exchange Indenture (except as expressly provided therein in
respect of amendments without the consent of holders of Exchange
Debentures) without the affirmative vote or consent of Holders of
at least a majority of the outstanding shares of Senior Preferred
Stock, voting or consenting, as the case may be, separately as
one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting.
(E) Except as set forth in paragraphs (f)(ii)(A) and
(f)(ii)(B) above, (1) the creation, authorization or issuance of
any shares of any Junior Securities, Parity Securities or Senior
Securities, or (2) the increase or decrease in the amount of
authorized capital stock of any class, including Senior Preferred
Stock, Junior Preferred Stock or any other series of preferred
stock, shall not require the consent of Holders of Senior
Preferred Stock and shall not, unless not complying with
paragraphs (f)(ii)(A) and (f)(ii)(B) above, be deemed to affect
adversely the rights, preferences, privileges or voting rights of
Holders of shares of Senior Preferred Stock.
(iii) In any case in which the Holders of shares of the
Senior Preferred Stock shall be entitled to vote pursuant to this
paragraph (f) or pursuant to Delaware law, each Holder of shares of the
Senior Preferred Stock shall be entitled to one vote for each share of
Senior Preferred Stock held and, except as otherwise required by
Delaware law, in the event of such a vote, the Holders of the Series A
Senior Preferred Stock and the holders of the Series B Senior Preferred
Stock shall vote together as a single class.
(g) Optional Exchange.
(i) Conditions.
(A) The Company may, at its option on any Dividend
Payment Date (herein the "Exchange Date"), exchange all, but not
less than all, of the then outstanding shares of Senior Preferred
Stock into the Company's 14 3/4% Senior Subordinated Debentures
due 2010 (the "Exchange Debentures") if such exchange is then
permitted by the terms of the Credit Agreement and the Debenture
Indenture. To exchange Senior Preferred Stock into Exchange
Debentures, the Company shall send a written notice (the
"Exchange Notice") of exchange by mail to each Holder of Senior
Preferred Stock, which notice shall state: (v) that the Company
has elected to exchange the Senior Preferred Stock into Exchange
Debentures pursuant to this Section 1; (w) the Exchange Date,
which shall be the next succeeding Dividend
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<PAGE> 10
Payment Date and shall not be less than 20 days following the
date on which the Exchange Notice is mailed; (x) that the Holder
is to surrender to the Company, at the place or places where
certificates for shares of Senior Preferred Stock are to be
surrendered for exchange, in the manner designated in the
Exchange Notice, his certificate or certificates representing the
shares of Senior Preferred Stock to be exchanged (properly
endorsed or assigned for transfer); (y) that dividends on the
shares of Senior Preferred Stock to be exchanged shall cease to
accrue, and the Holders of such shares shall cease to have any
further rights with respect to such shares (other than the right
to receive Exchange Debentures), on the Exchange Date whether or
not certificates for shares of Senior Preferred Stock are
surrendered for exchange on the Exchange Date unless the Company
shall default in the delivery of Exchange Debentures; and (z)
that interest on the Exchange Debentures shall accrue from the
Exchange Date whether or not certificates for shares of Senior
Preferred Stock are surrendered for exchange on the Exchange
Date. On the Exchange Date, if the conditions set forth in
clauses (I) through (V) below are satisfied and if the exchange
is then permitted under the Credit Agreement and the Debenture
Indenture, the Company shall issue Exchange Debentures in
exchange for the Senior Preferred Stock as provided in the next
paragraph, provided that on the Exchange Date: (I) there shall be
legally available funds sufficient therefor (including, without
limitation, legally available funds sufficient therefor under
Sections 160 and 170 (or any successor provisions) of the
Delaware General Corporation Law); (II) either (a) a registration
statement relating to the Exchange Debentures shall have been
declared effective under the Securities Act of 1933, as amended
(the "Securities Act"), prior to such exchange and shall continue
to be in effect on the Exchange Date or (b)(i) the Company shall
have obtained a written opinion of counsel that an exemption from
the registration requirements of the Securities Act is available
for such exchange and that upon receipt of such Exchange
Debentures pursuant to such exchange made in accordance with such
exemption, the holders (assuming such holder is not an Affiliate
of the Company) thereof will not be subject to any restrictions
imposed by the Securities Act upon the resale thereof and (ii)
such exemption is relied upon by the Company for such exchange;
(III) the Exchange Indenture and the trustee thereunder (the
"Trustee") shall have been qualified under the Trust Indenture
Act of 1939, as amended, if such qualification is required; (IV)
immediately after giving effect to such exchange, no Default or
Event of Default (each as defined in the Exchange Indenture)
would exist under the Exchange Indenture; and (V) the Company
shall have delivered to the Trustee a written opinion of counsel,
dated the date of exchange, regarding the satisfaction of the
conditions set forth in clauses (I), (II) and (III).
In the event that the issuance of the Exchange Debentures is not
permitted on the Exchange Date set forth in the Exchange Notice,
or any of the conditions set forth in clauses (I) through (V) of
the preceding sentence are not satisfied on the Exchange Date set
forth in the Exchange Notice, the Exchange Date shall be deemed
to be the first business day thereafter, if any, upon which all
of such conditions are satisfied.
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(B) Upon any exchange pursuant to paragraph (g)(i)(A),
each Holder of outstanding shares of Senior Preferred Stock shall
be entitled to receive Exchange Debentures in a principal amount
equal to the sum of (i) the liquidation preference of such
Holder's shares of Senior Preferred Stock and (ii) the amount of
accumulated and unpaid dividends, if any, thereon; provided that
the Company may pay cash in lieu of issuing an Exchange Note in a
principal amount of less than $1,000.
(ii) Procedure for Exchange.
(A) On or before the Exchange Date, each Holder of
Senior Preferred Stock shall surrender the certificate or
certificates representing such shares of Senior Preferred Stock,
in the manner and at the place designated in the Exchange Notice.
The Company shall cause the Exchange Debentures to be executed on
the Exchange Date and, upon surrender in accordance with the
Exchange Notice of the certificates for any shares of Senior
Preferred Stock so exchanged (properly endorsed or assigned for
transfer), such shares shall be exchanged by the Company into
Exchange Debentures. The Company shall pay interest on the
Exchange Debentures at the rate and on the dates specified
therein from the Exchange Date.
(B) Subject to the conditions set forth in paragraph
(g)(i), if notice has been mailed as aforesaid, and if before the
Exchange Date (1) the Exchange Indenture shall have been duly
executed and delivered by the Company and the Trustee and (2) all
Exchange Debentures necessary for such exchange shall have been
duly executed by the Company and delivered to the Trustee with
irrevocable instructions to authenticate the Exchange Debentures
necessary for such exchange, then the rights of the Holders of
shares of the Senior Preferred Stock as stockholders of the
Company shall cease (except the right to receive Exchange
Debentures), and the Person or Persons entitled to receive the
Exchange Debentures issuable upon exchange shall be treated for
all purposes as the registered Holder or Holders of such Exchange
Debentures as of the date of exchange without any further action
of the Holders of Senior Preferred Stock.
(h) Change of Control Offer. Subject to contractual and other
restrictions with respect thereto, including without limitation,
restrictions imposed by the Credit Agreement and the Debenture
Indenture, upon the occurrence of a Change of Control, the Company shall
make an offer (a "Change of Control Offer") to each Holder of Senior
Preferred Stock to repurchase any or all of such Holder's shares of
Senior Preferred Stock at a purchase price in cash equal to 100.0% of
the aggregate liquidation preference thereof plus accumulated and unpaid
dividends thereon, if any, to the date of repurchase (the "Change of
Control Payment").
(A) Within 30 days following any Change of Control, the
Company shall mail a notice to each Holder of Senior Preferred
Stock stating: (1) that the Change of Control Offer is being made
pursuant to this paragraph (h) and that all shares of
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<PAGE> 12
Senior Preferred Stock tendered will be accepted for payment; (2)
the purchase price and the purchase date, which shall be no
sooner than 30 nor later than 60 days from the date such notice
is mailed (the "Change of Control Payment Date"); (3) that any
shares not tendered will continue to accumulate dividends; (4)
that, unless the Company defaults in the payment of the Change of
Control Payment, all shares of Senior Preferred Stock accepted
for payment pursuant to the Change of Control Offer shall cease
to accumulate dividends after the Change of Control Payment Date;
(5) that Holders electing to have any shares of Senior Preferred
Stock repurchased pursuant to a Change of Control Offer will be
required to surrender such shares, with the form entitled "Option
of Holder to Elect Purchase" on the reverse of the shares of
Senior Preferred Stock, completed, or transfer by book-entry
transfer, to the Company or its transfer 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;
(6) that Holders will be entitled to withdraw their election if
the Company or the transfer agent, as the case may be, receives,
not later than the close of business on the third Business Day
preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the
Holder, the number of shares of Senior Preferred Stock delivered
for repurchase, and a statement that such Holder is withdrawing
his election to have such shares repurchased; and (7) that
Holders whose shares of Senior Preferred Stock are being
repurchased only in part will be issued new shares of Senior
Preferred Stock equal in liquidation preference to the
unpurchased portion of the shares of Senior Preferred Stock
surrendered (or transferred by book-entry transfer), which
unpurchased portion must be equal to $25 in liquidation
preference or an integral multiple thereof.
(B) On the Change of Control Payment Date, the Company
shall, to the extent lawful, (1) accept for payment all shares of
Senior Preferred Stock or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the
Company or its transfer agent an amount equal to the Change of
Control Payment in respect of all shares of Senior Preferred
Stock or portions thereof so tendered, and (3) deliver or cause
to be delivered to the transfer agent the shares of Senior
Preferred Stock so accepted together with an Officers'
Certificate stating the aggregate liquidation preference of such
Senior Preferred Stock or portions thereof being repurchased by
the Company. The Company or its transfer agent, as the case may
be, shall promptly mail to each Holder of shares of Senior
Preferred Stock so tendered the Change of Control Payment for
such shares or portions thereof. The Company shall promptly issue
a certificate representing shares of Senior Preferred Stock and
mail (or cause to be transferred by book entry) to each Holder a
new certificate representing shares of Senior Preferred Stock
equal in liquidation preference to any unpurchased portion of
such shares surrendered by such Holder, if any; provided, that
each such certificate shall have a liquidation preference of $25
or an integral multiple thereof. The Company shall publicly
announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date.
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(C) The Company 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
shares of Senior Preferred Stock in connection with a Change of
Control.
(D) The Company's obligations with respect to a Change
of Control Offer shall be satisfied to the extent actually
performed by a third party in accordance with the terms of this
paragraph (h).
(i) Conversion or Exchange.
The Holders of shares of Senior Preferred Stock shall not have
any rights hereunder to convert such shares into or exchange such shares
for shares of any other class or classes or of any other series of any
class or classes of Capital Stock of the Company.
(j) Preemptive Rights.
No shares of Senior Preferred Stock shall have any rights of
preemption whatsoever as to any securities of the Company, or any
warrants, rights or options issued or granted with respect thereto,
regardless of how such securities or such warrants, rights or options
may be designated, issued or granted.
(k) Reissuance of Senior Preferred Stock.
Shares of Senior Preferred Stock that have been issued and
reacquired in any manner, including shares purchased or redeemed or
exchanged, shall (upon compliance with any applicable provisions of the
laws of Delaware) have the status of authorized but unissued shares of
preferred stock of the Company undesignated as to series and may be
designated or redesignated and issued or reissued, as the case may be,
as part of any series of preferred stock of the Company, provided that
such shares may not in any event be reissued as Senior Preferred Stock
(other than in payment of dividends on Senior Preferred Stock).
(l) Business Day.
If any payment, redemption or exchange shall be required by the
terms hereof to be made on a day that is not a Business Day, such
payment, redemption or exchange shall be made on the immediately
succeeding Business Day.
(m) Certain Additional Provisions.
(i) Restricted Payments.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly make any Restricted
Payment, unless, at the time of such
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<PAGE> 14
Restricted Payment: (1) no Default Event shall have occurred and
be continuing or would occur as a consequence thereof; and (2)
such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries
after the Preferred Stock Issue Date, does not exceed the sum
(the "Basket") of (a) (i) Consolidated EBITDA of the Company for
the period (taken as one accounting period), commencing on the
first day of the first fiscal quarter commencing on or prior to
the Preferred Stock Issue Date, to and including the last day of
the fiscal quarter ended immediately prior to the date of each
such calculation (or, in the event Consolidated EBITDA for such
period is a deficit, then minus such deficit) less (ii) 150% of
Consolidated Fixed Charges for such period, plus (b) the
aggregate Net Cash Proceeds received by the Company from the sale
of the Company's Qualified Capital Stock (other than in each case
(i) to a Subsidiary of the Company), (ii) to the extent applied
in connection with a Qualified Exchange and (iii) to the extent
applied to repurchase Capital Stock pursuant to clause (b) of the
definition of the Other Permitted Payments after the Preferred
Stock Issue Date. The foregoing provisions of this paragraph
(m)(i) shall not prohibit the following Restricted Payments: (A)
a Qualified Exchange; (B) the payment of any dividend within 60
days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions
of this Section 1; and (C) Other Permitted Payments. The full
amount of any Restricted Payment made pursuant to clause (B) of
the immediately preceding sentence (but not pursuant to clauses
(A) or (C)) of the immediately preceding sentence, however, will
be deducted in the calculation of the aggregate amount of
Restricted Payments available to be made pursuant to the Basket.
The amount of any Restricted Payment, if other than in cash,
shall be the fair market value thereof, as determined in the good
faith reasonable judgment of the Board of Directors of the
Company.
(ii) Reports.
So long as any shares of Senior Preferred Stock are
outstanding, the Company shall furnish to each Holder of Senior
Preferred Stock (at such Holder's address listed in the register
of Holders maintained by the transfer agent and registrar of the
Senior Preferred Stock): (i) beginning at the end of the
Company's first fiscal year ending after the Preferred Stock
Issue Date, 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 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
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.
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(n) Subordination.
(i) Agreement to Subordinate. Any and all payments and
distributions at any time declared or due on account of the Senior
Preferred Stock, including, without limitation, dividend, redemption and
change of control payments, ("Preferred Stock Payments") shall be
subordinated in right of payment to the payment in full in cash or cash
equivalents of all Senior Indebtedness whether outstanding on the date
hereof or hereafter created, incurred, assumed or guaranteed, and that
such subordination is for the benefit of the holders of Senior
Indebtedness. For purposes of this paragraph (n), the term "Senior
Indebtedness" means (a) indebtedness of the Company arising under the
Credit Agreement and (b) the Discount Debentures.
(ii) Relative Rights. Upon any distribution of assets of the
Company, winding up, total or partial liquidation or reorganization of
the Company, whether voluntary or involuntary, the holders of all Senior
Indebtedness shall be entitled to receive payment on such Senior
Indebtedness in full in cash or cash equivalents before the holders of
Senior Preferred Stock shall be entitled to receive any Preferred Stock
Payments. No payment (by set-off or otherwise) may be made by or on
behalf of the Company with respect to Preferred Stock Payments for cash
or property, (x) upon the maturity of any Senior Indebtedness of the
Company by lapse of time, acceleration or otherwise, unless and until
all principal of, premium, if any, and the interest on and fees in
respect of such Senior Indebtedness are paid in full in cash or cash
equivalents, (y) when such payment is prohibited by the indenture or
credit agreement relating to the Senior Indebtedness and (z) in the
event of default in the payment of any principal of, premium, if any, or
interest on and fees in respect of Senior Indebtedness of the Company
when it becomes due and payable, whether at maturity or at a date fixed
for prepayment or by declaration or otherwise (a "Payment Default"),
unless and until such Payment Default has been cured or waived or
otherwise has ceased to exist.
(iii) When Amounts Must be Paid Over. In the event that,
notwithstanding the other provisions of this Certificate of
Designations, a Holder receives any Preferred Stock Payment at a time
when such Holder has actual knowledge that such payment or distribution
is prohibited by this paragraph (n) or the indenture or credit agreement
relating to the Senior Indebtedness, such Preferred Stock Payment shall
be held by the Holders in trust for the benefit of, and shall be paid
forthwith over and delivered, upon written request, to, the Holders of
Senior Indebtedness remaining unpaid or unprovided for, or to the
trustee or trustees under the indenture relating to the Senior
Indebtedness, ratably according to aggregate principal amounts remaining
unpaid on account of such Senior Indebtedness held or represented by
such, for application to the payment of all obligations with respect to
Senior Indebtedness remaining unpaid, to the extent necessary to pay or
to provide for the payment of all such obligations in full in cash or
cash equivalents in accordance with their terms, after giving effect to
any concurrent payment or distribution to or for Holders of Senior
Indebtedness.
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(o) Definitions and Interpretation.
(i) Definitions. As used in this Section 1, the following
terms shall have the following meanings, unless the context otherwise
requires:
"Acquisition" means the acquisition of the Business by the
Company and its Subsidiaries in accordance with the provisions of the
Acquisition Agreement.
"Acquisition Agreement" means, collectively: that certain Asset
Purchase Agreement dated as of November 21, 1997 by and among the
Company, Green Equity Investors, II, L.P. (for limited purposes),
Liberty Group Operating, Inc., Hollinger International Inc., APAC-90,
Inc., American Publishing (1991) Inc. and APAC-95, Inc. and that certain
Asset Purchase Agreement dated as of November 21, 1997 among the same
parties plus American Publishing Company of Illinois.
"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, the term "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, directly or through one or
more intermediaries, whether through the ownership of voting securities,
by contract, or otherwise, provided, that, with respect to ownership
interest in the Company and its Subsidiaries, a Beneficial Owner of 10%
or more of the total voting power normally entitled to vote in the
election of directors, managers or trustees, as applicable, shall for
such purposes be deemed to constitute control.
"Asset Sale" means, with respect to any specified Person, the
following: (i) (A) the sale, lease, conveyance or other disposition by
such Person of any assets (including, without limitation, by way of a
sale and leaseback) or (B) the issue or sale by such Person or any of
its Subsidiaries of Equity Interests of any of such Person's
Subsidiaries, and (ii) which occurs in a single transaction or a series
of related transactions.
"Beneficial Owner" or "beneficial owner" for purposes of the
definition of Change of Control and Affiliate has the meaning attributed
to it in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on
the Preferred Stock Issue Date), whether or not applicable.
"Board of Directors" means the Board of Directors of the Company.
"Business" means the business the assets of which were (or are to
be) purchased pursuant to the Asset Purchase Agreement (on a collective
basis).
"Business Day" means any day other than a Legal Holiday.
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"Capital Stock" means, with respect to any corporation, any and
all shares, interests, rights to purchase (other than convertible or
exchangeable Indebtedness that is not itself otherwise capital stock),
warrants, options, participations or other equivalents of or interests
(however designated) in stock issued by that corporation.
"Capitalized Lease Obligation" means, as to any person, the
obligations of such person under a lease that are required to be
classified and accounted for as capital lease obligations under GAAP
and, for purposes of this definition, the amount of such obligations at
any date shall be the capitalized amount of such obligations at such
date, determined in accordance with GAAP.
"Cash Equivalent" means (a) 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
one year from the date of acquisition thereof; (b) marketable general
obligations issued by any state of the United States of America or any
political subdivision of any such state or any public instrumentality
thereof maturing within one year from the date of acquisition thereof
and, at the time of acquisition thereof, having a credit rating of "A"
or better from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.; (c) certificates of deposit, time deposits,
eurodollar time deposits, overnight bank deposits or bankers'
acceptances having maturities of not more than one year from the date of
acquisition thereof of any domestic commercial bank, the long-term debt
of which is rated at the time of acquisition thereof at least "A" or the
equivalent thereof by either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc. and having capital and surplus in excess of
$500,000,000; (d) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses
(a), (b) and (c) above entered into with any bank meeting the
qualifications specified in clause (c) above; (e) commercial paper rated
at the time of acquisition thereof at least A-2 or the equivalent
thereof by Standard & Poor's Ratings Group or P-2 or the equivalent
thereof by Moody's Investors Service, Inc., or carrying an equivalent
rating by a nationally recognized rating agency, if both of the two
named rating agencies cease publishing ratings of investments, and in
either case maturing within 270 days after the date of acquisition
thereof; and (f) interests in any investment company which invests
solely in instruments of the type specified in clauses (a) through (e)
above.
"Certificate of Incorporation" means the Company's Certificate of
Incorporation.
"Change of Control" (i) any merger or consolidation of the
Company with or into any person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of
the assets of the Company on a consolidated basis, in one transaction or
a series of related transactions, if, immediately after giving effect to
such transaction(s), any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable), other than any Excluded Person or Excluded Persons, is or
becomes the Beneficial Owner, directly or indirectly, of more than 50%
of the total voting power in the aggregate normally entitled to vote in
the election of directors,
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<PAGE> 18
managers or trustees, as applicable, of the transferee(s) or surviving
entity or entities, (ii) any "person" or "group," other than any
Excluded Person or Excluded Persons, becomes the Beneficial Owner,
directly or indirectly, of more than 50% of the total voting power in
the aggregate of all classes of Capital Stock of the Company then
outstanding normally entitled to vote in elections of directors,
managers or trustees, as applicable, of the transferee(s) or surviving
entity or entities or (iii) during any period of 12 consecutive months
after the Preferred Stock Issue Date, individuals who at the beginning
of any such 12-month period constituted the Board of Directors of the
Company (together, in each case, with any new directors whose election
by such Board of Directors or whose nomination for election by the
shareholders of the Company was approved by LGP or a Related Party of
LGP or by the Excluded Persons or by a vote of a majority of the
directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office, as
applicable.
"Company" means this corporation.
"consolidated" means, with respect to the Company, the
consolidated accounts of its Subsidiaries with those of the Company, all
in accordance with GAAP; provided that "consolidated" will not include
consolidation of the accounts of any Unrestricted Subsidiary with the
accounts of the Company.
"Consolidated EBITDA" means, with respect to any person, for any
period, the Consolidated Net Income of such person for such period
adjusted to add thereto (to the extent deducted from net revenues in
determining Consolidated Net Income), without duplication, the sum of
(i) consolidated income taxes, (ii) consolidated depreciation and
amortization (including amortization of debt issuance costs in
connection with any Indebtedness of such person and its Subsidiaries),
(iii) Consolidated Fixed Charges and (iv) all other non-cash charges;
provided that consolidated income taxes, depreciation and amortization
of a Subsidiary of such person that is less than wholly owned shall only
be added to the extent of the equity interest of such person in such
Subsidiary.
"Consolidated Fixed Charges" of any person means, for any period,
the aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid,
accrued, or scheduled to be paid or accrued (including, in accordance
with the following sentence, interest attributable to Capitalized Lease
Obligations) of such person and its Consolidated Subsidiaries during
such period, excluding amortization of debt issuance costs incurred in
connection with the Discount Debentures, the Senior Subordinated Notes
or the Credit Agreement but including (i) original issue discount and
non-cash interest payments or accruals on any Indebtedness, (ii) the
interest portion of all deferred payment obligations, and (iii) all
commissions, discounts and other fees and charges owed with respect to
bankers' acceptances and letters of credit financings and currency and
Interest Swap and Hedging Obligations, in each case to the extent
attributable to such period, and (b) the amount of cash dividends paid
by such person or any of its
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Consolidated Subsidiaries in respect of preferred stock (other than by
Subsidiaries of such person to such person or such person's wholly owned
Subsidiaries). For purposes of this definition, (x) interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest
rate reasonably determined by the Company to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance with GAAP
and (y) to the extent such expense would result in a liability upon the
consolidated balance sheet of such person in accordance with GAAP,
interest expense attributable to any Indebtedness represented by the
guaranty by such person or a Subsidiary of such person of an obligation
of another person shall be deemed to be the interest expense
attributable to the Indebtedness guaranteed. Notwithstanding the
foregoing, Consolidated Fixed Charges shall not include costs, fees and
expenses incurred in connection with the Acquisition, and any non-cash
charge or expense associated with the write-off of deferred debt
issuance costs associated with the Credit Agreement, the Senior
Subordinated Notes or the Discount Debentures.
"Consolidated Net Income" means, with respect to any Person for
any period, the net income (or loss) of such Person and its Consolidated
Subsidiaries (determined on a consolidated basis in accordance with
GAAP) for such period, adjusted to exclude (only to the extent included
in computing such net income (or loss) and without duplication): (a) all
gains and losses which are either extraordinary (as determined in
accordance with GAAP) or are either unusual or nonrecurring (including
any gain from the sale or other disposition of assets outside the
ordinary course of business or from the issuance or sale of any Capital
Stock), (b) the net income, if positive, of any person, other than a
Consolidated Subsidiary, in which such person or any of its Consolidated
Subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in cash to such person or a
Consolidated Subsidiary of such person during such period, but in any
case not in excess of such person's pro rata share of such person's net
income for such period, (c) the net income or loss of any person
acquired in a pooling of interests transaction for any period prior to
the date of such Acquisition, (d) the net income, if positive, of any of
such person's Consolidated Subsidiaries in the event and solely to the
extent that the declaration or payment of dividends or similar
distributions is not at the time permitted by operation of the terms of
its charter or bylaws or any other agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to
such Consolidated Subsidiary, (e) the effects of changes in accounting
principles, (f) any non-cash compensation expense in connection with the
exercise of, grant to or repurchase from officers, directors and
employees of stock, stock options or stock equivalents, (g) any non-cash
charge or expense associated with the write-off of deferred debt
issuance costs associated with the Credit Agreement, the Senior
Subordinated Notes or the Discount Debentures, and (h) costs, fees and
expenses incurred in connection with the Acquisition.
"Consolidated Subsidiary" means, for any person, each Subsidiary
of such person (whether now existing or hereafter created or acquired)
the financial statements of which are consolidated for financial
statement reporting purposes with the financial statements of such
person in accordance with GAAP.
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<PAGE> 20
"Credit Agreement" means the one or more credit agreements
(including, without limitation, the Credit Agreement dated as of January
27, 1998 by and among Liberty Group Operating, Inc., Liberty Group
Publishing, Inc., Citicorp USA, Inc., as administrative agent and the
other parties named therein) entered into by and among the Company,
certain of its subsidiaries (if any) and certain financial institutions,
which provide for in the aggregate one or more term loans and/or
revolving credit and letter of credit facilities, including any related
notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, as such credit agreement and/or
related documents may be amended, restated, supplemented, renewed,
replaced or otherwise modified from time to time whether or not with the
same agent, trustee, representative lenders or holders, and, subject to
the proviso to the next succeeding sentence irrespective of any changes
in the terms and conditions thereof. Without limiting the generality of
the foregoing, the term "Credit Agreement" shall include any amendment,
amendment and restatement, renewal, extension, restructuring, supplement
or modification to any such credit agreement and all refundings,
refinancings and replacements of any such credit agreement, including
any agreement (i) extending the maturity of any Indebtedness incurred
thereunder or contemplated thereby, (ii) adding or deleting borrowers or
guarantors thereunder, so long as borrowers and issuers include one or
more of the Company and its Subsidiaries and their respective successors
and assigns, (iii) increasing the amount of Indebtedness incurred
thereunder or available to be borrowed thereunder, or (iv) otherwise
altering the terms and conditions thereof in a manner not prohibited by
the terms hereof.
"Debenture Indenture" means the Indenture, pursuant to which the
Discount Debentures will be issued.
"Default Event" means any of the following events: (1) any time
when the Company fails to make a mandatory redemption of the Senior
Preferred Stock when required (whether or not any contractual or other
restrictions apply to such redemption) pursuant to paragraph (e)(ii)
hereof; or (2) any time when the Company fails to make an offer to
repurchase all of the outstanding shares of Senior Preferred Stock
following a Change of Control, if such offer to repurchase is required
to be made pursuant to paragraph (h)(i) hereof (whether or not any
contractual or other restrictions apply to such redemption).
"Discount Debentures" means the 115/8% Senior Discount Debentures
due 2009 of the Company to be issued pursuant to the Debenture
Indenture.
"Disqualified Capital Stock" means (a) except as set forth in
(b), with respect to any person, any Equity Interest of such person
that, by its terms or by the terms of any security into which it is
convertible, exercisable or exchangeable, is, or upon the happening of
an event or the passage of time or both would be, required to be
redeemed or repurchased (including at the option of the holder thereof)
by such person or any of its Subsidiaries, in whole or in part, on or
prior to the Stated Maturity of the Discount Debentures and (b) with
respect to any Subsidiary of such person (including with respect to any
Subsidiary of the Company), any Equity Interests other than any common
equity with no preference,
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<PAGE> 21
privileges, or redemption or repayment provisions and preferred equity
owned by the Company or one of its Subsidiaries.
"Dividend Payment Date" means February 1, May 1, August 1 and
November 1 of each year.
"Dividend Period" means the Initial Dividend Period and,
thereafter, each Quarterly Dividend Period.
"Equity Interest" of any Person means any shares, interests,
participations or other equivalents (however designated) in such
Person's equity, and shall in any event include any Capital Stock issued
by, or partnership or membership interests in, such Person.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Exchange Date" means a date on which shares of Senior Preferred
Stock are exchanged by the Company for Exchange Debentures.
"Exchange Debentures" means the 14 3/4% Senior Subordinated
Debentures due 2010 of the Company to be issued at the option of the
Company in exchange for the Senior Preferred Stock which are
subordinated to the Discount Debentures.
"Exchange Indenture" means the Indenture between Liberty Group
Publishing, Inc. to State Street Bank and Trust Company, as trustee
dated as of January 27, 1998 relating to the Exchange Debentures.
"Excluded Person" means GEI and its Related Parties.
"Exempted Affiliate Transaction" means (a) compensation,
indemnification and other benefits paid or made available (x) pursuant
to the employment agreements between the Company and members of its
senior management, (y) for or in connection with services actually
rendered to the Company and comparable to those generally paid or made
available by entities engaged in the same or similar businesses
(including reimbursement or advancement of reasonable out-of-pocket
expenses and loans to officers, directors and employees, (i) in the
ordinary course of business and (ii) to purchase Company Common Stock in
an amount not to exceed $1.0 million, (b) transactions, expenses and
payments in connection with the Acquisition, (c) any Restricted Payments
or other payments or transactions expressly permitted under paragraph
m(i) hereof, (d) payments to LGP for management services under the
Management Services Agreement in an amount not to exceed $1.5 million in
any fiscal year, plus reimbursement of reasonable out-of-pocket costs
and expenses, (e) payments to LGP for reasonable and customary fees and
expenses for financial advisory and investment banking services provided
to the Company in connection with major financial transactions, and (f)
transactions between or among the Company and
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its Subsidiaries or between or among Subsidiaries of the Company,
provided that any ownership interest in any such Subsidiary which is not
beneficially owned directly or indirectly by the Company or any of its
Subsidiaries is not beneficially owned by an Affiliate of the Company
other than by virtue of the direct or indirect ownership interest in
such Subsidiary held (in the aggregate) by the Company and/or one or
more of its Subsidiaries.
"GAAP" means United States 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 approved by a significant segment of the accounting profession
in the United States as in effect on the Preferred Stock Issue Date.
"GEI" means Green Equity Investors II, L.P.
"Holder" means a Person in whose name a share of Senior Preferred
Stock is registered.
"Indebtedness" of any person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of any such
Person, to the extent such liabilities and obligations would appear as a
liability upon the consolidated balance sheet of such person in
accordance with GAAP, (i) in respect of borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such person
or only to a portion thereof), (ii) evidenced by bonds, notes,
debentures or similar instruments, (iii) representing the balance
deferred and unpaid of the purchase price of any property or services,
except those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors; (b) all
liabilities and obligations, contingent or otherwise, of such person (i)
evidenced by bankers' acceptances or similar instruments issued or
accepted by banks, (ii) relating to any Capitalized Lease Obligation, or
(iii) evidenced by a letter of credit or a reimbursement obligation of
such person with respect to any letter of credit; (c) all net
obligations of such person under Interest Swap and Hedging Obligations;
(d) all liabilities and obligations of others of the kind described in
the preceding clauses (a), (b) or (c) that such person has guaranteed or
that is otherwise its legal liability or which are secured by one or
more Liens on any assets or property of such Person; provided that if
the liabilities or obligations which are secured by a Lien have not been
assumed in full by such Person or are not such Person's legal liability
in full, the amount of such Indebtedness for the purposes of this
definition shall be limited to the lesser of the amount of such
Indebtedness secured by such Lien or the fair market value of the assets
or property securing such Lien; (e) any and all deferrals, renewals,
extensions, refinancing and refundings (whether direct or indirect) of,
or amendments, modifications or supplements to, any liability of the
kind described in any of the preceding clauses (a), (b), (c) or (d), or
this clause (e), whether or not between or among the same parties; and
(f) all Disqualified Capital Stock of such person (measured at the
greater of its voluntary or involuntary maximum fixed repurchase price
plus accrued and unpaid dividends). For purposes hereof, the "maximum
fixed repurchase price" of any
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Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified
Capital Stock as if such Disqualified Capital Stock were purchased on
any date on which Indebtedness shall be required to be determined
pursuant to the Indenture, and if such price is based upon, or measured
by, the fair market value of such Disqualified Capital Stock, such fair
market value to be determined in good faith by the board of directors of
the issuer (or managing general partner of the issuer) of such
Disqualified Capital Stock.
"Initial Dividend Period" means the dividend period commencing on
the Preferred Stock Issue Date and ending on the day before the first
Dividend Payment Date to occur thereafter.
"Interest Swap and Hedging Obligation" means any obligation of
any person pursuant to any interest rate swap agreement, interest rate
cap agreement, interest rate collar agreement, interest rate exchange
agreement, currency exchange agreement or any other agreement or
arrangement designed to protect against fluctuations in interest rates
or currency values, including, without limitation, any arrangement
whereby, directly or indirectly, such person is entitled to receive from
time to time periodic payments calculated by applying either a fixed or
floating rate of interest on a stated notional amount in exchange for
periodic payments made by such person calculated by applying a fixed or
floating rate of interest on the same notional amount.
"Investment" by any Person in any other Person means (without
duplication) (a) the acquisition (whether by purchase, merger,
consolidation or otherwise) by such Person (whether for cash, property,
services, securities or otherwise) of capital stock, bonds, notes,
debentures, partnership or other ownership interests or other
securities, including any options or warrants, of such other person or
any agreement to make any such acquisition; (b) the making by such
Person of any deposit with, or advance, loan or other extension of
credit to, such other Person (including the purchase of property from
another Person subject to an understanding or agreement, contingent or
otherwise, to resell such property to such other Person) or any
commitment to make any such advance, loan or extension (but excluding
accounts receivable, endorsements for collection or deposits arising in
the ordinary course of business); (c) other than guarantees of
Indebtedness of the Company or any Subsidiary; (d) the making of any
capital contribution by such person to such other person; and (e) the
designation by the Board of Directors of the Company of any person to be
an Unrestricted Subsidiary. The Company shall be deemed to make an
Investment in an amount equal to the fair market value of the net assets
of any subsidiary (or, if neither the Company nor any of its
Subsidiaries has theretofore made an Investment in such subsidiary, in
an amount equal to the Investments being made), at the time that such
subsidiary is designated an Unrestricted Subsidiary, and any property
transferred to an Unrestricted Subsidiary from the Company or a
Subsidiary of the Company shall be deemed an Investment valued at its
fair market value at the time of such transfer. The amount of any such
Investment shall be reduced by any liabilities or obligations of the
Company or any of its Subsidiaries to be assumed or discharged in
connection with such Investment by an entity other than the Company or
any
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<PAGE> 24
of its Subsidiaries. For purposes of clarification and greater
certainty, the designation of a newly formed subsidiary as an
Unrestricted Subsidiary shall not constitute an Investment.
"Junior Preferred Stock" means the Company's Series B 10% Junior
Redeemable Cumulative Preferred Stock, par value $0.01 per share, with a
liquidation preference of $1,000 per share, consisting of 175,000
shares.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the Company's principal place of business, 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 for the intervening period.
"LGP" means Leonard Green & Partners, L.P.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation or other
encumbrance upon or with respect to any property of any kind, real or
personal, movable or immovable, now owned or hereafter acquired.
"Management Services Agreement" means that certain Management
Services Agreement dated as of the Closing Date by and between LGP, on
the one hand, and the Company and/or its Subsidiaries, on the other
hand, providing for certain annual fees, expenses and reimbursements to
be paid to LGP, as such Management Services Agreement may be amended
from time to time.
"Net Cash Proceeds" means the aggregate amount of cash or Cash
Equivalents received by the Company in the case of a sale of Qualified
Capital Stock and by the Company and its Subsidiaries in respect of an
Asset Sale plus, in the case of an issuance of Qualified Capital Stock
upon any exercise, exchange or conversion of securities (including
options, warrants, rights and convertible or exchangeable debt) of the
Company that were issued for cash on or after the Preferred Stock Issue
Date, the amount of cash originally received by the Company upon the
issuance of such securities (including options, warrants, rights and
convertible or exchangeable debt) less, in each case, the sum of all
payments, fees, commissions and (in the case of Asset Sales, reasonable
and customary) expenses (including, without limitation, the fees and
expenses of legal counsel and investment banking fees and expenses)
incurred in connection with such Asset Sale or sale of Qualified Capital
Stock, and, in the case of an Asset Sale only, less (i) the amount
(estimated reasonably and in good faith by the Company) of income,
franchise, sales and other applicable taxes required to be paid by the
Company or any of its respective Subsidiaries in connection with such
Asset Sale, (ii) the amounts of any repayments of Indebtedness secured,
directly or indirectly, by Liens on the assets which are the subject of
such Asset Sale or Indebtedness associated with such assets which is due
by reason of such Asset Sale (i.e., such disposition is permitted by the
terms of the instruments evidencing or applicable to such Indebtedness,
or by the terms
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of a consent granted thereunder, on the condition that the proceeds (or
portion thereof) of such disposition be applied to such Indebtedness),
and other fees, expenses and other expenditures, in each case,
reasonably incurred as a consequence of such repayment of Indebtedness
(whether or not such fees, expenses or expenditures are then due and
payable or made, as the case may be); (iii) all amounts deemed
appropriate by the Company (as evidenced by a signed certificate of the
Chief Financial Officer of the Company delivered to the Holders) to be
provided as a reserve, in accordance with GAAP, against any liabilities
associated with such assets which are the subject of such Asset Sale;
and (iv) with respect to Asset Sales by Subsidiaries of the Company, the
portion of such cash payments attributable to persons holding a minority
interest in such Subsidiary.
"obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any Indebtedness.
"Other Permitted Payments" means, without duplication, (a) the
payments provided for by clauses (a), (d) and (e) of the definition of
"Exempted Affiliate Transaction"; (b) the repurchase of common stock,
stock options and stock equivalents of the Company held by former
directors, officers or employees of the Company or any of its
Subsidiaries ("Management Stock Repurchases") in an aggregate amount not
to exceed in any fiscal year $1.0 million, plus the amount of any net
cash proceeds to the Company from (I) sales of Capital Stock of the
Company to management employees subsequent to the Preferred Stock Issue
Date (provided further that the amount of any such net cash proceeds to
the Company to the extent used for Management Stock Repurchases will be
excluded from the calculation of the available Basket pursuant to
paragraph (m)(i)); and (II) any key-person life insurance policies, in
either case, to the extent utilized for Management Stock Repurchases;
provided, that any amount not so paid in any fiscal year may be paid in
future fiscal years; and (c) Restricted Payments in an aggregate amount
not to exceed $4.0 million.
"Permitted Affiliate Transaction" means any Exempt Affiliate
Transaction and any other contract, agreement, arrangement or
transaction between the Company or any of its Subsidiaries with any
Affiliate (an "Affiliate Transaction") or any series of related
Affiliate Transactions the terms of which are fair and reasonable to the
Company or such Subsidiary, as the case may be, and are at least as
favorable as the terms which could reasonably be expected to be obtained
by the Company or such Subsidiary, as the case may be, in a comparable
transaction made on an arm's length basis with persons who are not
Affiliates; provided that in connection with any Affiliate Transaction
or series of related Affiliate Transactions (other than Exempted
Affiliate Transactions) (1) involving consideration to either party in
excess of $1.5 million, the Company must deliver an Officer's
Certificate to the Holders, stating that the terms of such Affiliate
Transaction are fair and reasonable to the Company, and no less
favorable to the Company than could reasonably be expected to have been
obtained in an arm's length transaction with a non-Affiliate, and (2)
involving consideration to either party in excess of $7.5 million, the
Company must also, prior to consummation thereof, obtain a favorable
written opinion as to the fairness of such
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<PAGE> 26
transaction to the Company from a financial point of view from an
independent investment banking firm of national reputation or, if
pertaining to a matter for which such investment banking firms do not
customarily render such opinions, an appraisal or valuation firm of
national reputation; provided further, that these requirements shall not
apply to the sale or purchase of products or services by the Company or
its Subsidiaries to or from any Affiliate of LGP or any Related Party
thereof, which sale or purchase is in the ordinary course of business
and in accordance with industry practice.
"Permitted Investment" means Investments in (a) any of the
Discount Debentures; (b) Cash Equivalents; (c) intercompany notes;
provided that Indebtedness under any such notes of a Subsidiary shall be
deemed to be a Restricted Investment if such person ceases to be a
Subsidiary; (d) Investments in the form of promissory notes of members
of the Company's management not to exceed $1.0 million in principal
amount at any time outstanding solely in consideration of the purchase
by such persons of Qualified Capital Stock of the Company; (e)
Investments by the Company or any Subsidiary in any person that is or
immediately after such Investment becomes a Subsidiary, or immediately
after such Investment merges or consolidates into the Company or any
Subsidiary; provided that such person is engaged in all material
respects in a Related Business; (f) Investments in the Company by any
Subsidiary; provided that in the case of Indebtedness constituting any
such Investment, such Indebtedness shall be unsecured and subordinated
in all respects to the Company's obligations under the Discount
Debentures; (g) Investments in securities of trade creditors or
customers received in settlement of obligations that arose in the
ordinary course of business or pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade
creditors or customers; (h) Investments by the Company outstanding on
the Preferred Stock Issue Date; (i) transactions or arrangements with
officers or directors of the Company or any Subsidiary entered into in
the ordinary course of business (including compensation or employee
benefit arrangements with any officer or director of the Company or any
Subsidiary which are Permitted Affiliate Transactions); (j) Investments
in persons (other than Affiliates of the Company) received as
consideration from Asset Sales; (k) additional Investments at any time
outstanding not to exceed the sum of (i) $5.0 million and (ii) the
cumulative gain (net of taxes and all payments, fees, commissions and
expenses incurred in such sale or disposition) realized by the Company
and its Subsidiaries in cash or Cash Equivalents on the sale or other
disposition after the Preferred Stock Issue Date of Investments
(including Permitted Investments and Restricted Investments) made after
the Preferred Stock Issue Date in accordance with the Debenture
Indenture (but only to the extent that such gain is excluded from the
net income of the Company and the Consolidated Subsidiaries by the
definition of Consolidated Net Income); and (l) the acquisition of
Equity Interests of a Person engaged in a Related Business, other than a
Person described in clause (e), through the issuance of Common Stock of
the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint-stock company,
trust, unincorporated organization or government or agency or political
subdivision thereof (including any subdivision or ongoing
26
<PAGE> 27
business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Preferred Stock Issue Date" means the date on which the Senior
Preferred Stock is originally issued by the Company under this Section
1.
"Qualified Capital Stock" means any Equity Interest that is not
Disqualified Capital Stock.
"Qualified Exchange" means any legal defeasance, redemption,
retirement, repurchase or other acquisition of Capital Stock or
Indebtedness of the Company issued on or after the Preferred Stock Issue
Date with the Net Cash Proceeds received by the Company from the
substantially concurrent sale of its Qualified Capital Stock or any
exchange of Qualified Capital Stock of the Company for any Capital Stock
or Indebtedness of the Company issued on or after the Issue Date.
"Quarterly Dividend Period" shall mean the quarterly period
commencing on each February 1, May 1, August 1 and November 1 and ending
on the day before the following Dividend Payment Date.
"Redemption Date" with respect to any shares of Senior Preferred
Stock, means the date on which such shares of Senior Preferred Stock are
redeemed by the Company.
"Related Business" means the business conducted (or proposed to
be conducted, including the activities referred to as being contemplated
by the Company, as described or referred to in this Offering Memorandum)
by the Company as of the Issue Date and any and all businesses that in
the good faith judgment of the Board of Directors of the Company are
reasonably related businesses, including reasonably related extensions
thereof.
"Related Party" means any partnership or corporation which is
managed by or controlled by LGP or any Affiliate thereof.
"Restricted Investment" means, in one or a series of related
transactions, any Investment, other than investments in Cash Equivalents
and other Permitted Investments; provided, however, that a merger of
another person with or into the Company or a Subsidiary in accordance
with the terms of the Indenture shall not be deemed to be a Restricted
Investment so long as the surviving entity is the Company or a direct
wholly owned Subsidiary.
"Restricted Payment" means, (a) the declaration or payment of any
dividend or other distribution in respect of Junior Securities or Equity
Interests of the Company or any of the Company's Subsidiaries, (b) any
payment on account of the purchase, redemption or other acquisition or
retirement for value of Junior Securities or Equity Interests of the
Company or any of the Company's Subsidiaries, and (c) any Restricted
Investment by such person;
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<PAGE> 28
provided, however, that the term "Restricted Payment" does not include
(i) any dividend, distribution or other payment on or with respect to
Equity Interests of the Company to the extent payable solely in shares
of Qualified Capital Stock of the Company; (ii) any dividend,
distribution or other payment to the Company, or to any of its
Subsidiaries , by the Company or any of its Subsidiaries; (iii) payments
made pursuant to the Acquisition; (iv) Permitted Investments; or (v) pro
rata dividends and other distributions on Equity Interests of any
Subsidiary by such Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Senior Preferred Stock" means the Company's Series A 14 3/4%
Senior Redeemable Exchangeable Cumulative Preferred Stock, par value
$0.01 per share, with a liquidation preference of $25 per share,
consisting of 21,000,000 shares.
"Senior Subordinated Notes" means the 93/8% Senior Subordinated
Notes due 2008 of Liberty Group Operating, Inc., a subsidiary of the
Company.
"Stated Maturity," when used with respect to any Discount
Debenture, means February 1, 2009.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than
50.0% of the total voting power of the Equity Interests 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 (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).
"Unrestricted Subsidiary" means any subsidiary of the Company
that does not own any Capital Stock of, or own or hold any Lien on any
property of the Company or any other Subsidiary of the Company and that,
at the time of determination, shall be an Unrestricted Subsidiary (as
designated by the Board of Directors of the Company); provided, that (i)
such subsidiary shall not engage, to any substantial extent, in any line
or lines of business activity other than a Related Business and (ii)
neither immediately prior thereto nor after giving pro forma effect to
such designation would there exist a Default Event. The Board of
Directors of the Company may designate any Unrestricted Subsidiary to be
a Subsidiary, provided that no Default Event is existing or will occur
as a consequence thereof. Each such designation shall be evidenced by
delivering to the Holders a certified copy of the resolution giving
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<PAGE> 29
effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions.
"wholly owned Subsidiary" of any Person means a Subsidiary of
such Person all of the outstanding Capital Stock, Equity Interests or
other ownership interests of which (other than directors' qualifying
shares and shares in non-U.S. companies required by local law to be
owned by local residents) shall at the time be owned (i) by such Person,
(ii) by one or more wholly owned Subsidiaries of such Person or (iii) by
such Person and one or more wholly owned Subsidiaries of such Person.
(ii) Interpretation. For the purposes of this Certificate of
Designations: (x) words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include
the other gender as the context requires and (y) the word "including"
and words of similar import shall mean "including, without limitation,"
unless the context otherwise requires or unless otherwise specified.
(p) Transfer Restrictions.
The certificates evidencing shares of Senior Preferred Stock
shall, until the second anniversary of the date of original issuance of
such shares, unless otherwise agreed by the Company and the holders of
any such certificates, bear a legend substantially to the following
effect:
"The Senior Preferred Stock 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 Senior Preferred Stock evidenced hereby may not be
offered, sold or otherwise transferred in the absence of
such registration or an applicable exemption therefrom.
Each purchaser of the Senior Preferred Stock 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. The
holder of the Senior Preferred Stock evidenced hereby
agrees for the benefit of the Company that (A) such Senior
Preferred Stock may be offered, resold, pledged or
otherwise transferred, only (a) inside the United States
to a person whom 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) outside the United States
to a foreign person in a transaction meeting the
requirements of Rule 903 or Rule 904 of Regulation S under
the Securities Act, (c) in a transaction meeting the
requirements of Rule 144 under the Securities Act, (d) to
the Company, (e) pursuant to an effective registration
statement or (f) in accordance with another exemption from
the registration requirements of the Securities Act (and
based upon an opinion of counsel if the company so
requests), and, in each case, in accordance with any
applicable securities
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<PAGE> 30
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 Senior Preferred Stock evidenced hereby of
the resale restrictions set forth in (A) above."
The shares of Senior Preferred Stock not otherwise registered
pursuant to an effective registration statement under the
Securities Act shall be subject to the restrictions on transfer
set forth in the legend referred to above until the second
anniversary of the date of original issuance of such shares of
Senior Preferred Stock.
2. DESIGNATION OF THE COMPANY'S SERIES B 10% JUNIOR REDEEMABLE CUMULATIVE
PREFERRED STOCK.
(a) Designation.
There is hereby created out of the authorized and unissued shares
of preferred stock of the Company a series of preferred stock designated
as the "Series B 10% Junior Redeemable Cumulative Preferred Stock". The
number of shares constituting such series shall be 175,000 shares of
Junior Preferred Stock, consisting of an initial issuance of 49,000
shares of Junior Preferred Stock plus additional shares of Junior
Preferred Stock which may be issued, including to pay dividends on the
Junior Preferred Stock if the Company is required or permitted to pay
dividends in additional shares of Junior Preferred Stock. The
liquidation preference of the Junior Preferred Stock shall be $1,000 per
share.
(b) Rank.
The Junior Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding up and
dissolution of the Company, rank senior to all classes of common stock
of the Company, and to each other class of capital stock or series of
preferred stock hereafter created by the Board of Directors the terms of
which do not expressly provide that it ranks senior to or on a parity
with the Junior Preferred Stock as to dividend distributions and
distributions upon the liquidation, winding up and dissolution of the
Company (collectively referred to with the common stock of the Company
as "Junior Securities"). The Junior Preferred Stock shall, with respect
to dividend distributions and distributions upon the liquidation,
winding up and dissolution of the Company, rank on a parity with any
class of capital stock or series of preferred stock hereafter created
which expressly provides that it ranks on a parity with the Junior
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding up and dissolution of the Company ("Parity
Securities"), provided that any such Parity Securities that were not
approved by the Holders in accordance with paragraph (f)(ii)(A) hereof
shall be deemed to be Junior Securities and not Parity Securities. The
Junior Preferred Stock shall, with respect to dividend distributions and
distributions upon the liquidation, winding up and dissolution of the
Company, rank junior to the Senior Preferred Stock and to each class of
capital stock or series of preferred stock hereafter created which has
been approved by the Holders of the
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<PAGE> 31
Junior Preferred Stock in accordance with paragraph (f)(ii)(B) and which
expressly provides that it ranks senior to the Junior Preferred Stock as
to dividend distributions or distributions upon the liquidation, winding
up and dissolution of the Company (collectively referred to with the
Senior Preferred Stock as "Senior Securities").
(c) Dividends.
(i) Beginning on the date of issuance of shares of the Junior
Preferred Stock, the Holders of the outstanding shares of Junior
Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors, out of funds legally available therefor,
distributions in the form of cash dividends on each share of Junior
Preferred Stock, at a rate per annum equal to 10% of the liquidation
preference per share of the Junior Preferred Stock, payable quarterly,
provided that if any dividend payable on any Dividend Payment Date is
not declared and paid in full in cash on such Dividend Payment Date, the
amount payable as dividends on such Dividend Payment Date that is not
paid in cash on such Dividend Payment Date shall be paid by the Company
in additional fully paid and non-assessable shares (including fractional
shares, if applicable) of Junior Preferred Stock having an aggregate
liquidation preference equal to the amount of such dividends (rounded to
the nearest whole cent), it being understood that dividends shall begin
to accrue from such Dividend Payment Date on such additional shares of
Junior Preferred Stock whether such additional shares of Junior
Preferred Stock are issued on such date or any later date or are never
issued. The payment of a dividend by the Company in such additional
shares of Junior Preferred Stock shall constitute full payment of such
dividend. All dividends shall be cumulative, whether or not earned or
declared, on a daily basis from the Preferred Stock Issue Date and shall
be payable quarterly in arrears on each Dividend Payment Date,
commencing on May 1, 1998. Each distribution in the form of a dividend
(whether in cash or in additional shares of Junior Preferred Stock)
shall be payable to Holders of record as they appear on the stock books
of the Company on such record dates, not less than 10 nor more than 45
days preceding the related Dividend Payment Date, as shall be fixed by
the Board of Directors.
(ii) All dividends paid with respect to shares of the Junior
Preferred Stock pursuant to paragraph (c)(i) shall be paid pro rata to
the Holders entitled thereto.
(iii) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of Directors
to declare, or the Company to pay or set apart for payment, any
dividends on shares of the Junior Preferred Stock at any time.
(iv) Dividends on account of arrears for any past Dividend
Period may be declared and paid at any time, without reference to any
regular Dividend Payment Date, to Holders of record on such date, not
more than 45 days prior to the payment thereof, as may be fixed by the
Board of Directors.
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(v) No full dividends shall be declared by the Board of
Directors or paid or funds set apart for payment of dividends by the
Company on any Parity Securities for any period unless full cumulative
dividends shall have been or contemporaneously are declared and paid in
full, or declared and (in the case of dividends payable in cash) a sum
in cash set apart sufficient for such payment, on the Junior Preferred
Stock for all Dividend Periods terminating on or prior to the date of
payment of such full dividends on such Parity Securities. If any
dividends are not paid in full, as aforesaid, upon the shares of the
Junior Preferred Stock and any other Parity Securities, all dividends
declared upon shares of the Junior Preferred Stock and any other Parity
Securities shall be declared pro rata based on the relative liquidation
preference of the Junior Preferred Stock and such Parity Securities.
(vi) (A) Except as permitted by paragraph (l)(i) hereof,
Holders of shares of the Junior Preferred Stock shall be entitled
to receive the dividends provided for in paragraph (c)(i) hereof
in preference to and in priority over any dividends upon any of
the Junior Securities.
(B) So long as any shares of Junior Preferred Stock are
outstanding and except as permitted by paragraph (l)(i) hereof,
the Company shall not (1) declare, pay or set apart for payment
any dividend on any of the Junior Securities or make any payment
on account of, or set apart for payment money for a sinking or
other similar fund for, the purchase, redemption or other
retirement of, any of the Junior Securities or any warrants,
rights, calls or options exercisable for or convertible into any
of the Junior Securities, or (2) make any distribution in respect
thereof, either directly or indirectly, and whether in cash,
obligations or shares of the Company or other property (other
than distributions or dividends in Junior Securities to the
holders of Junior Securities), or (3) permit any corporation or
other entity directly or indirectly controlled by the Company to
purchase or redeem any of the Junior Securities or any such
warrants, rights, calls or options unless full cumulative
dividends determined in accordance herewith have been paid in
full on the Junior Preferred Stock.
(vii) Dividends payable on shares of the Junior Preferred Stock
for any period less than a year shall be computed on the basis of a
360-day year of twelve 30-day months and the actual number of days
elapsed in the period for which payable. If any Dividend Payment Date
occurs on a day that is not a Business Day, any accrued dividends
otherwise payable on such Dividend Payment Date shall be paid on the
next succeeding Business Day.
(d) Liquidation Preference.
(i) Upon any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Company, the Holders of shares of
Junior Preferred Stock then outstanding shall be entitled to be paid,
out of the assets of the Company available for distribution to its
stockholders, $1,000 per share of Junior Preferred Stock, plus an amount
in cash equal to accumulated and unpaid dividends thereon to the date
fixed for liquidation, dissolution or winding up (including an amount
equal to a prorated dividend for the period from the last
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<PAGE> 33
Dividend Payment Date to the date fixed for liquidation, dissolution or
winding up) before any payment shall be made or any assets distributed
to the holders of any of the Junior Securities, including, without
limitation, common stock of the Company. Except as provided in the
preceding sentence, Holders of shares of Junior Preferred Stock shall
not be entitled to any distribution in the event of liquidation,
dissolution or winding up of the affairs of the Company. If the assets
of the Company are not sufficient to pay in full the liquidation
payments payable to the Holders of outstanding shares of the Junior
Preferred Stock and all Parity Securities, then the holders of all such
shares shall share equally and ratably in such distribution of assets of
the Company in accordance with the amounts which would be payable on
such distribution if the amount to which the Holders of outstanding
shares of Junior Preferred Stock and the holders of outstanding shares
of all Parity Securities are entitled were paid in full.
(ii) For the purposes of this paragraph (d), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities
or other consideration) of all or substantially all of the property or
assets of the Company nor the consolidation or merger of the Company
with or into one or more corporations or other entities shall be deemed
to be a liquidation, dissolution or winding up of the affairs of the
Company (unless such sale, conveyance, exchange or transfer is in
connection with a liquidation, dissolution or winding up of the business
of the Company).
(e) Redemption
(i) Optional Redemption.
(A) The Company may (subject to contractual and other
restrictions with respect thereto, including, without limitation,
restrictions imposed by the Credit Agreement and the Debenture
Indenture, and the legal availability of funds therefor), at the
option of the Company, redeem at any time or from time to time,
from any source of funds legally available therefor, in whole or
in part, in the manner provided in paragraph (e)(iii) hereof, any
or all of the shares of the Junior Preferred Stock, at a
redemption price equal to 100% of the liquidation preference per
share plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends per share (including an amount
in cash equal to a prorated dividend for the period from the
Dividend Payment Date immediately prior to the Redemption Date to
the Redemption Date) (the "Optional Redemption Price"), provided
that no optional redemption pursuant to this paragraph (e)(i)(A)
shall be authorized or made at any time when the Company is
making or required to make within the next 30 days, or purchasing
shares of Junior Preferred Stock under, a Change of Control Offer
in accordance with the provisions of paragraph (h) of this
Section 2 and provided, further, that no optional redemption of
only a portion of the then outstanding shares of Junior Preferred
Stock shall be authorized or made at any time when full
cumulative dividends on the Junior Preferred Stock for all past
Dividend Periods have not been declared and paid in full.
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<PAGE> 34
(B) In the event of a redemption pursuant to this
paragraph (e)(i) of only a portion of the then outstanding shares
of the Junior Preferred Stock, the Company shall effect such
redemption as it determines, pro rata according to the number of
shares held by each Holder of Junior Preferred Stock or by lot,
as may be determined by the Company in its sole discretion.
(ii) Mandatory Redemption. On February 1, 2010, the Company
shall redeem, subject to contractual and other restrictions with respect
thereto, including, without limitation, restrictions imposed by the
Credit Agreement and the Debenture Indenture, from any source of funds
legally available therefor, in the manner provided in paragraph (e)(iii)
hereof, all of the shares of the Junior Preferred Stock then outstanding
at a redemption price equal to 100% of the liquidation preference per
share, plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends per share (including an amount equal to
a prorated dividend for the period from the Dividend Payment Date
immediately prior to the Redemption Date to the Redemption Date) (the
"Mandatory Redemption Price").
(iii) Procedures for Redemption.
(A) At least 15 days and not more than 60 days prior to
the date fixed for any redemption of the Junior Preferred Stock,
written notice (the "Redemption Notice") shall be given by
first-class mail, postage prepaid, to each Holder of Junior
Preferred Stock of record on the record date fixed for such
redemption of the Junior Preferred Stock at such Holder's address
as the same appears on the stock register of the Company,
provided that no failure to give such notice nor any deficiency
therein shall affect the validity of the procedure for the
redemption of any shares of Junior Preferred Stock to be redeemed
except as to the Holder or Holders to whom the Company has failed
to give said notice or except as to the Holder or Holders whose
notice was defective. The Redemption Notice shall state: (1) that
whether the redemption is pursuant to paragraph (e)(i) or (e)(ii)
hereof; (2) the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be; (3) whether all or less
than all the outstanding shares of the Junior Preferred Stock are
to be redeemed and the total number of shares of the Junior
Preferred Stock being redeemed; (4) the number of shares of
Junior Preferred Stock held, as of the appropriate record date,
by the Holder that the Company intends to redeem; (5) the date
fixed for redemption; (6) that the Holder is to surrender to the
Company, at the place or places where certificates for shares of
Junior Preferred Stock are to be surrendered for redemption, in
the manner and at the price designated, his certificate or
certificates representing the shares of Junior Preferred Stock to
be redeemed; and (7) that dividends on the shares of the Junior
Preferred Stock to be redeemed shall cease to accrue on such
Redemption Date unless the Company defaults in the payment of the
Optional Redemption Price or the Mandatory Redemption Price, as
the case may be.
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(B) Each Holder of Junior Preferred Stock shall
surrender the certificate or certificates representing such
shares of Junior Preferred Stock to the Company, duly endorsed,
in the manner and at the place designated in the Redemption
Notice, and on the Redemption Date the full Optional Redemption
Price or the Mandatory Redemption Price, as the case may be, for
such shares shall be payable in cash to the Person whose name
appears on such certificate or certificates as the owner thereof,
and each surrendered certificate shall be canceled and retired.
In the event that less than all of the shares represented by any
such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(C) Unless the Company defaults in the payment in full
of the applicable redemption price, dividends on the Junior
Preferred Stock called for redemption shall cease to accumulate
on the Redemption Date, and the Holders of such redemption shares
shall cease to have any further rights with respect thereto on
the Redemption Date, other than the right to receive the Optional
Redemption Price or the Mandatory Redemption Price, as the case
may be, without interest.
(f) Voting Rights.
(i) The Holders of shares of the Junior Preferred Stock,
except as otherwise required under Delaware law or as set forth in
paragraphs (ii) and (iii) below, shall not be entitled or permitted to
vote on any matter required or permitted to be voted upon by the
stockholders of the Company.
(ii) (A) So long as any shares of the Junior Preferred Stock
are outstanding, the Company shall not authorize any class of
Parity Securities without the affirmative vote or consent of
Holders of at least a majority of the outstanding shares of
Junior Preferred Stock, voting or consenting, as the case may be,
separately as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting,
except that without the approval of Holders of the Junior
Preferred Stock, the Company may authorize and issue shares of
Parity Securities in exchange for, or the proceeds of which are
used to redeem or repurchase, any or all shares of Junior
Preferred Stock then outstanding, provided that, in the case of
Parity Securities issued in exchange for, or the proceeds of
which are used to redeem or repurchase, less than all shares of
Junior Preferred Stock then outstanding, (1) the aggregate
liquidation preference of such Parity Securities shall not exceed
the aggregate liquidation preference of, and accrued and unpaid
dividends on, and expenses in connection with the refinancing of,
the Junior Preferred Stock so exchanged, redeemed or repurchased,
(2) such Parity Securities shall not be Disqualified Capital
Stock and (3) such Parity Securities shall not be entitled to the
payment of cash dividends prior to the time at which cash
dividends would be permitted to be paid on the Junior Preferred
Stock.
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(B) So long as any shares of the Junior Preferred Stock
are outstanding, the Company shall not authorize any class of
Senior Securities (other than the Senior Preferred Stock) without
the affirmative vote or consent of Holders of at least a majority
of the outstanding shares of Junior Preferred Stock, voting or
consenting, as the case may be, separately as one class, given in
person or by proxy, either in writing or by resolution adopted at
an annual or special meeting; provided that nothing in the
foregoing shall require the approval of Holders of Junior
Preferred Stock in connection with the issuance of shares of
Senior Preferred Stock in payment of dividends on Senior
Preferred Stock.
(C) So long as any shares of the Junior Preferred Stock
are outstanding, the Company shall not amend this Section 2 so as
to affect adversely the specified rights, preferences, privileges
or voting rights of Holders of shares of Junior Preferred Stock
or to authorize the issuance of any additional shares of Junior
Preferred Stock (other than in payment of dividends on Junior
Preferred Stock) without the affirmative vote or consent of
Holders of at least a majority of the outstanding shares of
Junior Preferred Stock, voting or consenting, as the case may be,
separately as one class, given in person or by proxy, either in
writing or by resolution adopted at an annual or special meeting.
The affirmative vote or consent of Holders of at least a majority
of the outstanding shares of Junior Preferred Stock, voting or
consenting, as the case may be, separately as one class, whether
voting in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting, may waive compliance
with any provision of this Section 2.
(D) Except as set forth in paragraphs (f)(ii)(A) and
(f)(ii)(B) above, (1) the creation, authorization or issuance of
any shares of any Junior Securities, Parity Securities or Senior
Securities, or (2) the increase or decrease in the amount of
authorized capital stock of any class, including Senior Preferred
Stock, Junior Preferred Stock or any other series of any
preferred stock, shall not require the consent of Holders of
Junior Preferred Stock and shall not, unless not complying with
paragraphs (f)(ii)(A) and (f)(ii)(B) above, be deemed to affect
adversely the rights, preferences, privileges or voting rights of
Holders of shares of Junior Preferred Stock.
(iii) In any case in which the Holders of shares of the Junior
Preferred Stock shall be entitled to vote pursuant to this paragraph (f)
or pursuant to Delaware law, each Holder of shares of the Junior
Preferred Stock shall be entitled to one vote for each share of Junior
Preferred Stock held.
(g) Change of Control Offer. Subject to contractual and other
restrictions with respect thereto, including, without limitation,
restrictions imposed by the Credit Agreement and the Debenture
Indenture, upon the occurrence of a Change of Control, the Company shall
make an offer (a "Change of Control Offer") to each Holder of Junior
Preferred Stock to repurchase any or all of such Holder's shares of
Junior Preferred Stock at a purchase price
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in cash equal to 100.0% of the aggregate liquidation preference thereof
plus accumulated and unpaid dividends thereon, if any, to the date of
repurchase (the "Change of Control Payment").
(A) Within 30 days following any Change of Control, the
Company shall mail a notice to each Holder of Junior Preferred
Stock stating: (1) that the Change of Control Offer is being made
pursuant to this paragraph (g) and that all shares of Junior
Preferred Stock tendered will be accepted for payment; (2) the
purchase price and the purchase date, which shall be no sooner
than 30 nor later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"); (3) that any
shares not tendered will continue to accumulate dividends; (4)
that, unless the Company defaults in the payment of the Change of
Control Payment, all shares of Junior Preferred Stock accepted
for payment pursuant to the Change of Control Offer shall cease
to accumulate dividends after the Change of Control Payment Date;
(5) that Holders electing to have any shares of Junior Preferred
Stock repurchased pursuant to a Change of Control Offer will be
required to surrender such shares, with the form entitled "Option
of Holder to Elect Purchase" on the reverse of the shares of
Junior Preferred Stock, completed, or transfer by book-entry
transfer, to the Company or its transfer 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;
(6) that Holders will be entitled to withdraw their election if
the Company or the transfer agent, as the case may be, receives,
not later than the close of business on the third Business Day
preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the
Holder, the number of shares of Junior Preferred Stock delivered
for repurchase, and a statement that such Holder is withdrawing
his election to have such shares repurchased; and (7) that
Holders whose shares of Junior Preferred Stock are being
repurchased only in part will be issued new shares of Junior
Preferred Stock equal in liquidation preference to the
unpurchased portion of the shares of Junior Preferred Stock
surrendered (or transferred by book-entry transfer), which
unpurchased portion must be equal to $1,000 in liquidation
preference or an integral multiple thereof.
(B) On the Change of Control Payment Date, the Company
shall, to the extent lawful, (1) accept for payment all shares of
Junior Preferred Stock or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the
Company or its transfer agent an amount equal to the Change of
Control Payment in respect of all shares of Junior Preferred
Stock or portions thereof so tendered, and (3) deliver or cause
to be delivered to the transfer agent the shares of Junior
Preferred Stock so accepted together with an Officers'
Certificate stating the aggregate liquidation preference of such
Junior Preferred Stock or portions thereof being repurchased by
the Company. The Company or its transfer agent, as the case may
be, shall promptly mail to each Holder of shares of Junior
Preferred Stock so tendered the Change of Control Payment for
such shares or portions thereof. The Company shall promptly issue
a certificate representing shares of Junior Preferred
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Stock and mail (or cause to be transferred by book entry) to each
Holder a new certificate representing shares of Junior Preferred
Stock equal in liquidation preference to any unpurchased portion
of such shares surrendered by such Holder, if any; provided, that
each such certificate shall have a liquidation preference of
$1,000 or an integral multiple thereof. The Company 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) The Company 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
shares of Junior Preferred Stock in connection with a Change of
Control.
(D) The Company's obligations with respect to a Change
of Control Offer shall be satisfied to the extent actually
performed by a third party in accordance with the terms of this
paragraph (g).
(h) Conversion or Exchange.
The Holders of shares of Junior Preferred Stock shall not have
any rights hereunder to convert such shares into or exchange such shares
for shares of any other class or classes or of any other series of any
class or classes of Capital Stock of the Company.
(i) Preemptive Rights.
No shares of Junior Preferred Stock shall have any rights of
preemption whatsoever as to any securities of the Company, or any
warrants, rights or options issued or granted with respect thereto,
regardless of how such securities or such warrants, rights or options
may be designated, issued or granted.
(j) Reissuance of Junior Preferred Stock.
Shares of Junior Preferred Stock that have been issued and
reacquired in any manner, including shares purchased or redeemed or
exchanged, shall (upon compliance with any applicable provisions of the
laws of Delaware) have the status of authorized but unissued shares of
preferred stock of the Company undesignated as to series and may be
designated or redesignated and issued or reissued, as the case may be,
as part of any series of preferred stock of the Company (including
without limitation as Junior Preferred Stock).
(k) Business Day.
If any payment, redemption or exchange shall be required by the
terms of this Section 2 to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately
succeeding Business Day.
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(l) Certain Additional Provisions.
(i) Restricted Payments.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly make any Restricted
Payment, unless, at the time of such Restricted Payment: (1) no
Default Event shall have occurred and be continuing or would
occur as a consequence thereof; and (2) such Restricted Payment,
together with the aggregate of all other Restricted Payments made
by the Company and its Subsidiaries after the Preferred Stock
Issue Date, does not exceed the sum (the "Basket") of (a) (i)
Consolidated EBITDA of the Company for the period (taken as one
accounting period), commencing on the first day of the first
fiscal quarter commencing on or prior to the Preferred Stock
Issue Date, to and including the last day of the fiscal quarter
ended immediately prior to the date of each such calculation (or,
in the event Consolidated EBITDA for such period is a deficit,
then minus such deficit) less (ii) 150% of Consolidated Fixed
Charges for such period, plus (b) the aggregate Net Cash Proceeds
received by the Company from the sale of the Company's Qualified
Capital Stock (other than in each case (i) to a Subsidiary of the
Company), (ii) to the extent applied in connection with a
Qualified Exchange and (iii) to the extent applied to repurchase
Capital Stock pursuant to clause (b) of the definition of Other
Permitted Payments after the Preferred Stock Issue Date. The
foregoing provisions of this paragraph (m)(i) shall not prohibit
the following Restricted Payments: (A) a Qualified Exchange; (B)
the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment
would have complied with the provisions of this Section 1; and
(C) Other Permitted Payments. The full amount of any Restricted
Payment made pursuant to clause (B) of the immediately preceding
sentence (but not pursuant to clauses (A) or (C)) of the
immediately preceding sentence, however, will be deducted in the
calculation of the aggregate amount of Restricted Payments
available to be made pursuant to the Basket.
(ii) Reports.
So long as any shares of Junior Preferred Stock are outstanding,
the Company shall furnish to each Holder (at such Holder's address
listed in register of Junior Preferred Stock maintained by the transfer
agent and registrar of the Junior Preferred Stock): (i) beginning at the
end of the Company's first fiscal year ending after the Preferred Stock
Issue Date, 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 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 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.
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(m) Subordination.
(i) Agreement to Subordinate. Any and all payments and
distributions at any time declared or due on account of the Junior
Preferred Stock, including, without limitation, dividend, redemption and
change of control payments ("Preferred Stock Payments") shall be
subordinated in right of payment to the payment in full in cash or cash
equivalents of all Senior Indebtedness whether outstanding on the date
hereof or hereafter created, incurred, assumed or guaranteed, and that
such subordination is for the benefit of the holders of Senior
Indebtedness. For purposes of this paragraph (m), the term "Senior
Indebtedness" means (a) indebtedness of the Company arising under the
Credit Agreement and (b) the Discount Debentures.
(ii) Relative Rights. Upon any distribution of assets of the
Company, winding up, total or partial liquidation or reorganization of
the Company, whether voluntary or involuntary, the holders of all Senior
Indebtedness shall be entitled to receive payment on such Senior
Indebtedness in full in cash or cash equivalents before the holders of
Junior Preferred Stock shall be entitled to receive any Preferred Stock
Payments. No payment (by set-off or otherwise) may be made by or on
behalf of the Company with respect to Preferred Stock Payments for cash
or property, (x) upon the maturity of any Senior Indebtedness of the
Company by lapse of time, acceleration or otherwise, unless and until
all principal of, premium, if any, and the interest on and fees in
respect of such Senior Indebtedness are paid in full in cash or cash
equivalents, (y) when such payment is prohibited by the indenture or
credit agreement relating to the Senior Indebtedness and (z) in the
event of default in the payment of any principal of, premium, if any, or
interest on and fees in respect of Senior Indebtedness of the Company
when it becomes due and payable, whether at maturity or at a date fixed
for prepayment or by declaration or otherwise (a "Payment Default"),
unless and until such Payment Default has been cured or waived or
otherwise has ceased to exist.
(iii) When Amounts Must be Paid Over. In the event that,
notwithstanding the other provisions of this Certificate of
Designations, a Holder receives any Preferred Stock Payment at a time
when such Holder has actual knowledge that such payment or distribution
is prohibited by this paragraph (m) or the indenture or credit agreement
relating to the Senior Indebtedness, such Preferred Stock Payment shall
be held by the Holders in trust for the benefit of, and shall be paid
forthwith over and delivered, upon written request, to, the Holders of
Senior Indebtedness remaining unpaid or unprovided for, or to the
trustee or trustees under the indenture relating to the Senior
Indebtedness, ratably according to aggregate principal amounts remaining
unpaid on account of such Senior Indebtedness held or represented by
such, for application to the payment of all obligations with respect to
Senior Indebtedness remaining unpaid, to the extent necessary to pay or
to provide for the payment of all such obligations in full in cash or
cash equivalents in accordance with their terms, after giving effect to
any concurrent payment or distribution to or for Holders of Senior
Indebtedness.
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(n) Definitions and Interpretation.
(i) Definitions. As used in this Section 2, the following
terms shall have the following meanings, unless the context otherwise
requires:
"Acquisition" means the acquisition of the Business by the
Company and its Subsidiaries in accordance with the provisions of the
Acquisition Agreement.
"Acquisition Agreement" means, collectively: that certain Asset
Purchase Agreement dated as of November 21, 1997 by and among the
Company, Green Equity Investors, II, L.P., (for limited purposes)
Liberty Group Operating, Inc., Hollinger International Inc., APAC-90,
Inc., American Publishing (1991) Inc. and APAC-95, Inc. and that certain
Asset Purchase Agreement dated as of November 21, 1997 among the same
parties plus American Publishing Company of Illinois.
"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, the term "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, directly or through one or
more intermediaries, whether through the ownership of voting securities,
by contract, or otherwise, provided, that, with respect to ownership
interest in the Company and its Subsidiaries, a Beneficial Owner of 10%
or more of the total voting power normally entitled to vote in the
election of directors, managers or trustees, as applicable, shall for
such purposes be deemed to constitute control.
"Asset Sale" means, with respect to any specified Person, the
following: (i) (A) the sale, lease, conveyance or other disposition by
such Person of any assets (including, without limitation, by way of a
sale and leaseback) or (B) the issue or sale by such Person or any of
its Subsidiaries of Equity Interests of any of such Person's
Subsidiaries, and (ii) which occurs in a single transaction or a series
of related transactions.
"Beneficial Owner" or "beneficial owner" for purposes of the
definition of Change of Control and Affiliate has the meaning attributed
to it in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on
the Preferred Stock Issue Date), whether or not applicable.
"Board of Directors" means the Board of Directors of the Company.
"Business" means the business the assets of which were (or are to
be) purchased pursuant to the Asset Purchase Agreement (on a collective
basis).
"Business Day" means any day other than a Legal Holiday.
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"Capital Stock" means, with respect to any corporation, any and
all shares, interests, rights to purchase (other than convertible or
exchangeable Indebtedness that is not itself otherwise capital stock),
warrants, options, participations or other equivalents of or interests
(however designated) in stock issued by that corporation.
"Capitalized Lease Obligation" means, as to any person, the
obligations of such person under a lease that are required to be
classified and accounted for as capital lease obligations under GAAP
and, for purposes of this definition, the amount of such obligations at
any date shall be the capitalized amount of such obligations at such
date, determined in accordance with GAAP.
"Cash Equivalent" means (a) 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
one year from the date of acquisition thereof; (b) marketable general
obligations issued by any state of the United States of America or any
political subdivision of any such state or any public instrumentality
thereof maturing within one year from the date of acquisition thereof
and, at the time of acquisition thereof, having a credit rating of "A"
or better from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.; (c) certificates of deposit, time deposits,
eurodollar time deposits, overnight bank deposits or bankers'
acceptances having maturities of not more than one year from the date of
acquisition thereof of any domestic commercial bank, the long-term debt
of which is rated at the time of acquisition thereof at least "A" or the
equivalent thereof by either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc. and having capital and surplus in excess of
$500,000,000; (d) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses
(a), (b) and (c) above entered into with any bank meeting the
qualifications specified in clause (c) above; (e) commercial paper rated
at the time of acquisition thereof at least A-2 or the equivalent
thereof by Standard & Poor's Ratings Group or P-2 or the equivalent
thereof by Moody's Investors Service, Inc., or carrying an equivalent
rating by a nationally recognized rating agency, if both of the two
named rating agencies cease publishing ratings of investments, and in
either case maturing within 270 days after the date of acquisition
thereof; and (f) interests in any investment company which invests
solely in instruments of the type specified in clauses (a) through (e)
above.
"Certificate of Incorporation" means the Company's Certificate of
Incorporation.
"Change of Control" (i) any merger or consolidation of the
Company with or into any person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of
the assets of the Company on a consolidated basis, in one transaction or
a series of related transactions, if, immediately after giving effect to
such transaction(s), any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not
applicable), other than any Excluded Person or Excluded Persons, is or
becomes the Beneficial Owner, directly or indirectly, of more than 50%
of the total voting power in the aggregate normally entitled to vote in
the election of directors,
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managers or trustees, as applicable, of the transferee(s) or surviving
entity or entities, (ii) any "person" or "group," other than any
Excluded Person or Excluded Persons, becomes the Beneficial Owner,
directly or indirectly, of more than 50% of the total voting power in
the aggregate of all classes of Capital Stock of the Company then
outstanding normally entitled to vote in elections of directors, or
(iii) during any period of 12 consecutive months after the Preferred
Stock Issue Date, individuals who at the beginning of any such 12-month
period constituted the Board of Directors of the Company (together, in
each case, with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Company was approved by LGP or a Related Party of LGP or by the Excluded
Persons or by a vote of a majority of the directors then still in office
who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the
Company then in office, as applicable.
"Company" means this corporation.
"consolidated" means, with respect to the Company, the
consolidated accounts of its Subsidiaries with those of the Company, all
in accordance with GAAP; provided that "consolidated" will not include
consolidation of the accounts of any Unrestricted Subsidiary with the
accounts of the Company.
"Consolidated EBITDA" means, with respect to any person, for any
period, the Consolidated Net Income of such person for such period
adjusted to add thereto (to the extent deducted from net revenues in
determining Consolidated Net Income), without duplication, the sum of
(i) consolidated income taxes, (ii) consolidated depreciation and
amortization (including amortization of debt issuance costs in
connection with any Indebtedness of such person and its Subsidiaries),
(iii) Consolidated Fixed Charges and (iv) all other non-cash charges;
provided that consolidated income taxes, depreciation and amortization
of a Subsidiary of such person that is less than wholly owned shall only
be added to the extent of the equity interest of such person in such
Subsidiary.
"Consolidated Fixed Charges" of any person means, for any period,
the aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid,
accrued, or scheduled to be paid or accrued (including, in accordance
with the following sentence, interest attributable to Capitalized Lease
Obligations) of such person and its Consolidated Subsidiaries during
such period, excluding amortization of debt issuance costs incurred in
connection with the Discount Debentures, the Senior Subordinated Notes
or the Credit Agreement but including (i) original issue discount and
non-cash interest payments or accruals on any Indebtedness, (ii) the
interest portion of all deferred payment obligations, and (iii) all
commissions, discounts and other fees and charges owed with respect to
bankers' acceptances and letters of credit financings and currency and
Interest Swap and Hedging Obligations, in each case to the extent
attributable to such period, and (b) the amount of cash dividends paid
by such person or any of its Consolidated Subsidiaries in respect of
preferred stock (other than by Subsidiaries of such
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person to such person or such person's wholly owned Subsidiaries). For
purposes of this definition, (x) interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably
determined by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (y) to the
extent such expense would result in a liability upon the consolidated
balance sheet of such person in accordance with GAAP, interest expense
attributable to any Indebtedness represented by the guaranty by such
person or a Subsidiary of such person of an obligation of another person
shall be deemed to be the interest expense attributable to the
Indebtedness guaranteed. Notwithstanding the foregoing, Consolidated
Fixed Charges shall not include costs, fees and expenses incurred in
connection with the Acquisition, and any non-cash charge or expense
associated with the write-off of deferred debt issuance costs associated
with the Credit Agreement, the Senior Subordinated Notes or the Discount
Debentures.
"Consolidated Net Income" means, with respect to any Person for
any period, the net income (or loss) of such Person and its Consolidated
Subsidiaries (determined on a consolidated basis in accordance with
GAAP) for such period, adjusted to exclude (only to the extent included
in computing such net income (or loss) and without duplication): (a) all
gains and losses which are either extraordinary (as determined in
accordance with GAAP) or are either unusual or nonrecurring (including
any gain from the sale or other disposition of assets outside the
ordinary course of business or from the issuance or sale of any Capital
Stock), (b) the net income, if positive, of any person, other than a
Consolidated Subsidiary, in which such person or any of its Consolidated
Subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in cash to such person or a
Consolidated Subsidiary of such person during such period, but in any
case not in excess of such person's pro rata share of such person's net
income for such period, (c) the net income or loss of any person
acquired in a pooling of interests transaction for any period prior to
the date of such Acquisition, (d) the net income, if positive, of any of
such person's Consolidated Subsidiaries in the event and solely to the
extent that the declaration or payment of dividends or similar
distributions is not at the time permitted by operation of the terms of
its charter or bylaws or any other agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to
such Consolidated Subsidiary, (e) the effects of changes in accounting
principles, (f) any non-cash compensation expense in connection with the
exercise of, grant to or repurchase from officers, directors and
employees of stock, stock options or stock equivalents, (g) any non-cash
charge or expense associated with the write-off of deferred debt
issuance costs associated with the Credit Agreement, the Senior
Subordinated Notes or the Discount Debentures, and (h) costs, fees and
expenses incurred in connection with the Acquisition.
"Consolidated Subsidiary" means, for any person, each Subsidiary
of such person (whether now existing or hereafter created or acquired)
the financial statements of which are consolidated for financial
statement reporting purposes with the financial statements of such
person in accordance with GAAP.
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"Credit Agreement" means the one or more credit agreements
(including, without limitation, the Credit Agreement dated as of January
27, 1998 by and among Liberty Group Operating, Inc., Liberty Group
Publishing, Inc., Citicorp USA, Inc., as administrative agent and the
other parties named therein) entered into by and among the Company,
certain of its subsidiaries (if any) and certain financial institutions,
which provide for in the aggregate one or more term loans and/or
revolving credit and letter of credit facilities, including any related
notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, as such credit agreement and/or
related documents may be amended, restated, supplemented, renewed,
replaced or otherwise modified from time to time whether or not with the
same agent, trustee, representative lenders or holders, and, subject to
the proviso to the next succeeding sentence irrespective of any changes
in the terms and conditions thereof. Without limiting the generality of
the foregoing, the term "Credit Agreement" shall include any amendment,
amendment and restatement, renewal, extension, restructuring, supplement
or modification to any such credit agreement and all refundings,
refinancings and replacements of any such credit agreement, including
any agreement (i) extending the maturity of any Indebtedness incurred
thereunder or contemplated thereby, (ii) adding or deleting borrowers or
guarantors thereunder, so long as borrowers and issuers include one or
more of the Company and its Subsidiaries and their respective successors
and assigns, (iii) increasing the amount of Indebtedness incurred
thereunder or available to be borrowed thereunder, or (iv) otherwise
altering the terms and conditions thereof in a manner not prohibited by
the terms hereof.
"Debenture Indenture" means the Indenture, pursuant to which the
Discount Debentures will be issued.
"Default Event" means any of the following events: (1) any time
when the Company fails to make a mandatory redemption of the Senior
Preferred Stock when required (whether or not any contractual or other
restrictions apply to such redemption) pursuant to paragraph (e)(ii)
hereof; or (2) any time when the Company fails to make an offer to
repurchase all of the outstanding shares of Senior Preferred Stock
following a Change of Control, if such offer to repurchase is required
to be made pursuant to paragraph (g)(i) hereof (whether or not any
contractual or other restrictions apply to such redemption).
"Discount Debentures" means the 115/8% Senior Discount Debentures
due 2009 of the Company to be issued pursuant to the Debenture
Indenture.
"Disqualified Capital Stock" means (a) except as set forth in
(b), with respect to any person, any Equity Interest of such person
that, by its terms or by the terms of any security into which it is
convertible, exercisable or exchangeable, is, or upon the happening of
an event or the passage of time or both would be, required to be
redeemed or repurchased (including at the option of the holder thereof)
by such person or any of its Subsidiaries, in whole or in part, on or
prior to the Stated Maturity of the Discount Debentures and (b) with
respect to any Subsidiary of such person (including with respect to any
Subsidiary of the Company), any Equity Interests other than any common
equity with no preference,
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privileges, or redemption or repayment provisions and preferred equity
owned by the Company or one of its Subsidiaries.
"Dividend Payment Date " means February 1, May 1, August 1 and
November 1.
"Dividend Period" means the Initial Dividend Period and,
thereafter, each Quarterly Dividend Period.
"Equity Interest" of any Person means any shares, interests,
participations or other equivalents (however designated) in such
Person's equity, and shall in any event include any Capital Stock issued
by, or partnership or membership interests in, such Person.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Excluded Person" means GEI and its Related Parties.
"Exempted Affiliate Transaction" means (a) compensation,
indemnification and other benefits paid or made available (x) pursuant
to the employment agreements between the Company and members of its
senior management, (y) for or in connection with services actually
rendered to the Company and comparable to those generally paid or made
available by entities engaged in the same or similar businesses
(including reimbursement or advancement of reasonable out-of-pocket
expenses and loans to officers, directors and employees (i) in the
ordinary course of business and (ii) to purchase Company Common Stock in
an amount not to exceed $1.0 million, (b) transactions, expenses and
payments in connection with the Acquisition, (c) any Restricted Payments
or other payments or transactions expressly permitted under paragraph
l(i) hereof, (d) payments to LGP for management services under the
Management Services Agreement in an amount not to exceed $1.5 million in
any fiscal year, plus reimbursement of reasonable out-of-pocket costs
and expenses, (e) payments to LGP for reasonable and customary fees and
expenses for financial advisory and investment banking services provided
to the Company in connection with major financial transactions, and (f)
transactions between or among the Company and its Subsidiaries or
between or among Subsidiaries of the Company, provided that any
ownership interest in any such Subsidiary which is not beneficially
owned directly or indirectly by the Company or any of its Subsidiaries
is not beneficially owned by an Affiliate of the Company other than by
virtue of the direct or indirect ownership interest in such Subsidiary
held (in the aggregate) by the Company and/or one or more of its
Subsidiaries.
"GAAP" means United States 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 approved by a significant segment of the accounting profession
in the United States as in effect on the Preferred Stock Issue Date.
46
<PAGE> 47
"GEI" means Green Equity Investors II, L.P.
"Holder" means a Person in whose name a share of Junior Preferred
Stock is registered.
"Indebtedness" of any person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of any such
Person, to the extent such liabilities and obligations would appear as a
liability upon the consolidated balance sheet of such person in
accordance with GAAP, (i) in respect of borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such person
or only to a portion thereof), (ii) evidenced by bonds, notes,
debentures or similar instruments, (iii) representing the balance
deferred and unpaid of the purchase price of any property or services,
except those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors; (b) all
liabilities and obligations, contingent or otherwise, of such person (i)
evidenced by bankers' acceptances or similar instruments issued or
accepted by banks, (ii) relating to any Capitalized Lease Obligation, or
(iii) evidenced by a letter of credit or a reimbursement obligation of
such person with respect to any letter of credit; (c) all net
obligations of such person under Interest Swap and Hedging Obligations;
(d) all liabilities and obligations of others of the kind described in
the preceding clauses (a), (b) or (c) that such person has guaranteed or
that is otherwise its legal liability or which are secured by one or
more Liens on any assets or property of such Person; provided that if
the liabilities or obligations which are secured by a Lien have not been
assumed in full by such Person or are not such Person's legal liability
in full, the amount of such Indebtedness for the purposes of this
definition shall be limited to the lesser of the amount of such
Indebtedness secured by such Lien or the fair market value of the assets
or property securing such Lien; (e) any and all deferrals, renewals,
extensions, refinancing and refundings (whether direct or indirect) of,
or amendments, modifications or supplements to, any liability of the
kind described in any of the preceding clauses (a), (b), (c) or (d), or
this clause (e), whether or not between or among the same parties; and
(f) all Disqualified Capital Stock of such person (measured at the
greater of its voluntary or involuntary maximum fixed repurchase price
plus accrued and unpaid dividends). For purposes hereof, the "maximum
fixed repurchase price" of any Disqualified Capital Stock which does not
have a fixed repurchase price shall be calculated in accordance with the
terms of such Disqualified Capital Stock as if such Disqualified Capital
Stock were purchased on any date on which Indebtedness shall be required
to be determined pursuant to the Indenture, and if such price is based
upon, or measured by, the fair market value of such Disqualified Capital
Stock, such fair market value to be determined in good faith by the
board of directors of the issuer (or managing general partner of the
issuer) of such Disqualified Capital Stock.
"Interest Swap and Hedging Obligation" means any obligation of
any person pursuant to any interest rate swap agreement, interest rate
cap agreement, interest rate collar agreement, interest rate exchange
agreement, currency exchange agreement or any other agreement or
arrangement designed to protect against fluctuations in interest rates
or currency values, including, without limitation, any arrangement
whereby, directly or
47
<PAGE> 48
indirectly, such person is entitled to receive from time to time
periodic payments calculated by applying either a fixed or floating rate
of interest on a stated notional amount in exchange for periodic
payments made by such person calculated by applying a fixed or floating
rate of interest on the same notional amount.
"Investment" by any Person in any other Person means (without
duplication) (a) the acquisition (whether by purchase, merger,
consolidation or otherwise) by such Person (whether for cash, property,
services, securities or otherwise) of capital stock, bonds, notes,
debentures, partnership or other ownership interests or other
securities, including any options or warrants, of such other person or
any agreement to make any such acquisition; (b) the making by such
Person of any deposit with, or advance, loan or other extension of
credit to, such other Person (including the purchase of property from
another Person subject to an understanding or agreement, contingent or
otherwise, to resell such property to such other Person) or any
commitment to make any such advance, loan or extension (but excluding
accounts receivable, endorsements for collection or deposits arising in
the ordinary course of business); (c) other than guarantees of
Indebtedness of the Company or any Subsidiary; (d) the making of any
capital contribution by such person to such other person; and (e) the
designation by the Board of Directors of the Company of any person to be
an Unrestricted Subsidiary. The Company shall be deemed to make an
Investment in an amount equal to the fair market value of the net assets
of any subsidiary (or, if neither the Company nor any of its
Subsidiaries has theretofore made an Investment in such subsidiary, in
an amount equal to the Investments being made), at the time that such
subsidiary is designated an Unrestricted Subsidiary, and any property
transferred to an Unrestricted Subsidiary from the Company or a
Subsidiary of the Company shall be deemed an Investment valued at its
fair market value at the time of such transfer. The amount of any such
Investment shall be reduced by any liabilities or obligations of the
Company or any of its Subsidiaries to be assumed or discharged in
connection with such Investment by an entity other than the Company or
any of its Subsidiaries. For purposes of clarification and greater
certainty, the designation of a newly formed subsidiary as an
Unrestricted Subsidiary shall not constitute an Investment.
"Junior Preferred Stock" means the Company's Series B 10% Junior
Redeemable Cumulative Preferred Stock, par value $0.01 per share, with a
liquidation preference of $1,000 per share, consisting of 175,000
shares.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the Company's principal place of business, 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 for the intervening period.
"LGP" means Leonard Green & Partners, L.P.
48
<PAGE> 49
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation or other
encumbrance upon or with respect to any property of any kind, real or
personal, movable or immovable, now owned or hereafter acquired.
"Management Services Agreement" means that certain Management
Services Agreement dated as of the Closing Date by and between LGP, on
the one hand, and the Company and/or its Subsidiaries, on the other
hand, providing for certain annual fees, expenses and reimbursements to
be paid to LGP, as such Management Services Agreement may be amended
from time to time.
"Net Cash Proceeds" means the aggregate amount of cash or Cash
Equivalents received by the Company in the case of a sale of Qualified
Capital Stock and by the Company and its Subsidiaries in respect of an
Asset Sale plus, in the case of an issuance of Qualified Capital Stock
upon any exercise, exchange or conversion of securities (including
options, warrants, rights and convertible or exchangeable debt) of the
Company that were issued for cash on or after the Preferred Stock Issue
Date, the amount of cash originally received by the Company upon the
issuance of such securities (including options, warrants, rights and
convertible or exchangeable debt) less, in each case, the sum of all
payments, fees, commissions and (in the case of Asset Sales, reasonable
and customary) expenses (including, without limitation, the fees and
expenses of legal counsel and investment banking fees and expenses)
incurred in connection with such Asset Sale or sale of Qualified Capital
Stock, and, in the case of an Asset Sale only, less (i) the amount
(estimated reasonably and in good faith by the Company) of income,
franchise, sales and other applicable taxes required to be paid by the
Company or any of its respective Subsidiaries in connection with such
Asset Sale, (ii) the amounts of any repayments of Indebtedness secured,
directly or indirectly, by Liens on the assets which are the subject of
such Asset Sale or Indebtedness associated with such assets which is due
by reason of such Asset Sale (i.e., such disposition is permitted by the
terms of the instruments evidencing or applicable to such Indebtedness,
or by the terms of a consent granted thereunder, on the condition that
the proceeds (or portion thereof) of such disposition be applied to such
Indebtedness), and other fees, expenses and other expenditures, in each
case, reasonably incurred as a consequence of such repayment of
Indebtedness (whether or not such fees, expenses or expenditures are
then due and payable or made, as the case may be); (iii) all amounts
deemed appropriate by the Company (as evidenced by a signed certificate
of the Chief Financial Officer of the Company delivered to the Holders)
to be provided as a reserve, in accordance with GAAP, against any
liabilities associated with such assets which are the subject of such
Asset Sale; and (iv) with respect to Asset Sales by Subsidiaries of the
Company, the portion of such cash payments attributable to persons
holding a minority interest in such Subsidiary.
"obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any Indebtedness.
49
<PAGE> 50
"Other Permitted Payments" means, without duplication, (a) the
payments provided for by clauses (a), (d) and (e) of the definition of
"Exempted Affiliate Transaction"; (b) the repurchase of common stock,
stock options and stock equivalents of the Company held by former
directors, officers or employees of the Company or any of its
Subsidiaries ("Management Stock Repurchases") in an aggregate amount not
to exceed in any fiscal year $1.0 million, plus the amount of any net
cash proceeds to the Company from (I) sales of Capital Stock of the
Company to management employees subsequent to the Preferred Stock Issue
Date (provided further that the amount of any such net cash proceeds to
the Company to the extent used for Management Stock Repurchases will be
excluded from the calculation of the available Basket pursuant to
paragraph (l)(i)); and (II) any key-person life insurance policies, in
either case, to the extent utilized for Management Stock Repurchases;
provided, that any amount not so paid in any fiscal year may be paid in
future fiscal years; and (c) Restricted Payments in an aggregate amount
not to exceed $4.0 million.
"Permitted Affiliate Transaction" means any Exempt Affiliate
Transaction and any other contract, agreement, arrangement or
transaction between the Company or any of its Subsidiaries with any
Affiliate (an "Affiliate Transaction") or any series of related
Affiliate Transactions the terms of which are fair and reasonable to the
Company or such Subsidiary, as the case may be, and are at least as
favorable as the terms which could reasonably be expected to be obtained
by the Company or such Subsidiary, as the case may be, in a comparable
transaction made on an arm's length basis with persons who are not
Affiliates; provided that in connection with any Affiliate Transaction
or series of related Affiliate Transactions (other than Exempted
Affiliate Transactions) (1) involving consideration to either party in
excess of $1.5 million, the Company must deliver an Officer's
Certificate to the Holders, stating that the terms of such Affiliate
Transaction are fair and reasonable to the Company, and no less
favorable to the Company than could reasonably be expected to have been
obtained in an arm's length transaction with a non-Affiliate, and (2)
involving consideration to either party in excess of $7.5 million, the
Company must also, prior to consummation thereof, obtain a favorable
written opinion as to the fairness of such transaction to the Company
from a financial point of view from an independent investment banking
firm of national reputation or, if pertaining to a matter for which such
investment banking firms do not customarily render such opinions, an
appraisal or valuation firm of national reputation; provided further,
that these requirements shall not apply to the sale or purchase of
products or services by the Company or its Subsidiaries to or from any
Affiliate of LGP or any Related Party thereof, which sale or purchase is
in the ordinary course of business and in accordance with industry
practice.
"Permitted Investment" means Investments in (a) any of the
Discount Debentures; (b) Cash Equivalents; (c) intercompany notes,
provided that Indebtedness under any such notes of a Subsidiary shall be
deemed to be a Restricted Investment if such person ceases to be a
Subsidiary; (d) Investments in the form of promissory notes of members
of the Company's management not to exceed $1.0 million in principal
amount at any time outstanding solely in consideration of the purchase
by such persons of Qualified Capital Stock of the Company; (e)
Investments by the Company or any Subsidiary in any person that
50
<PAGE> 51
is or immediately after such Investment becomes a Subsidiary, or
immediately after such Investment merges or consolidates into the
Company or any Subsidiary, provided that such person is engaged in all
material respects in a Related Business; (f) Investments in the Company
by any Subsidiary, provided that in the case of Indebtedness
constituting any such Investment, such Indebtedness shall be unsecured
and subordinated in all respects to the Company's obligations under the
Discount Debentures; (g) Investments in securities of trade creditors or
customers received in settlement of obligations that arose in the
ordinary course of business or pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of such trade
creditors or customers; (h) Investments by the Company outstanding on
the Preferred Stock Issue Date; (i) transactions or arrangements with
officers or directors of the Company or any Subsidiary entered into in
the ordinary course of business (including compensation or employee
benefit arrangements with any officer or director of the Company or any
Subsidiary which are Permitted Affiliate Transactions); (j) Investments
in persons (other than Affiliates of the Company) received as
consideration from Asset Sales; (k) additional Investments at any time
outstanding not to exceed the sum of (i) $5.0 million and (ii) the
cumulative gain (net of taxes and all payments, fees, commissions and
expenses incurred in such sale or disposition) realized by the Company
and its Subsidiaries in cash or Cash Equivalents on the sale or other
disposition after the Preferred Stock Issue Date of Investments
(including Permitted Investments and Restricted Investments) made after
the Preferred Stock Issue Date in accordance with the Indenture (but
only to the extent that such gain is excluded from the net income of the
Company and the Consolidated Subsidiaries by the definition of
Consolidated Net Income); and (l) the acquisition of Equity Interests of
a Person engaged in a Related Business, other than a Person described in
clause (e), through the issuance of Common Stock of the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint-stock company,
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).
"Preferred Stock Issue Date" means the date on which the Junior
Preferred Stock is originally issued by the Company under this Section
2.
"Qualified Capital Stock" means any Equity Interest that is not
Disqualified Capital Stock.
"Qualified Exchange" means any legal defeasance, redemption,
retirement, repurchase or other acquisition of Capital Stock or
Indebtedness of the Company issued on or after the Preferred Stock Issue
Date with the Net Cash Proceeds received by the Company from the
substantially concurrent sale of its Qualified Capital Stock or any
exchange of Qualified Capital Stock of the Company for any Capital Stock
or Indebtedness of the Company issued on or after the Issue Date.
51
<PAGE> 52
"Quarterly Dividend Period" shall mean the quarterly period
commencing on each February 1, May 1, August 1 and November 1 and ending
on the day before the following Dividend Payment Date.
"Redemption Date" with respect to any shares of Junior Preferred
Stock, means the date on which such shares of Junior Preferred Stock are
redeemed by the Company.
"Related Business" means the business conducted (or proposed to
be conducted, including the activities referred to as being contemplated
by the Company, as described or referred to in this Offering Memorandum)
by the Company as of the Issue Date and any and all businesses that in
the good faith judgment of the Board of Directors of the Company are
reasonably related businesses, including reasonably related extensions
thereof.
"Related Party" means any partnership or corporation which is
managed by or controlled by LGP or any Affiliate thereof.
"Restricted Investment" means, in one or a series of related
transactions, any Investment, other than investments in Cash Equivalents
and other Permitted Investments; provided, however, that a merger of
another person with or into the Company or a Subsidiary in accordance
with the terms of the Indenture shall not be deemed to be a Restricted
Investment so long as the surviving entity is the Company or a direct
wholly owned Subsidiary.
"Restricted Payment" means, (a) the declaration or payment of any
dividend or other distribution in respect of Junior Securities or Equity
Interests of the Company or any of the Company's Subsidiaries, (b) any
payment on account of the purchase, redemption or other acquisition or
retirement for value of Junior Securities or Equity Interests of the
Company or any of the Company's Subsidiaries, and (c) any Restricted
Investment by such person; provided, however, that the term "Restricted
Payment" does not include (i) any dividend, distribution or other
payment on or with respect to Equity Interests of the Company to the
extent payable solely in shares of Qualified Capital Stock of the
Company; (ii) any dividend, distribution or other payment to the
Company, or to any of its Subsidiaries , by the Company or any of its
Subsidiaries; (iii) payments made pursuant to the Acquisition; (iv)
Permitted Investments; or (v) pro rata dividends and other distributions
on Equity Interests of any Subsidiary by such Subsidiary.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"SEC" means the Securities and Exchange Commission.
"Senior Subordinated Notes" means the 93/8% Senior Subordinated
Notes due 2008 of Liberty Group Operating, Inc., a subsidiary of the
Company.
52
<PAGE> 53
"Senior Preferred Stock" means the Company's Series A 14 3/4%
Senior Redeemable Exchangeable Cumulative Preferred Stock, par value
$0.01 per share, with a liquidation preference of $25 per share,
consisting of 21,000,000 shares.
"Stated Maturity," when used with respect to any Discount
Debenture, means February 1, 2009.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than
50.0% of the total voting power of the Equity Interests 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 (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).
"Unrestricted Subsidiary" means any subsidiary of the Company
that does not own any Capital Stock of, or own or hold any Lien on any
property of the Company or any other Subsidiary of the Company and that,
at the time of determination, shall be an Unrestricted Subsidiary (as
designated by the Board of Directors of the Company); provided, that (i)
such subsidiary shall not engage, to any substantial extent, in any line
or lines of business activity other than a Related Business and (ii)
neither immediately prior thereto nor after giving pro forma effect to
such designation would there exist a Default Event. The Board of
Directors of the Company may designate any Unrestricted Subsidiary to be
a Subsidiary, provided that no Default Event is existing or will occur
as a consequence thereof. Each such designation shall be evidenced by
delivering to the Holders a certified copy of the resolution giving
effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions.
"wholly owned Subsidiary" of any Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership
interests of which (other than directors' qualifying shares and shares
in non-U.S. companies required by local law to be owned by local
residents) shall at the time be owned (i) by such Person, (ii) by one or
more wholly owned Subsidiaries of such Person or (iii) by such Person
and one or more wholly owned Subsidiaries of such Person.
(ii) Interpretation. For the purposes of this Certificate of
Designations: (x) words in the singular shall be held to include the
plural and vice versa and words of one gender shall be held to include
the other gender as the context requires and (y) the word "including"
and words of similar import shall mean "including, without limitation,"
unless the context otherwise requires or unless otherwise specified.
53
<PAGE> 54
(o) Transfer Restrictions.
If certificated, the certificates evidencing shares of Junior
Preferred Stock shall, until the second anniversary of the date of
original issuance of such shares, unless otherwise agreed by the Company
and the holders of any such certificates, bear a legend substantially to
the following effect:
"The Junior Preferred Stock 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 Junior Preferred Stock evidenced hereby may not be
offered, sold or otherwise transferred in the absence of
such registration or an applicable exemption therefrom. In
connection with any transfer, the holder will deliver to
the registrar and transfer agent such certificates and
other information as it may reasonably require to confirm
that the transfer complies with the foregoing
restrictions."
The shares of Junior Preferred Stock not otherwise registered pursuant
to an effective registration statement under the Securities Act shall be
subject to the restrictions on transfer set forth in the legend referred
to above until the second anniversary of the date of original issuance
of such shares of Junior Preferred Stock.
54
<PAGE> 55
IN WITNESS WHEREOF, Liberty Group Publishing, Inc. has caused this
Certificate to be executed by its President and Secretary this ___ day of
January, 1998.
LIBERTY GROUP PUBLISHING, INC.
By: /s/ Kenneth L. Serota
-------------------------------------
Kenneth L. Serota
55
<PAGE> 1
EXHIBIT 4.3
_________________________________________________________
LIBERTY GROUP PUBLISHING, INC.
TO
STATE STREET BANK AND TRUST COMPANY
as Trustee
________________
Indenture
Dated as of January 27, 1998
________________
14 3/4% Senior Subordinated Debentures due 2010
___________________________________________________________
<PAGE> 2
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of January 27, 1998
Trust Indenture Indenture
Act Section Section
- ----------------- -----------
Section 310(a)(1) ............................... 609
(a)(2) ............................... 609
(a)(3) ............................... Not
Applicable
(a)(4) ............................... Not
Applicable
(b) ............................... 608
610
Section 311(a) ............................... 613(a)
(b) ............................... 613(b)
(b)(2) ............................... 703(a)(2)
703(b)
Section 312(a) ............................... 701
702(a)
(b) ............................... 702(b)
(c) ............................... 702(c)
Section 313(a) ............................... 703(a)
(b) ............................... 703(b)
(c) ............................... 703(a)
703(b)
(d) ............................... 703(c)
Section 314(a) ............................... 704
(b) ............................... Not
Applicable
(c)(1) ............................... 102
(c)(2) ............................... 102
(c)(3) ............................... Not
Applicable
(d) ............................... Not
Applicable
(e) ............................... 102
Section 315(a) ............................... 601(a)
(b) ............................... 602
703(a)(6)
(c) ............................... 601(b)
(d) ............................... 601(c)
(d)(1) ............................... 601(a)(1)
(d)(2) ............................... 601(c)(2)
(d)(3) ............................... 601(c)(3)
(e) ............................... 514
<PAGE> 3
Trust Indenture Indenture
Act Section Section
- ----------------- -----------
Section 316(a) ............................... 101
(a)(1)(A) ............................... 502
512
(a)(1)(B) ............................... 513
(a)(2) ............................... Not
Applicable
(b) ............................... 508
Section 317(a)(1) ............................... 503
(a)(2) ............................... 504
(b) ............................... 1003
Section 318(a) ............................... 107
______________
Note: This reconciliation and tie shall not, for any purpose, be deemed
to be a part of the Indenture.
<PAGE> 4
TABLE OF CONTENTS
Page
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions..................................... 1
SECTION 102. Compliance Certificates and Opinions............ 32
SECTION 103. Form of Documents Delivered to Trustee.......... 33
SECTION 104. Acts of Holders; Record Date.................... 34
SECTION 105. Notices, Etc., to Trustee and Company........... 35
SECTION 106. Notice to Holders; Waiver....................... 35
SECTION 107. Conflict with Trust Indenture Act............... 36
SECTION 108. Effect of Headings and
Table of Contents............................... 36
SECTION 109. Successors and Assigns.......................... 37
SECTION 110. Separability Clause............................. 37
SECTION 111. Benefits of Indenture........................... 37
SECTION 112. Governing Law................................... 37
SECTION 113. Legal Holidays.................................. 37
SECTION 114. No Personal Liability of Partners,
Stockholders, Officers, Directors............... 38
ARTICLE TWO
Debenture Forms
SECTION 201. Forms Generally................................. 38
ARTICLE THREE
The Debentures
SECTION 301. Title and Terms................................. 40
SECTION 302. Denominations................................... 43
SECTION 303. Execution, Authentication, Delivery
and Dating...................................... 43
SECTION 304. Temporary Debentures............................ 44
SECTION 305. Registration, Registration of Transfer
and Exchange.................................... 44
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Debentures...................................... 55
-i-
<PAGE> 5
Page
----
SECTION 307. Payment of Interest; Interest Rights
Preserved...................................... 56
SECTION 308. Persons Deemed Owners.......................... 58
SECTION 309. Cancellation................................... 58
SECTION 310. Computation of Interest........................ 59
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture........ 59
SECTION 402. Application of Trust Money..................... 60
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.............................. 61
SECTION 502. Acceleration of Maturity; Rescission and
Annulment...................................... 63
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee......................... 64
SECTION 504. Trustee May File Proofs of Claim............... 65
SECTION 505. Trustee May Enforce Claims Without
Possession of Debentures....................... 66
SECTION 506. Application of Money Collected................. 66
SECTION 507. Limitation on Suits............................ 66
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest................ 67
SECTION 509. Restoration of Rights and Remedies............. 68
SECTION 510. Rights and Remedies Cumulative................. 68
SECTION 511. Delay or Omission Not Waiver................... 68
SECTION 512. Control by Holders............................. 69
SECTION 513. Waiver of Past Defaults........................ 69
SECTION 514. Undertaking for Costs.......................... 70
SECTION 515. Waiver of Usury, Stay or Extension Laws........ 70
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities............ 70
SECTION 602. Notice of Defaults............................. 71
-ii-
<PAGE> 6
Page
----
SECTION 603. Certain Rights of Trustee...................... 71
SECTION 604. Not Responsible for Recitals or
Issuance of Debentures......................... 72
SECTION 605. May Hold Debentures............................ 73
SECTION 606. Money Held in Trust............................ 73
SECTION 607. Compensation and Reimbursement................. 73
SECTION 608. Disqualification; Conflicting Interests........ 74
SECTION 609. Corporate Trustee Required; Eligibility........ 74
SECTION 610. Resignation and Removal; Appointment of
Successor...................................... 74
SECTION 611. Acceptance of Appointment by Successor......... 76
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business...................... 76
SECTION 613. Preferential Collection of Claims
Against Company................................ 77
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee
Names and Addresses of Holders................. 77
SECTION 702. Preservation of Information;
Communications to Holders...................... 78
SECTION 703. Reports by Trustee............................. 78
SECTION 704. Reports by Company............................. 78
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Limitation on Merger, Sale
or Consolidation.............................. 79
SECTION 802. Successor Substituted......................... 80
SECTION 803. Transfer of Subsidiary Assets................. 80
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without
Consent of Holders............................ 81
-iii-
<PAGE> 7
Page
----
SECTION 902. Supplemental Indentures with Consent
of Holders.................................... 82
SECTION 903. Execution of Supplemental Indentures.......... 83
SECTION 904. Effect of Supplemental Indentures............. 83
SECTION 905. Conformity with Trust Indenture Act........... 83
SECTION 906. Reference in Debentures to Supplemental
Indentures.................................... 83
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and
Interest...................................... 84
SECTION 1002. Maintenance of Office or Agency............... 84
SECTION 1003. Money for Debenture Payments to be
Held in Trust................................. 85
SECTION 1004. Existence..................................... 86
SECTION 1005. Maintenance of Properties..................... 87
SECTION 1006. Payment of Taxes and Other Claims............. 87
SECTION 1007. Maintenance of Insurance...................... 88
SECTION 1008. Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital
Stock......................................... 88
SECTION 1009. Limitation on Restricted Payments............. 89
SECTION 1010. Limitations on Dividends and Other
Payment Restrictions Affecting
Subsidiaries.................................. 91
SECTION 1011. Limitation on Liens Securing
Indebtedness.................................. 92
SECTION 1012. Limitation on Transactions
with Affiliates............................... 93
SECTION 1013. Limitation on Sale of Assets and
Subsidiary Stock.............................. 94
SECTION 1014. Limitation on Issuances and Sales of
Capital Stock of Wholly Owned
Subsidiaries.................................. 99
SECTION 1015. Repurchase of Debentures at the Option
of the Holder Upon a Change of Control........ 99
SECTION 1016. Investment Company............................ 102
SECTION 1017. Limitation on Lines of Business............... 102
SECTION 1018. Statement by Officers as to
Default; Compliance Certificates.............. 102
SECTION 1019. Waiver of Certain Covenants................... 103
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ARTICLE ELEVEN
Redemption of Debentures
SECTION 1101. Right of Redemption........................... 103
SECTION 1102. Applicability of Article...................... 104
SECTION 1103. Election to Redeem; Notice to Trustee......... 104
SECTION 1104. Selection by Trustee of Debentures to Be
Redeemed...................................... 104
SECTION 1105. Notice of Redemption.......................... 105
SECTION 1106. Deposit of Redemption Price................... 105
SECTION 1107. Debentures Payable on Redemption Date......... 106
SECTION 1108. Debentures Redeemed in Part................... 106
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. Company's Option to Effect Defeasance or
Covenant Defeasance........................... 107
SECTION 1202. Defeasance and Discharge...................... 107
SECTION 1203. Covenant Defeasance........................... 107
SECTION 1204. Conditions to Defeasance or
Covenant Defeasance........................... 108
SECTION 1205. Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions................ 111
SECTION 1206. Reinstatement................................. 112
ARTICLE THIRTEEN
Subordination
SECTION 1301. Agreement to Subordinate...................... 112
SECTION 1302. Liquidation; Dissolution; Bankruptcy.......... 112
SECTION 1303. Default on Senior Indebtedness................ 113
SECTION 1304. Acceleration of Debentures.................... 115
SECTION 1305. When Distribution Must Be Paid Over........... 115
SECTION 1306. Notice by Company............................. 116
SECTION 1307. Subrogation................................... 116
SECTION 1308. Relative Rights............................... 117
SECTION 1309. Subordination May Not Be Impaired
by Company.................................... 117
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SECTION 1310. Distribution or Notice to Senior Discount
Debentures Trustee............................ 118
SECTION 1311. Rights of Trustee and Paying Agent............ 119
SECTION 1312. Authorization to Effect Subordination......... 119
SECTION 1313. Amendments.................................... 120
Annex A FORM OF DEBENTURE.................................. A-1
Annex B FORM OF REGULATION S CERTIFICATE
FOR HOLDER......................................... B-1
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INDENTURE, dated as of January 27, 1998, between Liberty Group
Publishing, Inc., a corporation duly organized and existing under the laws of
the State of Delaware (herein called the "Company"), having its principal
office at 3000 Dundee Road, Suite 203, Northbrook, Illinois 60062, and State
Street Bank and Trust Company, a trust company duly organized and existing
under the laws of the Commonwealth of Massachusetts, as Trustee (herein called
the "Trustee").
Each party agrees as follows from and after the Exchange Date for the
benefit of each other and for the equal and ratable benefit of the Holders of
the Company's 14 3/4% Series A Senior Subordinated Debentures due 2010 and the
class of 14 3/4% Series B Senior Subordinated Debentures due 2010 to be
exchanged for the 14 3/4% Series A Senior Subordinated Debentures due 2010 of
the Company:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
(4) unless otherwise specifically set forth herein, all calculations
or determinations of a Person shall be performed or made on a
consolidated basis in accordance with generally accepted accounting
principles; and
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(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that
Article.
"Acquired Indebtedness" means Indebtedness or Disqualified Capital
Stock of any Person existing at the time such Person becomes a Subsidiary of
the Company, including by designation, or is merged or consolidated into or
with the Company or one of its Subsidiaries.
"Acquisition" means the purchase or other acquisition of, or
combination with, any Person (including, without limitation, the acquisition of
more than 50% of the Equity Interests of any Person) or all or substantially
all the assets of any Person by any other Person, whether by purchase, stock
purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Affiliate" means any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. For
purposes of this definition, the term "control" means the power to direct the
management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by
contract, or otherwise, provided, that, with respect to ownership interest in
the Company and its Subsidiaries, a Beneficial Owner of 10% or more of the
total voting power normally entitled to vote in the election of directors,
managers or trustees, as applicable, shall for such purposes be deemed to
constitute control.
"Asset Sale" has the meaning set forth in Section 1013.
"Asset Sale Offer" has the meaning set forth in Section 1013.
"Average Life" means, as of the date of determination, with respect to
any security or instrument, the quotient obtained by dividing (i) the sum of
the
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products (a) of the number of months from the date of determination to the date
or dates of each successive scheduled principal (or redemption) payment of such
security or instrument and (b) the amount of each such respective principal (or
redemption) payment by (ii) the sum of all such principal (or redemption)
payments.
"Beneficial Owner" or "beneficial owner" for purposes of the definition
of Change of Control and Affiliate has the meaning attributed to it in Rules
13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue Date),
whether or not applicable.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any committee of the Board of Directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the board of directors of such Person.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York
or Hartford, Connecticut are authorized or obligated by law or executive order
to close.
"Capitalized Lease Obligation" means, as to any Person, the obligations
of such Person under a lease that are required to be classified and accounted
for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means, with respect to any corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
Indebtedness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of or interests (however designated) in
stock issued by that corporation.
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"Cash Equivalent" means (a) 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 one year from the
date of acquisition; (b) marketable general obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition thereof, having a credit
rating of "A" or better from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.; (c) certificates of deposit, time deposits, Eurodollar
time deposits, overnight bank deposits or bankers' acceptances having
maturities of not more than one year from the date of acquisition thereof of
any domestic commercial bank, the long-term debt of which is rated at the time
of acquisition thereof at least A or the equivalent thereof by Standard &
Poor's Ratings Group, or A or the equivalent thereof by Moody's Investors
Service, Inc. and having capital and surplus in excess of $500,000,000; (d)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (a), (b) and (c) above entered
into with any bank meeting the qualifications specified in clause (c) above;
(e) commercial paper rated at the time of acquisition thereof at least A-2 or
the equivalent thereof by Standard & Poor's Ratings Group or P-2 or the
equivalent thereof by Moody's Investors Service, Inc., or carrying an
equivalent rating by a nationally recognized rating agency, if both of the two
named rating agencies cease publishing ratings of investments, and in either
case maturing within 270 days after the date of acquisition thereof; and (f)
interests in any investment company which invests solely in instruments of the
type specified in clauses (a) through (e) above.
"CEDEL" has the meaning set forth in Section 201.
"Change of Control" has the meaning specified in Section 1015.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or, if at any time after
the execution of this instrument such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
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"Common Stock" of any Person means Capital Stock of such Person that
does not rank prior, as to the payment of dividends or as to the distribution
of assets upon any voluntary or involuntary liquidation, dissolution or winding
up of such Person, to shares of Capital Stock of any other class of such
Person.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President
or a Vice President, and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"consolidated" means, with respect to the Company, the consolidated
accounts of its Subsidiaries with those of the Company, all in accordance with
GAAP; provided that "consolidated" will not include consolidation of the
accounts of any Unrestricted Subsidiary with the accounts of the Company.
"Consolidated EBITDA" means, with respect to any Person, for any
period, the Consolidated Net Income of such Person for such period adjusted to
add thereto (to the extent deducted from net revenues in determining
Consolidated Net Income), without duplication, the sum of (i) consolidated
income taxes, (ii) consolidated depreciation and amortization (including
amortization of debt issuance costs in connection with any Indebtedness of
such Person and its Subsidiaries), (iii) Consolidated Fixed Charges and (iv)
all other non-cash charges; provided that consolidated income taxes,
depreciation and amortization of a Subsidiary of such Person that is less than
wholly owned shall only be added to the extent of the equity interest of such
Person in such Subsidiary.
"Consolidated Fixed Charges" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of (a) interest expensed or capitalized, paid, accrued, or scheduled
to be paid or accrued (including, in accordance with the following sentence,
interest attributable to
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Capitalized Lease Obligations) of such Person and its Consolidated Subsidiaries
during such period, excluding amortization of debt issuance costs incurred in
connection with the Debentures, the Senior Discount Debentures, the Principal
Subsidiary Notes or the Credit Agreement but including (i) original issue
discount and non-cash interest payments or accruals on any Indebtedness, (ii)
the interest portion of all deferred payment obligations, and (iii) all
commissions, discounts and other fees and charges owed with respect to bankers'
acceptances and letters of credit financings and currency and Interest Swap and
Hedging Obligations, in each case to the extent attributable to such period,
and (b) the amount of cash dividends paid by such Person or any of its
Consolidated Subsidiaries in respect of Preferred Stock (other than by
Subsidiaries of such Person to such Person or such Person's wholly owned
Subsidiaries). For purposes of this definition, (x) interest on a Capitalized
Lease Obligation shall be deemed to accrue at an interest rate reasonably
determined by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (y) to the extent such
expense would result in a liability upon the consolidated balance sheet of such
Person in accordance with GAAP, interest expense attributable to any
Indebtedness represented by the guaranty by such Person or a Subsidiary of such
Person of an obligation of another Person shall be deemed to be the interest
expense attributable to the Indebtedness guaranteed. Notwithstanding the
foregoing, Consolidated Fixed Charges shall not include costs, fees and
expenses incurred in connection with the Transactions, and any non-cash charge
or expense associated with the write-off of deferred debt issuance costs
associated with the Credit Agreement, the Principal Subsidiary Notes, the
Senior Discount Debentures or the Debentures.
"Consolidated Net Income" means, with respect to any Person for any
period, the net income (or loss) of such Person and its Consolidated
Subsidiaries (determined on a consolidated basis in accordance with GAAP) for
such period, adjusted to exclude (only to the extent included in computing such
net income (or loss) and without duplication): (a) all gains and losses which
are either extraordinary (as determined in accordance with GAAP) or are either
unusual or nonrecurring (including any gain from the sale or other disposition
of assets outside the ordinary course of business or from the issuance or sale
of any Capital Stock), (b) the net income, if positive, of any Person, other
than a Consolidated Subsidiary, in which such
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Person or any of its Consolidated Subsidiaries has an interest, except to the
extent of the amount of any dividends or distributions actually paid in cash to
such Person or a Consolidated Subsidiary of such Person during such period, but
in any case (i) not in excess of such Person's pro rata share of such Person's
net income for such period, (c) the net income or loss of any Person acquired
in a pooling of interests transaction for any period prior to the date of such
Acquisition, (d) the net income, if positive, of any of such Person's
Consolidated Subsidiaries in the event and solely to the extent that the
declaration or payment of dividends or similar distributions is not at the time
permitted by operation of the terms of its charter or bylaws or any other
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Consolidated Subsidiary, (e) the effects of
changes in accounting principles, (f) any non-cash compensation expense in
connection with the exercise of, grant to or repurchase from officers,
directors and employees of stock, stock options or stock equivalents, (g) any
non-cash charge or expense associated with the write-off of deferred debt
issuance costs associated with the Credit Agreement, the Principal Subsidiary
Notes, the Senior Discount Debentures or the Debentures, and (h) costs, fees
and expenses incurred in connection with the Transactions.
"Consolidated Net Worth" of any Person at any date means the aggregate
consolidated stockholders' equity of such Person (plus amounts of equity
attributable to preferred stock) and its Consolidated Subsidiaries, as would be
shown on the consolidated balance sheet of such Person prepared in accordance
with GAAP, adjusted to exclude (to the extent included in calculating such
equity), (a) the amount of any such stockholders' equity attributable to
Disqualified Capital Stock or treasury stock of such Person and its
Consolidated Subsidiaries, (b) all upward revaluations and other write-ups in
the book value of any asset of such Person or a Consolidated Subsidiary of such
Person subsequent to the Issue Date, and (c) all investments in subsidiaries
that are not Consolidated Subsidiaries and in Persons that are not
Subsidiaries.
"Consolidated Subsidiary" means, for any Person, each Subsidiary of
such Person (whether now existing or hereafter created or acquired) the
financial statements of which are consolidated for financial statement
reporting purposes with the financial statements of such Person in accordance
with GAAP.
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"Corporate Trust Office" means the principal office of the Trustee at
Golden Square, 225 Asylum Street, Hartford, Connecticut at which at any
particular time its corporate trust business shall be administered.
"corporation" means a corporation, association, company, joint-stock
company or business trust.
"Credit Agreement" means the one or more credit agreements (including,
without limitation, the Revolving Credit Facility) entered into by and among
the Company, certain of its Subsidiaries (if any) and certain financial
institutions, which provide for in the aggregate one or more term loans and/or
revolving credit and letter of credit facilities, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, as such credit agreement and/or related documents may be
amended, restated, supplemented, renewed, replaced or otherwise modified from
time to time whether or not with the same agent, trustee, representative
lenders or holders, and, subject to the proviso to the next succeeding
sentence, irrespective of any changes in the terms and conditions thereof.
Without limiting the generality of the foregoing, the term "Credit Agreement"
shall include any amendment, amendment and restatement, renewal, extension,
restructuring, supplement or modification to any such credit agreement and all
refundings, refinancings and replacements of any such credit agreement,
including any agreement (i) extending the maturity of any Indebtedness incurred
thereunder or contemplated thereby, (ii) adding or deleting borrowers or
guarantors thereunder, so long as borrowers and issuers include one or more of
the Company and its Subsidiaries and their respective successors and assigns,
(iii) increasing the amount of Indebtedness incurred thereunder or available to
be borrowed thereunder, provided that on the date such Indebtedness is incurred
it would not be prohibited by Section 1008 or (iv) otherwise altering the terms
and conditions thereof in a manner not prohibited by the terms hereof.
"Debentures" means, collectively, the Initial Debentures and, when and
if issued as provided in the Registration Rights Agreement, the Exchange
Debentures, and the Secondary Debentures.
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"Debentures Custodian" means the Trustee, as custodian with respect to
the Debentures in global form, or any successor entity thereto.
"Debenture Register" and "Debentures Registrar" have the respective
meaning specified in Section 305.
"Debt Incurrence Ratio" has the meaning set forth in Section 1008.
"Default" has the meaning set forth in Section 602.
"Defaulted Interest" has the meaning specified in Section 307.
"Definitive Debentures" means Debentures that are in the form of
Debenture as set forth in Annex A hereof that do not include the information
called for by footnotes 1 and 6 thereof.
"Depositary" has the meaning set forth in Section 201.
"Disqualified Capital Stock" means (a) except as set forth in (b), with
respect to any Person, any Equity Interest of such Person that, by its terms or
by the terms of any security into which it is convertible, exercisable or
exchangeable, is, or upon the happening of an event or the passage of time or
both would be, required to be redeemed or repurchased (including at the option
of the holder thereof) by such Person or any of its Subsidiaries, in whole or
in part, on or prior to the Stated Maturity of the Debentures and (b) with
respect to any Subsidiary of such Person (including with respect to any
Subsidiary of the Company), any Equity Interests other than any common equity
with no preference, privileges, or redemption or repayment provisions and
preferred equity owned by the Company or one of its Subsidiaries.
"Equity Interest" of any Person means any shares, interests,
participations or other equivalents (however designated) in such Person's
equity, and shall in any event include any Capital Stock issued by, or
partnership or membership interests in, such Person.
"Euroclear" has the meaning set forth in Section 201.
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"Event of Default" has the meaning specified in Section 501.
"Event of Loss" means, with respect to any property or asset, any (i)
loss, destruction or damage of such property or asset or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"Exchange Act" refers to the Securities Exchange Act of 1934 as it may
be amended and any successor act thereto.
"Exchange Date" means the date fixed by the Company at its option upon
which the Company's Senior Preferred Stock shall be exchanged for an aggregate
principal amount of Debentures equal to the liquidation value of the Senior
Preferred Stock exchanged.
"Exchange Debentures" means the 14 3/4% Senior Subordinated Debentures
due 2010, as supplemented from time to time in accordance with the terms
hereof, to be issued pursuant to this Indenture in connection with the offer to
exchange Exchange Debentures for the Initial Debentures that may be made by the
Company pursuant to the Registration Rights Agreement.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Excluded Person" means Green Equity Investors, L.P. and its Related
Parties.
"Exempted Affiliate Transaction" means (a) compensation,
indemnification and other benefits paid or made available (x) pursuant to the
employment agreements between the Company and members of its senior management,
or (y) for or in connection with services actually rendered to the Company and
comparable to those generally paid or made available by entities engaged in the
same or similar businesses (including reimbursement or advancement of
reasonable out-of-pocket expenses, directors' and officers' liability insurance
and loans to officers, directors and employees (i) in the ordinary course of
business and (ii) to purchase Holdings Common Stock in an amount not to exceed
$1.0 million), (b) transactions, expenses and payments in connection with the
Transactions, (c) any Restricted
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Payments or other payments or transactions expressly permitted under Section
1009, (d) payments to LGP for management services under the Management
Agreement in an amount not to exceed $1.5 million in any fiscal year, plus
reimbursement of reasonable out-of-pocket costs and expenses, (e) payments to
LGP for reasonable and customary fees and expenses for financial advisory and
investment banking services provided to the Company in connection with major
financial transactions, and (f) transactions between or among the Company and
its Subsidiaries or between or among Subsidiaries of the Company, provided that
any ownership interest in any such Subsidiary which is not beneficially owned
directly or indirectly by the Company or any of its Subsidiaries is not
beneficially owned by an Affiliate of the Company other than by virtue of the
direct or indirect ownership interest in such Subsidiary held (in the
aggregate) by the Company and/or one or more of its Subsidiaries.
"Fractional Secondary Debenture" has the meaning specified in Section
301.
"GAAP" means United States 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 approved by a significant segment of the
accounting profession in the United States as in effect on the Issue Date.
"Global Debenture" means a Debenture (including a Rule 144A Global
Debenture or a Regulation S Global Debenture) that contains the information
referred to in footnotes 1 and 6 to the form of Debenture as set forth in Annex
A hereof.
"Holder" means a Person in whose name a Debenture is registered in the
Debenture Register.
"Holdings Common Stock" means the Common Stock, par value $0.01 per
share, of the Company.
"Indebtedness" of any Person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such any Person, to
the extent such liabilities and obligations would appear as a liability upon
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the consolidated balance sheet of such Person in accordance with GAAP, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii)
evidenced by bonds, notes, debentures or similar instruments, (iii)
representing the balance deferred and unpaid of the purchase price of any
property or services, except those incurred in the ordinary course of its
business that would constitute ordinarily a trade payable to trade creditors;
(b) all liabilities and obligations, contingent or otherwise, of such Person
(i) evidenced by bankers' acceptances or similar instruments issued or accepted
by banks, (ii) relating to any Capitalized Lease Obligation, or (iii) evidenced
by a letter of credit or a reimbursement obligation of such Person with respect
to any letter of credit; (c) all net obligations of such Person under Interest
Swap and Hedging Obligations; (d) all liabilities and obligations of others of
the kind described in the preceding clauses (a), (b) or (c) that such Person
has guaranteed or that is otherwise its legal liability or which are secured by
one or more Liens on any assets or property of such Person; provided that if
the liabilities or obligations which are secured by a Lien have not been
assumed in full by such Person or are not such Person's legal liability in
full, the amount of such Indebtedness for the purposes of this definition shall
be limited to the lesser of the amount of such Indebtedness secured by such
Lien or the fair market value of the assets or property securing such Lien; (e)
any and all deferrals, renewals, extensions, refinancing and refundings
(whether direct or indirect) of, or amendments, modifications or supplements
to, any liability of the kind described in any of the preceding clauses (a),
(b), (c) or (d), or this clause (e), whether or not between or among the same
parties; and (f) all Disqualified Capital Stock of such Person (measured at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued and unpaid dividends). For purposes hereof, the "maximum fixed
repurchase price" of any Disqualified Capital Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant
to the Indenture, and if such price is based upon, or measured by, the Fair
Market Value of such Disqualified Capital Stock, such Fair Market Value to be
determined in good faith by the board of directors of the issuer (or managing
general partner of the issuer) of such Disqualified Capital Stock.
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"Incurrence Date" has the meaning set forth in Section 1008.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.
"Initial Debentures" means the 14 3/4% Senior Subordinated Debentures
due 2010, as supplemented from time to time in accordance with the terms
hereof, issued under this Indenture that contain the information referred to in
footnotes 1, 5 and 7 to the form of Debenture as set forth in Annex A hereof.
"Interest Payment Date" means each February 1 and August 1, commencing
the earlier of the first February 1 or August 1 immediately following the
Exchange Date.
"Interest Swap and Hedging Obligation" means any obligation of any
Person pursuant to any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate exchange agreement,
currency exchange agreement or any other agreement or arrangement designed to
protect against fluctuations in interest rates or currency values, including,
without limitation, any arrangement whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a fixed or floating rate of interest on a stated notional
amount in exchange for periodic payments made by such Person calculated by
applying a fixed or floating rate of interest on the same notional amount.
"Investment" by any Person in any other Person means (without
duplication) (a) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such Person (whether for cash, property, services, securities or
otherwise) of capital stock, bonds, notes, debentures, partnership or other
ownership interests or other securities, including any options or warrants, of
such other Person or any agreement to make any such acquisition; (b) the making
by such Person of any deposit with, or advance,
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loan or other extension of credit to, such other Person (including the purchase
of property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such other Person) or any
commitment to make any such advance, loan or extension (but excluding accounts
receivable, endorsements for collection or deposits arising in the ordinary
course of business); (c) other than guarantees of Indebtedness of the Company
or any Subsidiary to the extent permitted by the Section 1008, the entering
into by such Person of any guarantee of, or other credit support or contingent
obligation with respect to, Indebtedness or other liability of such other
Person; (d) the making of any capital contribution by such Person to such other
Person; and (e) the designation by the Board of Directors of the Company of any
Person to be an Unrestricted Subsidiary. The Company shall be deemed to make
an Investment in an amount equal to the fair market value of the net assets of
any subsidiary (or, if neither the Company nor any of its Subsidiaries has
theretofore made an Investment in such subsidiary, in an amount equal to the
Investments being made), at the time that such subsidiary is designated an
Unrestricted Subsidiary, and any property transferred to an Unrestricted
Subsidiary from the Company or a Subsidiary of the Company shall be deemed an
Investment valued at its fair market value at the time of such transfer. The
amount of any such Investment shall be reduced by any liabilities or
obligations of the Company or any of its Subsidiaries to be assumed or
discharged in connection with such Investment by an entity other than the
Company or any of its Subsidiaries. For purposes of clarification and greater
certainty, the designation of a newly formed subsidiary as an Unrestricted
Subsidiary shall not constitute an Investment.
"Issue Date" means the date of first issuance of the Debentures under
the Indenture.
"Junior Security" means, so long as the effect of any exclusion
employing this definition is not to cause the Debentures to be treated in any
bankruptcy case or proceeding or similar event as part of the same class of
claims as Senior Indebtedness or any class of claims pari passu with, or senior
to, the Senior Indebtedness, for any payment or distribution, debt or equity
securities of the Company or any successor corporation provided for by a plan
of reorganization or readjustment that are subordinated to the Senior
Indebtedness and any securities issued under such plan in respect of Senior
Indebtedness at least to the same
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<PAGE> 24
extent that the Debentures are subordinated to the payment of all Senior
Indebtedness then outstanding; provided that (a) if a new corporation results
from such reorganization or readjustment, such corporation assumes any Senior
Indebtedness not paid in full in cash or Cash Equivalents in connection with
such reorganization or readjustment and (b) the rights of the holders of such
Senior Indebtedness are not, without the consent of such holders, altered by
such reorganization or readjustment.
"Leverage Ratio" on any date of determination (the "Transaction Date")
means the ratio, on a pro forma basis, of (a) the aggregate amount of
Indebtedness of the Company and its Subsidiaries on a consolidated basis to (b)
the aggregate amount of Consolidated EBITDA of the Company attributable to
continuing operations and businesses (exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of) for the
Reference Period; provided, that for purposes of calculating Consolidated
EBITDA for this definition, (i) Acquisitions which occurred during the
Reference Period or subsequent to the Reference Period and on or prior to the
Transaction Date shall be assumed to have occurred on the first day of the
Reference Period, (ii) transactions giving rise to the need to calculate the
Leverage Ratio shall be assumed to have occurred on the first day of the
Reference Period, (iii) the incurrence of any Indebtedness or issuance of any
Disqualified Capital Stock during the Reference Period or subsequent to the
Reference Period and on or prior to the Transaction Date (and the application
of the proceeds therefrom to the extent used to refinance or retire other
Indebtedness) shall be assumed to have occurred on the first day of the
Reference Period, and (iv) the Consolidated Fixed Charges of such Person
attributable to interest on any Indebtedness or dividends on any Disqualified
Capital Stock bearing a floating interest (or dividend) rate shall be computed
on a pro forma basis as if the average rate in effect from the beginning of the
Reference Period to the Transaction Date had been the applicable rate for the
entire period, unless such Person or any of its Subsidiaries is a party to an
Interest Swap or Hedging Obligation (which shall remain in effect for the
12-month period immediately following the Transaction Date) that has the effect
of fixing the interest rate on the date of computation, in which case such rate
(whether higher or lower) shall be used.
"LGP" means Leonard Green & Partners, L.P.
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<PAGE> 25
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation or other encumbrance
upon or with respect to any property of any kind, real or personal, movable or
immovable, now owned or hereafter acquired.
"Liquidated Damages" shall have the meaning specified in the
Registration Rights Agreement.
"Management Agreement" means the management agreement, dated as of the
Issue Date, between the Principal Subsidiary on one hand and LGP on the other
hand substantially as in effect on the Issue Date.
"Maturity", when used with respect to any Debenture, means the date on
which the principal of such Debenture becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Net Cash Proceeds" means the aggregate amount of cash or Cash
Equivalents received by the Company in the case of a sale of Qualified Capital
Stock and by the Company and its Subsidiaries in respect of an Asset Sale plus,
in the case of an issuance of Qualified Capital Stock upon any exercise,
exchange or conversion of securities (including options, warrants, rights and
convertible or exchangeable debt) of the Company that were issued for cash on
or after the Issue Date, the amount of cash originally received by the Company
upon the issuance of such securities (including options, warrants, rights and
convertible or exchangeable debt) less, in each case, the sum of all payments,
fees, commissions and (in the case of Asset Sales, reasonable and customary)
expenses (including, without limitation, the fees and expenses of legal counsel
and investment banking fees and expenses) incurred in connection with such
Asset Sale or sale of Qualified Capital Stock, and, in the case of an Asset
Sale only, less (i) the amount (estimated reasonably and in good faith by the
Company) of income, franchise, sales and other applicable taxes required to be
paid by the Company or any of its respective Subsidiaries in connection with
such Asset Sale, (ii) the amounts of any repayments of Indebtedness secured,
directly or indirectly, by Liens on the assets which are the subject of such
Asset Sale or Indebtedness associated with such assets which is due by reason
of such Asset Sale (i.e., such disposition is permitted by the terms of the
instruments evidencing or applicable to such Indebtedness, or by the terms of a
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consent granted thereunder, on the condition that the proceeds (or portion
thereof) of such disposition be applied to such Indebtedness), and other fees,
expenses and other expenditures, in each case, reasonably incurred as a
consequence of such repayment of Indebtedness (whether or not such fees,
expenses or expenditures are then due and payable or made, as the case may be);
(iii) all amounts deemed appropriate by the Company (as evidenced by a signed
certificate of the Chief Financial Officer of the Company delivered to the
Trustee) to be provided as a reserve, in accordance with GAAP, against any
liabilities associated with such assets which are the subject of such Asset
Sale; and (iv) with respect to Asset Sales by Subsidiaries of the Company, the
portion of such cash payments attributable to Persons holding a minority
interest in such Subsidiary.
"Obligation" means any principal, premium or interest payment, or
monetary penalty, or damages, or purchase price due by the Company or any
Subsidiary under the terms of the Debentures or the Indenture, including any
Liquidated Damages due to the terms of the Registration Rights Agreement.
"Offering Memorandum" means the offering memorandum, dated January 15,
1998, and supplemented January 20, 1998, relating to the offering of the
Debentures.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President or a Vice President, and by the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company,
and delivered to the Trustee. One of the officers signing an Officer's
Certificate given pursuant to Section 1018 shall be the principal executive,
financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Outstanding", when used with respect to Debentures, means, as of the
date of determination, all Debentures theretofore authenticated and delivered
under this Indenture, except:
(i) Debentures theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
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(ii) Debentures for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying
Agent (other than the Company) in trust or set aside and segregated in
trust by the Company (if the Company shall act as its own Paying Agent)
for the Holders of such Debentures; provided that, if such Debentures are
to be redeemed, notice of such redemption has been duly given pursuant to
this Indenture or provision therefor satisfactory to the Trustee has been
made; and
(iii) Debentures which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Debentures have been authenticated
and delivered pursuant to this Indenture, other than any such Debentures
in respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Debentures are held by a bona fide purchaser
in whose hands such Debentures are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Debentures have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Debentures owned
by the Company or any other obligor upon the Debentures or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Debentures which the Trustee knows to be so owned shall
be so disregarded. Debentures so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction
of the Trustee the pledgee's right so to act with respect to such Debentures
and that the pledgee is not the Company or any other obligor upon the
Debentures or any Affiliate of the Company or of such other obligor. Secondary
Debentures shall be deemed Outstanding commencing as of the Interest Payment
Date with respect to which they are authenticated and delivered in lieu of cash
interest.
"pari passu", when used with respect to the ranking of any Indebtedness
of any Person in relation to other Indebtedness of such Person, means that each
such Indebtedness (a) either (i) is not subordinated in right of payment to any
other Indebtedness of such Person or (ii) is
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subordinate in right of payment to the same Indebtedness of such Person as is
the other and is so subordinate to the same extent and (b) is not subordinate
in right of payment to the other or to any Indebtedness of such Person as to
which the other is not so subordinate.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest (and Liquidated Damages, if any)
on any Debentures on behalf of the Company.
"Payment Blockage Period" has the meaning set forth in Section 1303.
"Payment Default" has the meaning set forth in Section 1303.
"Payment Notice" has the meaning set forth in Section 1303.
"Permitted Indebtedness" means any of the following:
(a) that the Company may incur Indebtedness evidenced by the Senior
Discount Debentures and by the Debentures and represented by this
Indenture up to the amounts specified therein as of the date thereof and
the Principal Subsidiary and its Subsidiaries may incur Indebtedness
evidenced by the Principal Subsidiary Notes and the guarantees thereof
and represented by the Principal Subsidiary Indenture up to the amounts
specified therein as of the date thereof;
(b) that the Company and its Subsidiaries, as applicable, may incur
Refinancing Indebtedness with respect to any Indebtedness or Disqualified
Capital Stock, as applicable, that was permitted by this Indenture to be
incurred and any Indebtedness of the Principal Subsidiary outstanding on
the Issue Date after giving effect to the Transactions;
(c) the Company and its Subsidiaries may incur Indebtedness solely
in respect of bankers's acceptances and letters of credit (in addition to
any such Indebtedness incurred under the Credit Agreement in accordance
with the Indenture) (to the extent that such incurrence does not result
in the incurrence of any obligation to repay any obligation relating to
borrowed
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<PAGE> 29
money of others), all in the ordinary course of business in accordance
with customary industry practices, in amounts and for the purposes
customary in the Company's industry; provided, that the aggregate
principal amount outstanding of such Indebtedness (including any
Indebtedness issued to refinance, refund or replace such Indebtedness)
shall not exceed $5.0 million;
(d) the Company and the Subsidiaries may incur Indebtedness arising
from tender, bid, performance or government contract bonds, other
obligations of like nature, or warranty or contractual service
obligations of like nature, in any case, incurred by the Company or its
Subsidiaries in the ordinary course of business;
(e) the Company and its Subsidiaries may incur Interest Swap and
Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate or currency risk with respect to any fixed or
floating rate Indebtedness that is permitted by the Indenture to be
outstanding or any receivable or liability the payment of which is
determined by reference to a foreign currency; provided, that the
notional amount of any such Interest Swap and Hedging Obligation does not
exceed the principal amount of Indebtedness to which such Interest Swap
and Hedging Obligation relates; and
(f) the Company may incur Indebtedness to any Subsidiary, and any
Subsidiary may incur Indebtedness to any other Subsidiary or to the
Company; provided, that, in the case of Indebtedness of the Company, such
obligations shall be unsecured and subordinated in all respects to the
Company's obligations pursuant to the Debentures and the date of any
event that causes such Subsidiary no longer to be a Subsidiary shall be
an Incurrence Date.
"Permitted Investment" means Investments in (a) any of the Debentures
or Senior Discount Debentures; (b) Cash Equivalents; (c) intercompany notes to
the extent permitted under clause (f) of the definition of "Permitted
Indebtedness," provided that Indebtedness under any such notes of a Subsidiary
shall be deemed to be a Restricted Investment if such Person ceases to be a
Subsidiary; (d) Investments in the form of promissory notes of members of the
Company's management not to exceed $1.0 million in principal amount at any time
outstanding solely in
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consideration of the purchase by such Persons of Qualified Capital Stock of the
Company; (e) Investments by the Company or any Subsidiary in any Person that is
or immediately after such Investment becomes a Subsidiary, or immediately after
such Investment merges or consolidates into the Company or any Subsidiary in
compliance with the terms of the Indenture, provided that such Person is
engaged in all material respects in a Related Business; (f) Investments in the
Company by any Subsidiary, provided that in the case of Indebtedness of the
Company constituting any such Investment, such Indebtedness shall be unsecured
and subordinated in all respects to the Company's obligations under the
Debentures; (g) Investments in securities of trade creditors or customers
received in settlement of obligations that arose in the ordinary course of
business or pursuant to any plan of reorganization or similar arrangement upon
the bankruptcy or insolvency of such trade creditors or customers; (h)
Investments by the Company outstanding on the Issue Date; (i) transactions or
arrangements with officers or directors of the Company or any Subsidiary
entered into in the ordinary course of business (including compensation or
employee benefit arrangements with any officer or director of the Company or
any Subsidiary permitted under Section 1012; (j) Investments in Persons (other
than Affiliates of the Company) received as consideration from Asset Sales to
the extent not prohibited by Section 1013; (k) additional Investments at any
time outstanding not to exceed the sum of (i) $5.0 million and (ii) the
cumulative gain (net of taxes and all payments, fees, commissions and expenses
incurred in such sale or disposition) realized by the Company and its
Subsidiaries in cash or Cash Equivalents on the sale or other disposition after
the Issue Date of Investments (including Permitted Investments and Restricted
Investments) made after the Issue Date in accordance with this Indenture (but
only to the extent that such gain is excluded from the net income of the
Company and the Consolidated Subsidiaries by the definition of Consolidated Net
Income); and (l) the acquisition of Equity Interests of a Person engaged in a
Related Business, other than a Person described in clause (e), through the
issuance of Holdings Common Stock.
"Permitted Lien" means (a) Liens existing on the Issue Date; (b) Liens
imposed by governmental authorities for taxes, assessments or other charges not
yet subject to penalty or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Company in
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accordance with GAAP; (c) statutory liens of carriers, warehousemen, mechanics,
materialmen, landlords, repairmen or other like Liens arising by operation of
law in the ordinary course of business provided that (i) the underlying
obligations are not overdue for a period of more than 60 days, or (ii) such
Liens are being contested in good faith and by appropriate proceedings and
adequate reserves with respect thereto are maintained on the books of the
Company in accordance with GAAP; (d) Liens securing the performance of bids,
trade contracts (other than borrowed money), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business; (e) easements,
rights-of-way, zoning, similar restrictions and other similar encumbrances or
title defects which, singly or in the aggregate, do not in any case materially
detract from the value of the property subject thereto (as such property is
used by the Company or any of its Subsidiaries) or interfere with the ordinary
conduct of the business of the Company or any of its Subsidiaries; (f) Liens
arising by operation of law in connection with judgments, only to the extent,
for an amount and for a period not resulting in an Event of Default with
respect thereto; (g) pledges or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security legislation; (h) Liens securing the Debentures;
(i) Liens securing Indebtedness of a Person existing at the time such Person
becomes a Subsidiary or is merged with or into the Company or a Subsidiary or
Liens securing Indebtedness incurred in connection with an Acquisition,
provided that such Liens were in existence prior to the date of such
Acquisition, were not incurred in anticipation thereof, and do not extend to
any other assets; (j) Liens arising from Purchase Money Indebtedness permitted
to be incurred under paragraph (a) of Section 1008 provided such Liens relate
solely to the property which is subject to such Purchase Money Indebtedness;
(k) leases or subleases granted to other Persons in the ordinary course of
business not materially interfering with the conduct of the business of the
Company or any of its Subsidiaries or materially detracting from the value of
the assets of the Company or any Subsidiary; (1) Liens arising from
precautionary Uniform Commercial Code financing statement filings regarding
operating leases entered into by the Company or any of its Subsidiaries in the
ordinary course of business; (m) Liens securing Refinancing Indebtedness
incurred to refinance any Indebtedness that was previously so secured in
accordance
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with the Indenture; (n) Liens securing Senior Indebtedness of the Company or
Senior Indebtedness of its Subsidiaries incurred in accordance with the
Indenture; (o) Liens securing Indebtedness incurred under paragraph (b) of
Section 1008; and (p) any interest or title of a lessor under any lease,
whether or not characterized as capital or operating, provided that such Liens
do not extend to any property or assets which is not leased property subject to
such lease.
"Permitted Payments" means, without duplication, (a) the payments
provided for by clauses (a), (d) and (e) of the definition of "Exempted
Affiliate Transaction"; provided that in the case of clause (d) of such
definition, no Default or Event of Default shall have occurred or be continuing
and the obligation to pay such amounts has been subordinated to the payment of
the Debentures; (b) the repurchase of common stock, stock options and stock
equivalents of the Company held by former directors, officers or employees of
the Company or any of its Subsidiaries in an aggregate amount not to exceed in
any fiscal year $1.0 million plus the aggregate Net Cash Proceeds received by
the Company from the sale of Holdings Common Stock to directors, officers or
employees of the Company; provided, that any amount not so paid in any fiscal
year may be paid in future fiscal years; and (c) Restricted Payments in an
aggregate amount not to exceed $4.0 million.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Post-Commencement Interest and Expense Claims" means any and all
claims arising after the commencement of any bankruptcy, insolvency,
receivership or similar proceeding for interest on Senior Indebtedness at the
rate (including any applicable post-default rate) set forth in the instrument
evidencing or agreement governing such Senior Indebtedness or for expense
reimbursement or indemnification on the terms set forth in such instrument or
agreement, whether or not such claims are enforceable, allowable or allowed in
such bankruptcy, insolvency, receivership or similar proceeding and even if
such claims are not enforceable or allowed therein.
"Predecessor Debenture" of any particular Debenture means every
previous Debenture evidencing all or a
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portion of the same debt as that evidenced by such particular Debenture; and,
for the purposes of this definition, any Debenture authenticated and delivered
under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or
stolen Debenture shall be deemed to evidence the same debt as the mutilated,
destroyed, lost or stolen Debenture.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of
such Person, to shares of Capital Stock of any other class of such Person.
"Principal Subsidiary" means Liberty Group Operating, Inc., a Delaware
corporation.
"Principal Subsidiary Indenture" means the Indenture, dated January 27,
1998, among Principal Subsidiary, the Subsidiary guarantors named therein, and
State Street Bank and Trust Company, as amended from time to time, and any
indenture in connection with any Refinancing Indebtedness incurred in
connection with the Principal Subsidiary Notes.
"Principal Subsidiary Notes" means the 9 3/8% Senior Subordinated Notes
due 2008 of Principal Subsidiary and any Refinancing Indebtedness incurred in
connection with such Principal Subsidiary Notes.
"pro forma" includes, with respect to an Acquisition or the incurrence
of Indebtedness in connection therewith, all adjustments, permitted or required
to be included pursuant to Article 11 of Regulation S-X and subject to
agreed-upon procedures to be performed by the Company's independent accountants
to determine whether the pro forma calculations are made in accordance with
Article 11 of Regulation S-X.
"Public Equity Offering" means an underwritten offering of common stock
of the Company or a Subsidiary for cash pursuant to an effective registration
statement under the Securities Act, provided at the time of or upon
consummation of such offering, such common stock of the Company or a Subsidiary
is listed on a national securities
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<PAGE> 34
exchange or quoted on the national market system of the Nasdaq Stock Market.
"Purchase Date" means the settlement date specified by the Company in
an Asset Sale Offer or Change of Control Offer, which shall be within three
business days of the expiration date specified in such offer.
"Purchase Money Indebtedness" of any Person means any Indebtedness of
such Person to any seller or other Person incurred to finance the acquisition
or construction (including in the case of a Capitalized Lease Obligation, the
lease) of any business or real or personal tangible property (or, in each case,
any interest therein) acquired or constructed after the Issue Date which, in
the reasonable good faith judgment of the Board of Directors of the Company, is
related to a Related Business of the Company and which is incurred concurrently
with, or within 180 days of, such acquisition or the completion of such
construction and, if secured, is secured only by the assets so financed.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"Qualified Exchange" means any legal defeasance, redemption,
retirement, repurchase or other acquisition of Capital Stock or Indebtedness of
the Company issued on or after the Issue Date with the Net Cash Proceeds
received by the Company from the substantially concurrent sale of its Qualified
Capital Stock or any exchange of Qualified Capital Stock of the Company for any
Capital Stock or Indebtedness of the Company issued on or after the Issue Date.
"Redemption Date", when used with respect to any Debenture to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Debenture to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Reference Period" with regard to any Person means the four full fiscal
quarters (or such lesser period during which such Person has been in existence)
ended immediately preceding any date upon which any determination is to be made
pursuant to the terms of the Debentures or the Indenture; provided that
"Reference Period" with regard to
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the Company shall include periods prior to the Acquisition of its predecessors.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital
Stock (a) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the
case of Disqualified Capital Stock, liquidation preference, not to exceed
(after deduction of the amount of fees, consents, premiums, prepayment
penalties and reasonable expenses incurred in connection with such Refinancing)
the lesser of (i) the principal amount or, in the case of Disqualified Capital
Stock, liquidation preference, of the Indebtedness or Disqualified Capital
Stock so Refinanced and (ii) if such Indebtedness being Refinanced was issued
with an original issue discount, the accreted value thereof (as determined in
accordance with GAAP) at the time of such Refinancing; provided, that if
Disqualified Capital Stock is to be so refinanced or if the Indebtedness to be
so refinanced is not Senior Indebtedness, (A) such Refinancing Indebtedness of
any Subsidiary of the Company shall only be used to Refinance outstanding
Indebtedness or Disqualified Capital Stock of such Subsidiary, (B) such
Refinancing Indebtedness shall (x) not have an Average Life shorter than the
Indebtedness or Disqualified Capital Stock to be so refinanced at the time of
such Refinancing and (y) in all respects, be no less subordinated or junior, if
applicable, to the rights of Holders of the Debentures than was the
Indebtedness or Disqualified Capital Stock to be refinanced, (C) such
Refinancing Indebtedness shall have a final stated maturity or redemption date,
as applicable, no earlier than the final stated maturity or redemption date, as
applicable, of the Indebtedness or Disqualified Capital Stock to be so
refinanced, and (D) such Refinancing Indebtedness shall be secured (if secured)
in a manner no more adverse to the Holders of the Debentures than the terms of
the Liens (if any) securing such refinanced Indebtedness, including, without
limitation, the amount of Indebtedness secured shall not be increased (except
by the amount of fees, consents, premiums, prepayment penalties and reasonable
expenses incurred in connection with such Refinancing). For purposes of
clarification and greater certainty, if Indebtedness
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<PAGE> 36
permitted by the terms of this Indenture (including clauses (a), (b) and (c) of
the second paragraph of Section 1008) is repaid, redeemed, defeased, refunded,
refinanced, discharged or otherwise retired for value from the proceeds of
Refinancing Indebtedness, the maximum amount of such Refinancing Indebtedness
shall be determined in accordance with the provisions of this definition, and
the amount of such Refinancing Indebtedness in excess of the amount of such
Indebtedness (as permitted by this definition) shall not reduce the amount of
Indebtedness permitted by the terms of this Indenture (including, without
limitation, not reducing or counting towards the amounts set forth in such
clauses (a), (b) and (c)).
"Registration Rights Agreement" means the registration rights agreement
made and entered into as of the Issue Date between the Company and Donaldson,
Lufkin & Jenrette Securities Corporation.
"Regular Record Date" means each January 15 and July 15.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Certificate" has the meaning set forth in Section 305.
"Regulation S Debentures" has the meaning set forth in Section 201.
"Regulation S Global Debenture" has the meaning set forth in Section
201.
"Regulation S Permanent Global Debenture" has the meaning set forth in
Section 201.
"Regulation S Temporary Global Debenture" has the meaning set forth in
Section 201.
"Related Business" means the business conducted (or proposed to be
conducted, including the activities referred to as being contemplated by the
Company, as described or referred to in the Offering Memorandum) by the Company
as of the Issue Date and any and all businesses that in the good faith judgment
of the Board of Directors of the Company are reasonably related businesses,
including reasonably related extensions thereof.
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"Related Party" means any partnership or corporation which is managed
by or controlled by LGP or any Affiliate thereof.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the president, any
vice president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any trust officer or
assistant trust officer, the controller or any assistant controller 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 Investment" means, in one or a series of related
transactions, any Investment, other than investments in Cash Equivalents and
other Permitted Investments; provided, however, that a merger of another Person
with or into the Company or a Subsidiary in accordance with the terms of this
Indenture shall not be deemed to be a Restricted Investment so long as the
surviving entity is the Company or a direct wholly owned Subsidiary.
"Restricted Payment" means, with respect to any Person, (a) the
declaration or payment of any dividend or other distribution in respect of
Equity Interests of such Person or any Subsidiary of such Person, (b) any
payment on account of the purchase, redemption or other acquisition or
retirement for value of Equity Interests of such Person or any Subsidiary of
such Person, (c) other than with the proceeds from the substantially concurrent
sale of, or in exchange for, Refinancing Indebtedness, any purchase,
redemption, or other acquisition or retirement for value of, any payment in
respect of any amendment of the terms of or any defeasance of, any Subordinated
Indebtedness, directly or indirectly, by such Person or any Subsidiary of such
Person prior to the scheduled maturity, any scheduled repayment of principal,
or scheduled sinking fund payment, as the case may be, of such Indebtedness,
(d) any Restricted Investment by such Person and (e) any payment provided for
by clause (d) of the definition of "Exempted Affiliate Transaction"; provided,
however, that the term "Restricted Payment" does not include (i) any dividend,
distribution or other payment on or with respect to Equity Interests of the
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Company to the extent payable solely in shares of Qualified Capital Stock of
the Company; (ii) any dividend, distribution or other payment to the Company,
or to any of its Subsidiaries, by the Company or any of its Subsidiaries; (iii)
payments made pursuant to the Transactions; (iv) Permitted Investments; or (v)
pro rata dividends and other distributions on Equity Interests of any
Subsidiary by such Subsidiary.
"restricted period" has the meaning set forth in Section 201.
"Revolving Credit Facility" means the Principal Subsidiary's revolving
credit facility under a credit agreement with Citicorp USA, Inc., as lender or
as administrative agent, up to an amount not exceeding $175,000,000.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Debentures" has the meaning set forth in Section 201.
"Rule 144A Global Debenture" has the meaning set forth in Section 201.
"Sale and Leaseback Transaction" means any transaction by which the
Company or a Subsidiary, directly or indirectly, becomes liable as a lessee or
as a guarantor or other surety with respect to any lease of any property
(whether real or personal or mixed), whether now owned or hereafter acquired
that the Company or any Subsidiary has sold or transferred or is to sell or
transfer to any other Person in a substantially concurrent transaction with
such assumption of liability.
"Secondary Debentures" means the Debentures issued pursuant to the
third paragraph of Section 301.
"Senior Discount Debentures" means the 11 5/8% Senior Discount
Debentures due 2009 of the Company.
"Senior Discount Debentures Trustee" means the trustee under the
indenture pursuant to which the Senior Discount Debentures were issued.
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"Senior Indebtedness" of the Company means Indebtedness (including,
without limitation, Post-Commencement Interest and Expense Claims) of the
Company under the Credit Agreement evidencing or governing the Revolving Credit
Facility, the Senior Discount Debentures or that, by the terms of the
instrument creating or evidencing such Indebtedness, is expressly designated
Senior Indebtedness and made senior in right of payment to the Debentures;
provided that in no event shall Senior Indebtedness include (a) Indebtedness to
any Subsidiary of the Company or any officer, director or employee of the
Company or any Subsidiary of the Company, (b) Indebtedness incurred in
violation of the terms of the Indenture, (c) Indebtedness to trade creditors,
and (d) Disqualified Capital Stock.
"Senior Preferred Stock" means the Company's 14 3/4% Senior Redeemable
Exchangeable Cumulative Preferred Stock.
"Significant Subsidiary" shall have the meaning provided under
Regulation S-X of the Securities Act, as in effect on the Issue Date. "Special
Record Date" for the payment of any Defaulted Interest means a date fixed by
the Trustee pursuant to Section 307.
"Stated Maturity," when used with respect to any Debenture means
February 1, 2010.
"Subordinated Indebtedness" means Indebtedness of the Company that is
subordinated in right of payment by its terms or the terms of any document or
instrument or instrument relating thereto to the Debentures, in any respect or
has a final stated maturity after the Stated Maturity.
"Subsidiary," with respect to any Person, means (i) a corporation a
majority of whose Equity Interests with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or
by one or more Subsidiaries of such Person, (ii) any other Person (other than a
corporation) in which such Person, one or more Subsidiaries of such Person, or
such Person and one or more Subsidiaries of such Person, directly or
indirectly, at the date of determination thereof has at least majority
ownership interest, or (iii) a
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partnership in which such Person or a Subsidiary of such Person is, at the
time, a general partner. Notwithstanding the foregoing, an Unrestricted
Subsidiary shall not be a Subsidiary of the Company or of any Subsidiary of the
Company. Unless the context requires otherwise, Subsidiary means each direct
and indirect Subsidiary of the Company.
"Transaction Date" has the meaning set forth in the definition of
"Leverage Ratio."
"Transactions" has the meaning set forth in the Offering Memorandum.
"Transfer Restricted Debentures" means Debentures that bear or are
required to bear the legend set forth in Section 305(g)(i).
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that
in the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Unrestricted Subsidiary" means any subsidiary of the Company that does
not own any Capital Stock of, or own or hold any Lien on any property of, the
Company or any other Subsidiary of the Company and that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by the Board
of Directors of the Company); provided, that (i) such subsidiary shall not
engage, to any substantial extent, in any line or lines of business activity
other than a Related Business, (ii) neither immediately prior thereto nor after
giving pro forma effect to such designation would there exist a Default or
Event of Default and (iii) immediately after giving pro forma effect thereto,
the Company could incur at least $1.00 of Indebtedness pursuant to the Debt
Incurrence Ratio of Section 1008. The Board of Directors of the Company may
designate any Unrestricted Subsidiary to be a Subsidiary, provided that (i) no
Default or Event of Default is existing
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or will occur as a consequence thereof and (ii) immediately after giving effect
to such designation, on a pro forma basis, the Company could incur at least
$1.00 of Indebtedness pursuant to the Debt Incurrence Ratio of Section 1008.
Each such designation shall be evidenced by filing with the Trustee a certified
copy of the resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions.
"U.S. Government Obligations" means direct non-callable obligations of,
or noncallable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as it may reasonably request or as
may be required under the Trust Indenture Act. Each such certificate or
opinion shall be given in the form of an Officers' Certificate, if to be given
by an officer of the Company, or an Opinion of Counsel, if to be given by
counsel, and shall comply with the requirements of the Trust Indenture Act and
any other requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
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(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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SECTION 104. Acts of Holders; Record Date.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and (subject to Section 601) conclusive in favor of the Trustee
and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust
Indenture Act, fix any day as the record date for the purpose of determining
the Holders entitled to give or take any request, demand, authorization,
direction, notice, consent, waiver or other action, or to vote on any action,
authorized or permitted to be given or taken by Holders. If not set by the
Company prior to the first solicitation of a Holder made by any Person in
respect of any such action, or, in the case of any such vote, prior to such
vote, the record date for any such action or vote shall be the 30th day (or, if
later, the date of the most recent list of Holders required to be provided
pursuant to
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Section 701) prior to such first solicitation or vote, as the case may be.
With regard to any record date, only the Holders on such date (or their duly
designated proxies) shall be entitled to give or take, or vote on, the relevant
action.
(d) The ownership of Debentures shall be proved by the Debentures
Register.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Debenture shall bind every future
Holder of the same Debenture and the Holder of every Debenture issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made
upon such Debenture.
SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each
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Holder affected by such event, at his address as it appears in the Debenture
Register, not later than the latest date (if any), and not earlier than the
earliest date (if any), prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act that is required under such Act to be part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
that may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
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SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Debentures 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 111. Benefits of Indenture.
Nothing in this Indenture or in the Debentures, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the holders of Senior Indebtedness and the Holders of Debentures,
any benefit or any legal or equitable right, remedy or claim under this
Indenture.
SECTION 112. GOVERNING LAW.
THIS INDENTURE AND THE DEBENTURES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Purchase
Date or Stated Maturity of any Debenture shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Debentures)
payment of interest or principal (and premium, if any) need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Redemption Date or Purchase
Date, or at the Stated Maturity, provided that no interest shall accrue for the
period from and after such Interest Payment Date, Redemption Date, Purchase
Date or Stated Maturity, as the case may be.
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SECTION 114. No Personal Liability of Partners, Stockholders, Officers,
Directors.
No direct or indirect stockholder, employee, officer or director, as
such, past, present or future of the Company, the Subsidiaries or any successor
entity shall have any personal liability in connection with this Indenture or
the Debentures solely by reason of his or its status as such stockholder,
employee, officer or director. Each Holder of Debentures by accepting a
Debenture waives and releases all such liability, acknowledges and consents to
the transactions described under "The Acquisition" in the Offering Memorandum
and further acknowledges the waiver and release are part of the consideration
for the issuance of the Debentures.
ARTICLE TWO
Debenture Forms
SECTION 201. Forms Generally.
The Debentures (including the Trustee's certificates of authentication)
shall be in substantially the form set forth in Annex A, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Debentures,
as evidenced by their execution of the Debentures.
The Definitive Debentures shall be printed, lithographed or engraved or
produced by any combination of these methods on steel engraved borders or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Debentures may be listed, all as determined by the
officers executing such Debentures, as evidenced by their execution of such
Debentures.
The Initial Debentures are being exchanged for Senior Preferred Stock
initially offered and sold to qualified institutional buyers in reliance on
Rule 144A ("Rule 144A Debentures") or in offshore transactions in reliance on
Regulation S ("Regulation S Debentures"). The
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Debentures may also be exchanged, pursuant to Section 3(a)(9) under the
Securities Act, for Senior Preferred Stock that has been registered under the
Securities Act pursuant to an Exchange Offer ("Unrestricted Debentures").
Rule 144A Debentures initially will be represented by one or more
Debentures in registered global form without interest coupons (collectively,
the "Rule 144A Global Debenture"). The Rule 144A Global Debenture will be
deposited upon issuance with the Trustee as custodian for The Depository Trust
Company (the "Depositary"), in New York, New York and registered in the name of
the Depositary or its nominee, in each case for credit to an account of a
direct or indirect participant in the Depositary.
Regulation S Debentures initially will be represented by one or more
temporary Debentures in registered global form without interest coupons
(collectively, the "Regulation S Temporary Global Debenture"). The Regulation
S Temporary Global Debenture will be deposited on behalf of the subscribers
thereof with a custodian for the Depositary. The Regulation S Temporary Global
Debenture will be registered in the name of a nominee of the Depositary for
credit to the subscribers' respective accounts at Euroclear System
("Euroclear") and Cedel Bank, S.A. ("CEDEL"). Beneficial interests in the
Regulation S Temporary Global Debenture may be held only through Euroclear or
CEDEL.
Within a reasonable period of time after the expiration of the
restricted period pursuant to Rule 903 of Regulation S under the Securities Act
(the "restricted period"), the Regulation S Temporary Global Debenture will be
exchanged for one or more permanent Debentures in registered global form
without interest coupons (the "Regulation S Permanent Global Debentures" and,
together with the Regulation S Temporary Global Debenture, the "Regulation S
Global Debenture") upon delivery to the Trustee of certification as provided in
Section 305(f) hereof. During the restricted period, beneficial interests in
the Regulation S Temporary Global Debenture may be held only through Euroclear
or CEDEL (as indirect participants in the Depositary), and, pursuant to the
Depositary's procedures, beneficial interests in the Regulation S Temporary
Global Debenture may not be transferred to a Person that takes delivery thereof
in the form of an interest in the Rule 144A Global Debenture. After the
restricted period, (i) beneficial interests in the
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Regulation S Permanent Global Debentures may be transferred to a Person that
takes delivery in the form of an interest in the Rule 144A Global Debenture and
(ii) beneficial interests in the Rule 144A Global Debenture may be transferred
to a Person that takes delivery in the form of an interest in the Regulation S
Permanent Global Debentures, provided, that the certification requirements
described in Section 305(e) hereof are complied with.
Unrestricted Debentures initially will be represented by one or more
Debentures in registered global form without interest coupons (collectively,
the "Unrestricted Global Debentures"). The Unrestricted Global Debenture will
be deposited with the Trustee as custodian for the Depository in New York, New
York and registered in the name of the Depository or its nominee, in each case
for credit to an account of a direct or indirect participant in the Depository.
ARTICLE THREE
The Debentures
SECTION 301. Title and Terms.
The aggregate principal amount of Debentures which may be authenticated
and delivered under this Indenture is limited to the aggregate liquidation
preference and accrued dividends on any Senior Preferred Stock for which the
Debentures are exchanged, except for Debentures authenticated and delivered as
Secondary Debentures pursuant to the following paragraph and Debentures
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Debentures pursuant to Section 304, 305, 306, 906 or
1108 or in connection with an Asset Sale Offer or Change of Control Offer
pursuant to Sections 1013 or 1015.
The Debentures shall be known and designated as the "14 3/4% Senior
Subordinated Debentures due 2010" of the Company. Their Stated Maturity shall
be February 1, 2010 and they shall bear interest at 14 3/4% from the Exchange
Date or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, as the case may be, payable semi-annually on
February 1 and August 1, commencing the earlier of the first February 1 or
August 1
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immediately following the Exchange Date, until the principal thereof is paid or
made available for payment.
On each Interest Payment Date, the Company may, at its option, in lieu
of the payment in cash of any portion of interest due and payable on such
Interest Payment Date, by giving notice to the Holders and the Trustee not less
than 15 nor more than 45 days prior to the Regular Record Date for such
Interest Payment Date, execute, and deliver to the Trustee for authentication,
together with a Company Order given not less than 15 nor more than 45 days
prior to such Interest Payment Date for the authentication and delivery of
additional Debentures in an aggregate principal amount equal to such portion of
interest; and the Trustee in accordance with such Company Order shall
authenticate and deliver to the Holders of record on such Regular Record Date
such additional Debentures requested in such Company Order (such duly executed
and authenticated additional Debentures being of the same series as the
Debentures and referred to herein as "Secondary Debentures"), and the due
issuance of such Secondary Debentures shall constitute full payment of such
portion of interest; provided, however, that interest shall not so be payable
in whole or part in Secondary Debentures in lieu of cash from and after the
date of any deposit of money pursuant to Section 401 or the defeasance or
covenant defeasance of the Debentures pursuant to Article Twelve; and provided
further, however, that, in lieu of the issuance of any Secondary Debentures (x)
the principal amount of which would be less than $1,000 or (y) would exceed the
largest integral multiple of $1,000 which is less than or equal to such
principal amount (in each case, a "Fractional Secondary Debenture"), the
Company shall, in the case of Clause (y), issue a Secondary Debenture with a
principal amount equal to such largest integral multiple and shall, in the case
of Clauses (x) and (y), in its sole discretion, either (1) on behalf of and for
the accounts of all Holders of Debentures who would be entitled to Fractional
Secondary Debentures, aggregate all such Fractional Secondary Debentures and,
on or before the tenth Business Day following the applicable Interest Payment
Date, sell such aggregated Fractional Secondary Debentures and, within six
Business Days of such sale, pay each such Holder his proportionate share of the
net proceeds of such sale, or (2) pay (on the applicable Interest Payment Date)
each such Holder, with respect to any Fractional Secondary Debenture
that such Holder would otherwise be entitled to receive, an amount in cash
equal to the average closing price per $1,000 principal amount of Debentures
for the ten trading days preceding the Business Day immediately preceding the
applicable Interest Payment Date multiplied by a fraction, the numerator of
which is the principal amount of such Fractional Secondary Debenture
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otherwise issuable to such Holder and the denominator of which is $1,000. Each
issuance of Secondary Debentures in lieu of the payment in cash of all or any
portion of interest on the Debentures shall be made pro rata with respect to
the Outstanding Debentures. All Secondary Debentures shall be issued in the
same series as the Debentures originally issued pursuant to the Indenture, and
all Holders of Secondary Debentures shall be treated as Holders of Debentures
for any and all purposes of any Act of Holders or of other action of Holders or
otherwise pursuant to this Indenture except as may otherwise be required by
law. Any such Secondary Debentures shall be governed by the Indenture and the
terms of each such Secondary Debenture shall be identical to the terms of this
Debenture except with respect to, as the case may be, the designation of such
Secondary Debenture (which may (but need not) indicate the Interest Payment
Date of its original issuance), its aggregate principal amount, its CUSIP
number or other required identifications, any required legends (including with
respect to taxation) and the date from which interest accrues and except as may
otherwise be required by law. Notwithstanding the foregoing, Secondary
Debentures may be issued on any given Interest Payment Date in separate series
if such is required pursuant to a change in law after the date hereof, and, in
such event, the Holders of designated Debentures shall continue to be treated
in all respects as Holders of Debentures for all purposes of this Indenture
(including with respect to any Act of Holders or any other action of Holders or
otherwise pursuant to this Indenture) except as required by such change in law.
The principal of (and premium, if any) and interest (and Liquidated
Damages, if any) on the Debentures shall be payable at the office or agency of
the Company in the Borough of Manhattan, The City of New York maintained for
such purpose and at any other office or agency maintained by the Company for
such purpose; provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Debenture Register.
The Debentures shall be subject to repurchase by the Company pursuant
to an Asset Sale Offer or Change of Control Offer, respectively, as provided in
Sections 1013 and 1015.
The Debentures shall be subject to defeasance at the option of the
Company as provided in Article Twelve.
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SECTION 302. Denominations.
The Debentures shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Debentures shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents, and
attested by its Secretary or one of its Assistant Secretaries. The signature
of any of these officers on the Debentures may be manual or facsimile.
Debentures bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Debentures or did not
hold such offices at the date of such Debentures.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Debentures executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Debentures; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Debentures as in
this Indenture provided and not otherwise.
Each Debenture shall be dated the date of its authentication (except as
may be otherwise provided herein with respect to Secondary Debentures).
No Debenture shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Debenture a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Debenture shall be conclusive evidence, and the only evidence, that such
Debenture has been duly authenticated and delivered hereunder.
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SECTION 304. Temporary Debentures.
Pending the preparation of Definitive Debentures, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Debentures which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the Definitive Debentures in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Debentures may determine, as evidenced by their
execution of such Debentures.
If temporary Debentures are issued, the Company will cause Definitive
Debentures to be prepared without unreasonable delay. After the preparation of
Definitive Debentures, the temporary Debentures shall be exchangeable for
Definitive Debentures upon surrender of the temporary Debentures at any office
or agency of the Company designated pursuant to Section 1002, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Debentures the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of Definitive Debentures
of authorized denominations. Until so exchanged the temporary Debentures shall
in all respects be entitled to the same benefits under this Indenture as
Definitive Debentures.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
collectively referred to as the "Debenture Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Debentures and of transfers of Debentures. The Trustee is
hereby appointed "Debenture Registrar" for the purpose of registering
Debentures and transfers of Debentures as herein provided.
Upon surrender for registration of transfer of any Debenture at an
office or agency of the Company designated pursuant to Section 1002 for such
purpose, the Company shall execute, and upon receipt of a Company Order, the
Trustee
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shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Debentures of any authorized denominations and of
a like aggregate principal amount.
At the option of the Holder, Debentures may be exchanged for other
Debentures of any authorized denominations and of a like aggregate principal
amount, upon surrender of the Debentures to be exchanged at such office or
agency. Whenever any Debentures are so surrendered for exchange, the Company
shall execute, and upon receipt of a Company Order, the Trustee shall
authenticate and deliver, the Debentures which the Holder making the exchange
is entitled to receive.
All Debentures issued upon any registration of transfer or exchange of
Debentures shall be the valid obligation of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Debentures
surrendered upon such registration of transfer or exchange.
(a) Transfer and Exchange of Definitive Debentures. When Definitive
Debentures are presented to the Debenture Registrar with a request (x) to
register the transfer of such Definitive Debentures or (y) to exchange such
Definitive Debentures for an equal principal amount of Definitive Debentures of
other authorized denominations, the Debenture Registrar shall register the
transfer or make the exchange as requested if its reasonable requirements for
such transaction are met; provided, however, that the Definitive Debentures
surrendered for registration of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company
and the Debenture Registrar, duly executed by the Holder thereof or his
attorney duly authorized in writing; and
(ii) in the case of Transfer Restricted Debentures that are
Definitive Debentures, shall be accompanied by the following additional
information and documents, as applicable:
(A) if such Transfer Restricted Debenture is being delivered
to the Debenture Registrar by a Holder for registration in the name of
such
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Holder, without transfer, a certification from such Holder to that
effect (in substantially the form set forth on the reverse of the
Debenture); or
(B) if such Transfer Restricted Debenture is being transferred
to a "qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) that is aware that any sale of Debentures to it
will be made in reliance on Rule 144A under the Securities Act and
that is acquiring such Transfer Restricted Debenture for its own
account or for the account of another such "qualified institutional
buyer," a certification from such Holder to that effect (in
substantially the form set forth on the reverse of the Debenture);
or
(C) if such Transfer Restricted Debenture is being
transferred pursuant to an exemption from registration in
accordance with Rule 144, or outside the United States in an
offshore transaction in compliance with Rule 904 under the
Securities Act, or pursuant to an effective registration statement
under the Securities Act, a certification from such Holder to that
effect (in substantially the form set forth on the reverse of the
Debenture); or
(D) if such Transfer Restricted Debenture is being transferred
in reliance on another exemption from the registration requirements
of the Securities Act and with all applicable securities laws of
the States of the United States, a certification from such Holder
to that effect (in substantially the form set forth on the reverse
of the Debenture) and an Opinion of Counsel from the Holder
reasonably acceptable to the Company, the Trustee, and to the
Debenture Registrar to the effect that such transfer is in
compliance with the Securities Act.
(b) Restrictions on Transfer of a Definitive Debenture for a
Beneficial Interest in a Global Debenture. A Definitive Debenture may not be
exchanged for a beneficial interest in a Global Debenture except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee
of a Definitive Debenture, duly endorsed or
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accompanied by appropriate instruments of transfer, in form satisfactory to the
Trustee, together with:
(i) if such Definitive Debenture is a Transfer Restricted Debenture,
certification, in substantially the form set forth on the reverse of the
Debenture, that such Definitive Debenture is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act;
and
(ii) whether or not such Definitive Debenture is a Transfer
Restricted Debenture, written instructions directing the Trustee to make,
or to direct the Debentures Custodian to make, an endorsement on the
Global Debenture to reflect an increase in the aggregate principal amount
of the Debentures represented by the Global Debenture,
then the Trustee shall cancel such Definitive Debenture and cause, or direct
the Debentures Custodian to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Debentures Custodian,
the aggregate principal amount of Debentures represented by the Global
Debenture to be increased accordingly. If no Global Debentures are then
outstanding, the Company shall issue and upon receipt of a Company Order the
Trustee shall authenticate a new Global Debenture in the appropriate principal
amount.
(c) Transfer and Exchange of Global Debentures. The transfer and
exchange of Global Debentures or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture (including applicable
restrictions on transfer set forth herein, if any) and the procedures of the
Depositary therefor. Except as set forth in clause (d) through (f), a Global
Debenture may not be transferred as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary
or another nominee of the Depositary or by the Depositary or any such nominee
to a successor Depositary or a nominee of such successor Depositary.
(d) Transfer of a Beneficial Interest in a Global Debenture for a
Definitive Debenture.
(i) A Global Debenture is exchangeable for
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Definitive Debentures in registered certificated form if (A) the
Depositary (x) notifies the Company that it is unwilling or unable to
continue as depositary for the Global Debenture and the Company thereupon
fails to appoint a successor depositary or (y) has ceased to be a
clearing agency registered under the Exchange Act, (B) the Company, at
its option, notifies the Trustee in writing that it elects to cause the
issuance of the Debentures in certificated form or (C) there shall have
occurred and be continuing an Event of Default or any event which after
notice or lapse of time or both would be an Event of Default with respect
to the Debentures. In all cases, Definitive Debentures delivered in
exchange for any Global Debenture or beneficial interests therein will be
registered in the names, and issued in any approved denominations,
requested by or on behalf of the Depositary (in accordance with its
customary procedures) and will bear the applicable restrictive legend,
unless the Company determines otherwise in compliance with applicable
law.
(ii) Upon receipt by the Trustee of written instructions or such
other form of instructions as is customary for the Depositary, from the
Depositary or its nominee on behalf of any Person having a beneficial
interest in a Global Debenture, and upon receipt by the Trustee of a
written instruction or such other form of instructions as is customary
for the Depositary or the Person designated by the Depositary as having
such a beneficial interest in a Transfer Restricted Debenture only, the
following additional information and documents (all of which may be
submitted by facsimile):
(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the beneficial owner,
a certification from the transferor to that effect (in
substantially the form set forth on the reverse of the Debenture);
or
(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) that is aware that any sale of Debentures to it
will be made in reliance on Rule 144A under the Securities Act and
that is acquiring such beneficial interest in the Transfer
Restricted Debenture for its own account or the
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account of another such "qualified institutional buyer", a
certification to that effect from the transferor (in substantially
the form set forth on the reverse of the Debenture); or
(C) if such beneficial interest is being transferred pursuant
to an exemption from registration in accordance with Rule 144, or
outside the United States in an offshore transaction in compliance
with Rule 904 under the Securities Act, or pursuant to an effective
registration statement under the Securities Act, a certification
from the transferor to that effect (in substantially the form set
forth on the reverse of the Debenture); or
(D) if such beneficial interest in being transferred in
reliance on another exemption from the registration requirements of
the Securities Act and in accordance with all applicable securities
laws of the States of the United States, a certification to that
effect from the transferor (in substantially the form set forth on
the reverse of the Debenture) and an Opinion of Counsel from the
transferee or transferor reasonably acceptable to the Company and
to the Debenture Registrar to the effect that such transfer is in
compliance with the Securities Act,
then the Trustee shall cause, or direct the Debentures Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Debentures Custodian, the aggregate principal amount of the
Global Debenture to be reduced accordingly and, following such reduction, the
Company will execute and, upon receipt of a Company Order, the Trustee will
authenticate and deliver to the transferee a Definitive Debenture in the
appropriate principal amount.
(e) Exchanges between Regulation S Debentures and Rule 144A
Debentures. Prior to the expiration of the restricted period, beneficial
interests in the Regulation S Temporary Global Debenture may not be transferred
to a Person who takes delivery in the form of an interest in a Rule 144A Global
Debenture. After the expiration of the restricted period, beneficial interests
in Regulation S Permanent Global Debentures may be transferred to a Person
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who takes delivery in the form of an interest in a Rule 144A Global Debenture.
Upon receipt by the Trustee of written instructions or such other form of
instructions as is customary for the Depositary, from the Depositary or its
nominee on behalf of any Person having a beneficial interest in the Regulation
S Global Debenture, then the Trustee shall cause, or direct the Debentures
Custodian to cause, in accordance with the standing instructions and procedures
existing between the Depositary and the Debentures Custodian, the aggregate
principal amount of the Regulation S Global Debenture to be decreased and the
aggregate principal amount of the Rule 144A Global Debenture to be increased by
the principal amount of the beneficial interest in the Regulation S Global
Debenture to be exchanged, to credit, or cause to be credited, to the account
of the transferor a beneficial interest in the Rule 144A Global Debenture equal
to the reduction in the aggregate principal amount of the Regulation S Global
Debenture, and to debit, or cause to be debited, from the account of the
transferor the beneficial interest in the Regulation S Global Debenture that is
being exchanged or transferred.
Prior to the expiration of the restricted period, beneficial interests
in the Rule 144A Global Debenture may not be transferred to any Person that
takes delivery thereof in the form of an interest in the Regulation S Temporary
Global Debenture. After the expiration of the restricted period, beneficial
interests in the Rule 144A Global Debenture may be transferred to a Person who
takes delivery in the form of an interest in the Regulation S Permanent Global
Debenture only upon receipt by the Trustee of a written certification from the
transferor to the effect that such transfer is being made in accordance with
Rule 904 of Regulation S. Upon receipt by the Trustee of written instructions
or such other form of instructions as is customary for the Depositary, from the
Depositary or its nominee on behalf of any Person having a beneficial interest
in the Rule 144A Global Debenture, then the Trustee shall cause, or direct the
Debentures Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Debentures Custodian, the
aggregate principal amount of the Rule 144A Global Debenture to be decreased
and the aggregate principal amount of the Regulation S Global Debenture to be
increased by the principal amount of the beneficial interest in the Rule 144A
Global Debenture to be exchanged, to credit, or cause to be credited, to the
account of the transferor a beneficial interest in the Regulation S Global
Debenture
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equal to the reduction in the aggregate principal amount of the Rule 144A
Global Debenture, and to debit, or cause to be debited, from the account of the
transferor the beneficial interest in the Rule 144A Global Debenture that is
being exchanged or transferred.
(f) Restrictions on Transfer and Exchange of Regulation S
Temporary Global Debentures. A holder of a beneficial interest in a Regulation
S Temporary Global Debenture must provide Euroclear or CEDEL, as the case may
be, with a certificate in the form set forth in Annex B certifying that the
beneficial owner of the interest in the Regulation S Temporary Global Debenture
is either not a U.S. Person (as defined below) or has purchased such interest
in a transaction that is exempt from the registration requirements under the
Securities Act (the "Regulation S Certificate"), and Euroclear or CEDEL, as the
case may be, must provide to the Trustee (or to the Paying Agent if other than
the Trustee) a certificate in the form set forth in Annex B prior to (i) the
payment of interest or principal with respect to such holder of beneficial
interests in the Regulation S Temporary Global Debenture and (ii) any exchange
of such beneficial interest for a beneficial interest in a Regulation S
Permanent Global Debenture. "U.S. Person" means (i) any individual resident in
the United States, (ii) any partnership or corporation organized or
incorporated under the laws of the United States, (iii) any estate of which an
executor or administrator is a U.S. Person (other than an estate governed by
foreign law and of which at least one executor or administrator is a non-U.S.
Person who has sole or shared investment discretion with respect to its
asset(s)), (iv) any trust of which any trustee is a U.S. Person (other than a
trust of which at least one trustee is a non-U.S. Person who has sole or shared
investment discretion with respect to its assets and no beneficiary of the
trust (and no settlor if the trust is revocable) is a U.S. Person), (v) any
agency or branch of a foreign entity located in the United States, (vi) any
non-discretionary or similar account (other than an estate or trust) held by a
dealer or other fiduciary for the benefit or account of a U.S. Person, (vii)
any discretionary or similar account (other than an estate or trust) held by a
dealer or other fiduciary organized, incorporated or (if an individual)
resident in the United States (other than such an account held for the benefit
or account of a non-U.S. Person), (viii) any partnership or corporation
organized or incorporated under the laws of a foreign jurisdiction and formed
by a U.S. Person principally for the purpose of
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investing in securities not registered under the Securities Act (unless it is
organized or incorporated and owned, by accredited investors within the meaning
of Rule 501 (a) under the Securities Act who are not natural Persons, estates
or trusts); provided, however, that the term "U.S. Person" shall not include
(A) a branch or agency of a U.S. Person that is located and operating outside
the United States for valid business purposes as a locally regulated branch or
agency engaged in the banking or insurance business, (B) any employee benefit
plan established and administered in accordance with the law, customary
practices and documentation of a foreign country and (C) the international
organizations set forth in Section 902(o)(7) of Regulation S under the
Securities Act and any other similar international organizations, and their
agencies, affiliates and pension plans.
(g) Legends.
(i) Except as permitted by the following paragraphs (iv) and (v),
each Debenture certificate evidencing the Global Debentures and the
Definitive Debentures (and all Debentures issued in exchange therefor or
substitution thereof) shall bear a legend in substantially the following
form:
THE DEBENTURES (OR THEIR PREDECESSORS) EVIDENCED HEREBY WERE 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
DEBENTURES EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE DEBENTURES 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. THE HOLDER OF THE DEBENTURES
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH DEBENTURES
MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (a) INSIDE THE
UNITED STATES TO A PERSON WHOM 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) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (c) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (d) TO THE
COMPANY, (e) PURSUANT TO AN
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EFFECTIVE REGISTRATION STATEMENT OR (f) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS) 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 DEBENTURES EVIDENCED
HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
(ii) Except as permitted by the following paragraphs (iii), (iv) and
(v), each Regulation S Temporary Global Debenture (and all Debentures issued in
exchange therefor or substitution thereof) shall bear a legend in substantially
the form set forth in the form of Debenture attached to this Indenture.
(iii) Except as permitted by the following paragraphs (iv) and (v),
each Regulation S Permanent Global Debenture (and all Debentures issued in
exchange therefor or substitution thereof) shall bear a legend in substantially
the form set forth in the form of Debenture attached to this Indenture.
(iv) Upon any sale or transfer of a Transfer Restricted Debenture
(including any Transfer Restricted Debenture represented by a Global
Debenture) pursuant to Rule 144 under the Act or an effective
registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Debenture, the
Debenture Registrar shall permit the Holder thereof to exchange
such Transfer Restricted Debenture for a Definitive Debenture that
does not bear the legend set forth in (i), (ii) or (iii) above and
rescind any restriction on the transfer of such Transfer Restricted
Debenture; and
(B) any such Transfer Restricted Debenture represented by a
Global Debenture shall not be subject to the provisions set forth
in (i), (ii) or (iii) above (such sales or transfers being subject
only to the provisions of Section 305(c) hereof); provided,
however, that with respect to any request for an exchange of a
Transfer Restricted Debenture that is represented by a Global
Debenture for a Definitive Debenture that
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does not bear a legend, which request is made in reliance upon Rule
144, the Holder thereof shall certify in writing to the Debenture
Registrar that such request is being made pursuant to Rule 144
(such certification to be in substantially the form set forth on
the reverse of the Debenture).
(v) Any Exchange Debentures issued in connection with the
Exchange Offer or Unrestricted Debentures issued in exchange for registered
Senior Preferred Stock pursuant to Section 3(a)(9) under the Securities Act
shall not bear the legend set forth in (i), (ii) or (iii) above and the Trustee
shall rescind any restriction on the transfer of such Exchange Debentures or
Unrestricted Debentures.
(h) Cancellation and/or Adjustment of Global Debenture. At such
time as all beneficial interests in a Global Debenture have either been
exchanged for Definitive Debentures or beneficial interests in other Global
Debentures, redeemed, repurchased or canceled, such Global Debenture shall be
returned to or retained and canceled by the Trustee. At any time prior to such
cancellation, if any beneficial interest in a Global Debenture is exchanged for
Definitive Debentures or a beneficial interest in another Global Debenture,
redeemed, repurchased or canceled, the principal amount of Debentures
represented by such Global Debenture shall be reduced and an endorsement shall
be made on such Global Debenture, by the Trustee or the Debentures Custodian,
at the direction of the Trustee, to reflect such reduction.
(i) Obligations with respect to Transfers and Exchanges of Definitive
Debentures. To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Definitive Debentures and
Global Debentures at the Debenture Registrar's request.
(j) General. No service charge shall be made for any registration
of transfer or exchange of Debentures, but the Company may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Debentures, other than exchanges pursuant to Section 304, 906 or 1108 or in
accordance with any Asset Sale Offer or Change of Control Offer pursuant to
Section 1013 or 1015 not involving any transfer.
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The Company shall not be required (i) to issue, register the transfer
of or exchange any Debenture during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Debentures selected for redemption under Section 1104 and ending at the close
of business on the day of such mailing, or (ii) to register the transfer of or
exchange any Debenture so selected for redemption in whole or in part, except
the unredeemed portion of any Debenture being redeemed in part.
The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Debenture (including any transfers between or among Depositary
participants or beneficial owners of interests in any Global Debenture) other
than to require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when expressly
required by the terms of, this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements thereof.
Prior to due presentment for the registration of a transfer of any
Debenture, the Trustee and the Company may deem and treat the Person in whose
name any Debenture is registered as the absolute power of such Debenture for
all purposes, and none of the Trustee or the Company shall be affected by
notice to the contrary.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Debentures.
If any mutilated Debenture is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Debenture of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Debenture and
(ii) such security or indemnity as may be required by them to save each of them
and any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Debenture has been acquired by a bona fide
purchaser, the
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Company shall execute and upon its request the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Debenture, a new
Debenture of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Debenture has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Debenture, pay such Debenture.
Upon the issuance of any new Debenture under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Debenture issued pursuant to this Section in lieu of any
destroyed, lost or stolen Debenture shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Debenture shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Debentures duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Debentures.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Debenture which is payable in cash, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name that Debenture (or one or more Predecessor Debentures) is
registered at the close of business on the Regular Record Date immediately
preceding such Interest Payment Date.
Any interest on any Debenture which is payable in cash, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been
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such Holder, and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Debentures (or their respective
Predecessor Debentures) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be
paid on each Debenture and the date of the proposed payment, and at the
same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money
when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a Special Record Date for the payment of
such Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less than
10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special
Record Date and, in the name and at the expense of the Company, shall
cause notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder at his address as it appears in the Debenture Register,
not less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
therefor having been so mailed, such Defaulted Interest shall be paid to
the Persons in whose names the Debentures (or their respective
Predecessor Debentures) are registered at the close of business on such
Special Record Date and shall no longer be payable pursuant to the
following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Debentures may be listed, and upon such
notice as may be required by such exchange, if, after
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notice given by the Company to the Trustee of the proposed payment
pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Debenture
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Debenture shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Debenture.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Debenture for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Debenture is registered as the owner of such
Debenture for the purpose of receiving payment of principal of (and premium, if
any) and (subject to Section 307) interest (and Liquidated Damages, if any) on
such Debenture and for all other purposes whatsoever, whether or not such
Debenture be overdue, and neither the Company, the Trustee nor any agent of the
Company or the Trustee shall be affected by notice to the contrary.
SECTION 309. Cancellation.
All Debentures surrendered for payment, redemption, registration of
transfer or exchange or any Asset Sale Offer or Change of Control Offer
pursuant to Section 1013 or 1015 shall, if surrendered to any Person other than
the Trustee, be delivered to the Trustee and shall be promptly canceled by it.
The Company may at any time deliver to the Trustee for cancellation any
Debentures previously authenticated and delivered hereunder which the Company
may have acquired in any manner whatsoever, and all Debentures so delivered
shall be promptly canceled by the Trustee. No Debentures shall be
authenticated in lieu of or in exchange for any Debentures canceled as provided
in this Section, except as expressly permitted by this Indenture. All canceled
Debentures held by the Trustee shall be disposed of as directed by a Company
Order.
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SECTION 310. Computation of Interest.
Interest on the Debentures shall be computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Debentures herein
expressly provided for), and the Trustee, on demand of and at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Debentures theretofore authenticated and delivered (other
than (i) Debentures which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and (ii)
Debentures for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation; or
(B) all such Debentures not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited
or caused to be deposited
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with the Trustee as trust funds in trust for the purpose an amount
sufficient to pay and discharge the entire indebtedness on such
Debentures not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any) and interest (and
Liquidated Damages, if any) to the date of such deposit (in the
case of Debentures which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Debentures and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
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ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) the failure by the Company to pay any installment of interest
(or Liquidated Damages, if any) on the Debentures as and when the same
becomes due and payable and the continuance of any such failure for 30
days;
(2) the failure by the Company to pay all or any part of the
principal, or premium, if any, on the Debentures when and as the same
becomes due and payable at maturity, redemption, by acceleration or
otherwise, including, without limitation, payment of the Change of
Control Purchase Price or the Asset Sale Offer Price, or otherwise;
(3) the failure by the Company or any Subsidiary of the Company to
observe or perform any other covenant or agreement contained in the
Debentures or the Indenture and the continuance of such failure for a
period of 30 days after written notice is given to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25%
in aggregate principal amount of the Debentures outstanding, specifying
such Default;
(4) the entry by a court having jurisdiction in the premises of (A)
a decree or order for relief in respect of the Company or any Significant
Subsidiary of the Company in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or (B) a decree or order adjudging the Company or any
such Subsidiary a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition
of or in respect of the
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Company or any such Subsidiary under any applicable Federal or State law,
or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or any such
Subsidiary or of any substantial part of the property of the Company or
any such Subsidiary, or ordering the winding up or liquidation of the
affairs of the Company or any such Subsidiary, and the continuance of any
such decree or order for relief or any such other decree or order
unstayed and in effect for a period of 60 consecutive days;
(5) the commencement by the Company or any Significant Subsidiary
of the Company of a voluntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar
law or of any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by the Company or any such Subsidiary to the
entry of a decree or order for relief in respect of the Company or any
Significant Subsidiary of the Company in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against the Company or any
Subsidiary of the Company, or the filing by the Company or any such
Subsidiary of a petition or answer or consent seeking reorganization or
relief under any applicable Federal or State law, or the consent by the
Company or any such Subsidiary to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary of the Company or of any substantial part of the
property of the Company or any Significant Subsidiary of the Company, or
the making by the Company or any Significant Subsidiary of the Company of
an assignment for the benefit of creditors, or the admission by the
Company or any such Subsidiary in writing of its inability to pay its
debts generally as they become due, or the taking of corporate action by
the Company or any such Subsidiary in furtherance of any such action;
(6) a default in any Indebtedness of the Company or its
Subsidiaries, with an aggregate principal in excess of $15 million (a)
resulting from the failure to
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pay principal at maturity or (b) as a result of which the maturity of
such Indebtedness has been accelerated prior to its stated maturity; or
(7) a final unsatisfied judgment or final unsatisfied judgments not
covered by insurance for the payment of money are entered against the
Company or any Subsidiary of the Company in an aggregate amount in excess
of $15 million by a court or courts of competent jurisdiction, which
judgments remain unstayed, undischarged or unbonded for a period (during
which execution shall not be effectively stayed) of 60 days.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 501(4) or (5)) occurs and is continuing, then and in every such case
either the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Outstanding Debentures may declare all the Debentures to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by Holders). If an Event of Default specified in Section
501(4) or (5) occurs, the Debentures then Outstanding will be immediately due
and payable without any declaration or other Act on the part of the Trustee or
any Holder.
Upon any acceleration of maturity of the Debentures, all principal of
and accrued interest and Liquidated Damages on the Debentures shall be due and
payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in aggregate principal amount of the Outstanding Debentures, by written notice
to the Company and the Trustee, may rescind and annul such declaration and its
consequences if the Company has paid or deposited with the Trustee a sum
sufficient to pay and except on default with respect to any provision requiring
a supermajority approval to amend, which may only be waived by such
supermajority, all existing Events of Default, other than the non-payment
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of the principal of, premium, if any, and interest (and Liquidated Damages, if
any) on the Debentures which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent Default or impair any
right consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest (and Liquidated
Damages, if any) on any Debenture when such interest (and Liquidated
Damages, if any) becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Debenture at the Maturity thereof or, with respect to any
Debenture required to have been purchased pursuant to an Asset Sale Offer
or Change of Control Offer made by the Company, at the Purchase Date
thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Debentures, the whole amount then due and payable on such
Debentures for principal (and premium, if any) and interest (and Liquidated
Damages, if any), and, to the extent that payment of such interest shall be
legally enforceable, interest on any overdue principal (and premium, if any)
and on any overdue interest and Liquidated Damages, at the rate provided by the
Debentures, and, in addition thereto, 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.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Debentures and collect the
moneys adjudged
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or decreed to be payable in the manner provided by law out of the property of
the Company or any other obligor upon the Debentures, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Debentures), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official 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 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 607.
No provision of this Indenture 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
Debentures or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
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SECTION 505. Trustee May Enforce Claims Without Possession of Debentures.
All rights of action and claims under this Indenture or the Debentures
may be prosecuted and enforced by the Trustee without the possession of any of
the Debentures or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Debentures in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (or premium,
if any) or interest (or Liquidated Damages, if any), upon presentation of the
Debentures and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest (and Liquidated Damages,
if any) on the Debentures in respect of which or for the benefit of which
such money has been collected, ratably, without preference or priority of
any kind, according to the amounts due and payable on such Debentures for
principal (and premium, if any) and interest (and Liquidated Damages, if
any), respectively.
SECTION 507. Limitation on Suits.
No Holder of any Debenture shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a
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receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Debentures shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Debentures;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Debenture shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 307) interest (and Liquidated Damages, if any) on such Debenture on the
respective Stated Maturities expressed in such Debenture (or, in the case of
redemption, on the Redemption Date or in the case of an Asset Sale Offer or
Change of Control Offer made by the Company and required to
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be accepted as to such Debenture, on the Purchase Date) and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Debentures in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Debenture
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
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SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the Outstanding
Debentures shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Debentures may on behalf of the Holders of all the
Debentures waive any past Default hereunder and its consequences, except a
default with respect to any provision requiring a supermajority to amend, which
default may only be waived by such a supermajority, except a Default
(1) in the payment of the principal of (or premium, if any) or
interest (or Liquidated Damages, if any) on any Debenture (including any
Debenture which is required to have been purchased pursuant to an Asset
Sale Offer or Change of Control Offer which has been made by the
Company), or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Debenture affected.
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.
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SECTION 514. 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, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit
to file an undertaking to pay the costs of such suit, and may assess costs
against any such party litigant, in the manner and to the extent provided in
the Trust Indenture Act; provided, that neither this Section nor the Trust
Indenture Act shall be deemed to authorize any court to require such an
undertaking or to make such an assessment in any suit instituted by the
Company.
SECTION 515. Waiver of Usury, Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any usury, stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this Indenture
relating to the
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conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any Default hereunder, to
the extent it has knowledge of such Default as and to the extent provided by
the Trust Indenture Act. The term "Default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(d) 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 protection in respect of any
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action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon;
(e) 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 pursuant to this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such
request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of
the Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder.
SECTION 604. Not Responsible for Recitals or
Issuance of Debentures.
The recitals contained herein and in the Debentures, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Debentures. The Trustee shall not be accountable for the
use or application by the Company of the Debentures or the proceeds thereof.
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SECTION 605. May Hold Debentures.
The Trustee, any Paying Agent, any Debenture Registrar or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Debentures and, subject to Sections 608 and 613, may
otherwise deal with the Company with the same rights it would have if it were
not Trustee, Paying Agent, Debenture Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Indenture
(including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence
or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this trust,
including the costs and expenses of defending
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itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000 and a Corporate Trust
Office in the Borough of Manhattan, The City of New York. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
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(c) The Trustee may be removed at any time by Act of the Holders of
a majority in principal amount of the Outstanding Debentures, delivered to the
Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has
been a bona fide Holder of a Debenture for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the
Company or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or
of its property shall be appointed or any public officer shall
take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Debenture for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee.
If, within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in principal amount of the Outstanding Debentures
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment in the manner hereinafter provided, any Holder
who has been a
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bona fide Holder of a Debenture for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to all Holders in
the manner provided in Section 106. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers,
trusts and duties of the retiring Trustee; but, on request of the Company or
the successor Trustee, such retiring Trustee shall, upon payment of its
charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all
such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor
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of the Trustee hereunder, provided such corporation shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto. In case
any Debentures shall have been authenticated, but not delivered, by the Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Debentures
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Debentures.
SECTION 613. Preferential Collection of Claims
Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Debentures), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee
Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semi-annually, not more than 15 days after each Regular
Record Date, commencing the first Regular Record Date immediately
following the Exchange Date, a list, in such form as the Trustee
may reasonably require, of the names and addresses of the Holders
as of such Regular Record Date, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days prior
to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Debenture Registrar.
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SECTION 702. Preservation of Information;
Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Debenture
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders with
respect to their rights under this Indenture or under the Debentures and the
corresponding rights and duties of the Trustee, shall be provided by the Trust
Indenture Act.
(c) Every Holder of Debentures, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of either of them shall be held accountable by reason of
any disclosure of information as to the names and addresses of Holders made
pursuant to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which the
Debentures are listed, with the Commission and with the Company. The Company
will notify the Trustee when the Debentures are listed on any stock exchange.
SECTION 704. Reports by Company.
Whether or not the Company is subject to the reporting requirement of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee and to each
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Holder and to prospective purchasers of Debentures identified to the Company by
a Holder within 15 days after it is or would have been (if it were subject to
such reporting obligations) required to file such with the Commission, annual
and quarterly financial statements substantially equivalent to financial
statements that would have been included in reports filed with the Commission,
if the Company were subject to the requirements of Section 13 or 15(d) of the
Exchange Act, including, with respect to annual information only, a report
thereon by the Company's certified independent public accountants as such would
be required in such reports to the Commission, and, in each case, together with
a management's discussion and analysis of financial condition and results of
operations which would be so required and, unless the Commission will not
accept such reports, file with the Commission the annual, quarterly and other
reports which it is or would have been required to file with the Commission.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Limitation on Merger, Sale
or Consolidation.
The Company shall not consolidate with or merge with or into another
Person or, directly or indirectly, sell, lease, convey or transfer all or
substantially all of its assets (computed on a consolidated basis), whether in
a single transaction or a series of related transactions, to another Person or
group of affiliated Persons or adopt a plan of liquidation, unless:
(1) either (a) the Company is the continuing entity or (b) the
resulting, surviving or transferee entity or, in the case of a plan of
liquidation, the entity which receives the greatest value from such plan
of liquidation is a corporation organized under the laws of the United
States, any state thereof or the District of Columbia and expressly
assumes by supplemental indenture all of the obligations of the Company
in connection with the Debentures and this Indenture;
(2) no Default or Event of Default shall exist or shall occur
immediately after giving effect on a pro forma basis to such transaction;
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(3) immediately after giving effect to such transaction on a pro
forma basis, the Consolidated Net Worth of the consolidated, resulting,
surviving or transferee entity or, in the case of a plan of liquidation,
the entity which receives the greatest value from such plan of
liquidation is at least equal to the Consolidated Net Worth of the
Company immediately prior to such transaction; and
(4) immediately after giving effect to such transaction on a pro
forma basis, the consolidated, resulting, surviving or transferee entity
or, in the case of a plan of liquidation, the entity which receives the
greatest value from such plan of liquidation would immediately thereafter
be permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Debt Incurrence Ratio set forth in Section 1008.
SECTION 802. Successor Substituted.
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company or consummation of a plan of
liquidation in accordance with the foregoing, the successor corporation formed
by such consolidation or into which the Company is merged or to which such
transfer is made or, in the case of a plan of liquidation, the entity which
receives the greatest value from such plan of liquidation shall succeed to and
(except in the case of a lease) be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such successor corporation had been named therein as the Company, and (except
in the case of a lease) the Company shall be released from the obligations
under the Debentures and the Indenture except with respect to any obligations
that arise from, or are related to, such transaction.
SECTION 803. Transfer of Subsidiary Assets.
For purposes of the foregoing, the transfer (by lease, assignment, sale
or otherwise) of all or substantially all of the properties and assets of one
or more Subsidiaries, the Company's interest in which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or
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substantially all of the properties and assets of the Company.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without
Consent of Holders.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company
herein and in the Debentures; or
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(3) to secure the Debentures pursuant to the requirements of Section
1011 or otherwise; or
(4) to comply with any requirements of the Commission in order to
effect and maintain the qualification of this Indenture under the Trust
Indenture Act;
(5) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the provisions
of this Indenture, provided such action pursuant to this clause (5) shall
not adversely affect the interests of the Holders in any material
respect;
(6) prior to the Exchange Date, to evidence any modification to the
Indenture governing the Senior Discount Debentures approved by the
holders of the
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Senior Discount Debentures that does not require the consent of holders
of Senior Preferred Stock; or
(7) prior to the Exchange Date, to evidence any modification to the
Indenture approved by the holders of the Senior Preferred Stock.
SECTION 902. Supplemental Indentures with Consent
of Holders.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Debentures, by Act of said
Holders delivered to the Company and the Trustee, the Company, when authorized
by a Board Resolution, and the Trustee may enter into an indenture or
indentures supplemental hereto for the purpose of amending or supplementing
this Indenture or any supplemental indenture or modifying the rights of the
Holders; provided, however, that no such modification may, without the consent
of Holders of at least 66 2/3% in aggregate principal amount of Debentures at
the time outstanding, modify the provisions or subordinate provisions of the
Indenture(including the defined terms used therein) of Section 1015 in a manner
adverse to the Holders; and provided that no such modification may, without the
consent of each Holder thereby:
(1) change the Stated Maturity on any Debenture, or reduce the
principal amount thereof or the rate (or extend the time for payment) of
interest thereon or any premium payable upon the redemption at the option
of the Company thereof, or change the place of payment where, or the coin
or currency in which, any Debenture or any premium or interest (or
Liquidated Damages, if any) thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption at the option of
the Company, on or after the Redemption Date), or reduce the Change of
Control Purchase Price or the Asset Sale Offer Price of alter the
provisions (including the defined terms used therein) regarding the right
of the Company to redeem the Debentures at its option in a manner adverse
to the Holders, or
(2) reduce the percentage in principal amount of the Outstanding
Debentures, the consent of whose
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Holders is required for any such amendment, supplemental indenture or
waiver provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1019 except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Debenture affected
thereby.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Debentures theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
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SECTION 906. Reference in Debentures to Supplemental Indentures.
Debentures authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so
determine, new Debentures so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Debentures.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of (and premium,
if any) and any interest (and Liquidated Damages, if any) on the Debentures in
accordance with the terms of the Debentures and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Debentures may be presented or surrendered for
payment, where Debentures may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Debentures and this Indenture may be served. The Company will give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain
any such required office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and demands may be
made or served at the Corporate Trust Office of the Trustee, and the Company
hereby appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
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The Company may also from time to time designate one or more other
offices or agencies (in or outside the Borough of Manhattan, The City of New
York) where the Debentures may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company will give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
SECTION 1003. Money for Debenture Payments to be
Held in Trust.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal of (and premium, if any) or
interest (and Liquidated Damages, if any) on any of the Debentures, segregate
and hold in trust for the benefit of the Persons entitled thereto a sum
sufficient to pay the principal (and premium, if any) or interest (and
Liquidated Damages, if any) so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
prior to each due date of the principal of (and premium, if any) or interest
(and Liquidated Damages, if any) on any Debentures, deposit with a Paying Agent
a sum sufficient to pay the principal (and premium, if any) or interest (and
Liquidated Damages, if any) so becoming due, such sum to be held in trust for
the benefit of the Persons entitled to such principal, premium, interest or
Liquidated Damages, and (unless such Paying Agent is the Trustee) the Company
will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
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(1) hold all sums held by it for the payment of the principal of
(and premium, if any) or interest (and Liquidated Damages, if any) on
Debentures in trust for the benefit of the Persons entitled thereto until
such sums shall be paid to such Persons or otherwise disposed of as
herein provided;
(2) give the Trustee notice of any Default by the Company (or any
other obligor upon the Debentures) in the making of any payment of
principal (and premium, if any) or interest (and Liquidated Damages, if
any); and
(3) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of (and premium,
if any) or interest (and Liquidated Damages, if any) on any Debenture and
remaining unclaimed for two years after such principal (and premium, if any) or
interest has become due and payable shall be paid to the Company on Company
Request, or (if then held by the Company) shall be discharged from such trust;
and the Holder of such Debenture shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company 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 Company cause to be published
once, in a newspaper published in the English language, customarily published
on each Business Day and of general circulation in The City of New York,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than
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30 days from the date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 1004. Existence.
Subject to Article Eight and Section 1013, the Company and its
Subsidiaries will do or cause to be done all things necessary to preserve and
keep in full force and effect their existence, rights (charter and statutory)
and franchises; provided, however, that the Company and its Subsidiaries shall
not be required to preserve any such right or franchise if the Board of
Directors in good faith shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company or its
Subsidiaries and that the loss thereof is not disadvantageous in any material
respect to the Holders.
SECTION 1005. Maintenance of Properties.
The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary of the Company to be maintained
and kept in good condition, repair and working order and supplied with all
necessary equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, as determined by the Board of Directors in good faith,
desirable in the conduct of its business or the business of any Subsidiary and
not disadvantageous in any material respect to the Holders.
SECTION 1006. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any of its
Subsidiaries or upon the income, profits or property of the Company or any of
its Subsidiaries, and (2) all lawful claims for labor,
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materials and supplies which, if unpaid, might by law become a lien upon the
property of the Company or any of its Subsidiaries; provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 1007. Maintenance of Insurance.
The Company shall, and shall cause its Subsidiaries to, keep at all
times all of their properties which are of an insurable nature insured against
loss or damage with insurers believed by the Company to be responsible to the
extent that property of similar character is usually so insured by corporations
similarly situated and owning like properties in accordance with good business
practice.
SECTION 1008. Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital
Stock.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, issue, assume, guaranty, incur, become directly or
indirectly liable with respect to (including as a result of an Acquisition) or
otherwise become responsible for, contingently or otherwise (individually and
collectively, to "incur" or, as appropriate an "incurrence"), any
Indebtedness(including Acquired Indebtedness) other than Permitted
Indebtedness.
Notwithstanding the foregoing, if (i) no Default or Event of Default
shall have occurred and be continuing at the time of, or would occur after
giving effect on a pro forma basis to, such incurrence of Indebtedness or
Disqualified Capital Stock and (ii) on the date of such incurrence (the
"Incurrence Date"), after giving effect on a pro forma basis to such incurrence
of such Indebtedness or Disqualified Capital Stock and the use of proceeds
thereof, the Leverage Ratio shall not exceed 7.5 to 1 (the "Debt Incurrence
Ratio"), then the Company and its Subsidiaries may incur such Indebtedness or
Disqualified Capital Stock.
In addition, the foregoing limitations will not apply to:
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(a) the incurrence by the Company or any of its Subsidiaries of
Purchase Money Indebtedness on or after the Issue Date, provided, that
(i) the aggregate principal amount of such Indebtedness incurred on or
after the Issue Date and outstanding at any time pursuant to this
paragraph (a) (including any Indebtedness issued to refinance, replace or
refund such Indebtedness) shall not exceed $15.0 million, and (ii) in
each case, such Indebtedness as originally incurred shall not constitute
more than 100% of the cost (determined in accordance with GAAP) to the
Company or such Subsidiary, as applicable, of the property so purchased
or leased;
(b) the incurrence by the Company or any Subsidiary of Indebtedness
in an aggregate principal amount outstanding at any time (including
Indebtedness incurred to refinance, replace, or refund such Indebtedness)
of up to $10.0 million (which may be incurred pursuant to the Credit
Agreement); and
(c) the incurrence by the Company or any Subsidiary of Indebtedness
pursuant to the Credit Agreement up to an aggregate principal amount
outstanding at any time (including any Indebtedness incurred to
refinance, replace or refund such Indebtedness) of $175.0 million, minus
the amount of any such Indebtedness retired with the Net Cash Proceeds
from any Asset Sale or assumed by a transferee in an Asset Sale.
Indebtedness or Disqualified Capital Stock of any Person which is
outstanding at the time such Person becomes a Subsidiary of the Company
(including upon designation of any subsidiary or other Person as a Subsidiary)
or is merged with or into or consolidated with the Company or a Subsidiary of
the Company shall be deemed to have been incurred at the time such Person
becomes such a Subsidiary of the Company or is merged with or into or
consolidated with the Company or a Subsidiary of the Company, as applicable.
Notwithstanding anything to the contrary contained in this Indenture,
the Company shall not, and shall not permit any of its Subsidiaries to, incur
any Indebtedness that is contractually subordinate to any other Indebtedness of
the Company unless such Indebtedness is at least as subordinate to the
Debentures.
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SECTION 1009. Limitation on Restricted Payments.
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, make any Restricted Payment if, after giving effect to
such Restricted Payment on a pro forma basis:
(1) a Default or an Event of Default shall have occurred and be
continuing,
(2) The Company is not permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt Incurrence Ratio in Section
1008, or
(3) The aggregate amount of all Restricted Payments made by the
Company and its Subsidiaries, including after giving effect to such
proposed Restricted Payment, from and after the Issue Date, would exceed
the sum of:
(a) (i) Consolidated EBITDA of the Company for the period (taken
as one accounting period), commencing on the first day of the
first fiscal quarter commencing on or prior to the Issue Date,
to and including the last day of the fiscal quarter ended
immediately prior to the date of each such calculation (or, in
the event Consolidated EBITDA for such period is a deficit,
then minus 100% of such deficit) less (ii) 150% of
Consolidated Fixed Charges for such period, plus
(b) the aggregate Net Cash Proceeds received by the Company from
the sale of the Company's Qualified Capital Stock (other than
in each case (i) to a Subsidiary of the Company, (ii) to the
extent applied in connection with a Qualified Exchange and
(iii) to the extent applied to repurchase Capital Stock
pursuant to clause (b) of the definition of Permitted
Payments) after the Issue Date.
The provisions of the immediately preceding paragraph will not
prohibit or be violated by reason of (A) a Qualified Exchange; (B) the payment
or making of any Restricted Payment within 60 days after the date of
declaration thereof or the making of any binding commitment
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in respect thereof, if at said date of declaration or commitment, such
Restricted Payment would have complied with the provisions contained in clauses
(1), (2) and (3) of the immediately preceding paragraph; and (C) Permitted
Payments. The full amount of any Restricted Payment made pursuant to the
foregoing clause (B) (but not pursuant to clauses (A) or (C)) of the
immediately preceding sentence, however, will be deducted in the calculation of
the aggregate amount of Restricted Payments available to be made referred to in
clause (3) of the immediately preceding paragraph.
For purposes of this covenant, the amount of any Restricted Payment,
if other than in cash, shall be the fair market value thereof, as determined in
the good faith reasonable judgment of the Board of Directors of the Company.
SECTION 1010. Limitations on Dividends and Other
Payment Restrictions Affecting
Subsidiaries.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, assume or suffer to exist any consensual
restriction on the ability of any Subsidiary of the Company to pay dividends or
make other distributions to or on behalf of, or to pay any obligation to or on
behalf of, or otherwise to transfer assets or property to or on behalf of, or
make or pay loans or advances to or on behalf of, the Company or any Subsidiary
of the Company, except:
(a) restrictions imposed by the Debentures or this Indenture or by
other Indebtedness of the Company ranking pari passu with the Debentures,
provided such restrictions are not materially more restrictive than those
imposed by this Indenture and the Debentures,
(b) restrictions imposed by applicable law,
(c) existing restrictions under Indebtedness outstanding on the
Issue Date,
(d) restrictions under any Acquired Indebtedness not incurred in
violation of this Indenture or any agreement relating to any property,
asset, or business acquired by the Company or any of its Subsidiaries,
which restrictions in each case existed at the time of
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Acquisition, were not put in place in connection with or in anticipation
of such Acquisition and are not applicable to any Person, other than the
Person acquired, or to any property, asset or business, other than the
property, assets and business so acquired,
(e) any such restriction or requirement imposed by Indebtedness
incurred under the Credit Agreement in accordance with this Indenture,
provided such restriction or requirement is not materially more
restrictive than that imposed by the Revolving Credit Facility as of the
Issue Date,
(f) restrictions with respect solely to a Subsidiary of the Company
imposed pursuant to a binding agreement which has been entered into for
the sale or disposition of all or substantially all of the Equity
Interests or assets of such Subsidiary, provided such restrictions apply
solely to the Equity Interests or assets of such Subsidiary which are
being sold,
(g) restrictions on transfer contained in Purchase Money
Indebtedness incurred pursuant to paragraph (a) of Section 1008, provided
such restrictions relate only to the transfer of the property acquired
with the proceeds of such Purchase Money Indebtedness, and
(h) in connection with and pursuant to permitted Refinancings,
replacements of restrictions imposed pursuant to clauses (a), (c), (d),
(e), or (g) of this section that are not materially more restrictive than
those being replaced and do not apply to any other Person or assets than
those that would have been covered by the restrictions in the
Indebtedness so refinanced.
Notwithstanding the foregoing, neither (a) customary provisions
restricting subletting or assignment of any lease entered into in the ordinary
course of business, consistent with industry practice, nor (b) Liens permitted
under the terms of this Indenture shall in and of themselves be considered a
restriction on the ability of the applicable Subsidiary to transfer such
agreement or assets, as the case may be.
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SECTION 1011. Limitation on Liens Securing Indebtedness.
The Company will not, and will not permit any of its Subsidiaries to,
create, incur, assume or suffer to exist, to secure any Indebtedness, any Lien
of any kind, other than Permitted Liens, upon any of its respective assets now
owned or acquired on or after the date of this Indenture or upon any income or
profits therefrom unless the Company provides, and causes its Subsidiaries to
provide, concurrently therewith or immediately thereafter, that the Debentures
are equally and ratably so secured for so long as such Indebtedness so secured
remains outstanding; provided that, if such Indebtedness is Subordinated
Indebtedness, the Lien securing such Subordinated Indebtedness shall be
subordinate and junior to the Lien securing the Debentures with the same
relative priority as such Subordinated Indebtedness shall have with respect to
the Debentures.
SECTION 1012. Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly enter into any contract, agreement, arrangement or
transaction with any Affiliate (an "Affiliate Transaction"), or any series of
related Affiliate Transactions (other than Exempted Affiliate Transactions),
unless the terms of such Affiliate Transaction are fair and reasonable to the
Company or such Subsidiary, as the case may be, and are at least as favorable
as the terms which could reasonably be expected to be obtained by the Company
or such Subsidiary, as the case may be, in a comparable transaction made on an
arm's length basis with Persons who are not Affiliates.
Without limiting the foregoing, in connection with any Affiliate
Transaction or series of related Affiliate Transactions (other than Exempted
Affiliate Transactions) (1) involving consideration to either party in excess
of $1.5 million, the Company must deliver an Officers' Certificate to the
Trustee, stating that the terms of such Affiliate Transaction are fair and
reasonable to the Company, and no less favorable to the Company than could
reasonably be expected to have been obtained in an arm's length transaction
with a non-Affiliate, and (2) involving consideration to either party in excess
of $7.5 million, the Company must also, prior to the consummation thereof,
obtain a favorable written opinion as to the fairness of such transaction to
the Company from a financial point of view from an independent investment
banking firm of national
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reputation or, if pertaining to a matter for which such investment banking
firms do not customarily render such opinions, an appraisal or valuation firm
of national reputation; provided, that this sentence shall not apply to the
sale or purchase of products or services by the Company or its Subsidiaries to
or from any Affiliate of LGP or any Related Party thereof, which sale or
purchase is in the ordinary course of business and in accordance with industry
practice.
SECTION 1013. Limitation on Sale of Assets and Subsidiary Stock.
The Company shall not, and shall not permit any of its Subsidiaries
to, in one or a series of related transactions, convey, sell, transfer, assign
or otherwise dispose of, directly or indirectly, any of its property, business
or assets (other than cash or Cash Equivalents), including by merger or
consolidation, and including any sale or other transfer or issuance of any
Equity Interests (other than directors qualifying shares) of any Subsidiary of
the Company, whether by the Company or a Subsidiary of the Company, and
including (except as provided in clause (vi) of the third paragraph of this
section) any Sale and Leaseback Transaction (any of the foregoing, an "Asset
Sale"), unless:
(1) (a) within 360 days after the date of such Asset Sale, the Net
Cash Proceeds therefrom (the "Asset Sale Offer Amount") are applied to
the optional redemption of the Debentures in accordance with the terms of
this Indenture and other Indebtedness of the Company ranking on a parity
with the Debentures from time to time outstanding with similar provisions
requiring the Company to make an offer to purchase or redeem such
Indebtedness with the proceeds of asset sales, pro rata in proportion to
the respective principal amounts (or accreted values in the case of
Indebtedness issued with an original issue discount) of the Debentures
and such other Indebtedness then outstanding or to the repurchase of the
Debentures and such other Indebtedness pursuant to a cash offer (subject
only to conditions required by applicable law, if any (pro rata in
proportion to the respective principal amounts or accreted values in the
case of Indebtedness issued with an original issue discount) of the
Debentures and such other Indebtedness then outstanding) (the "Asset Sale
Offer") at a purchase
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price of 100% of the principal amount thereof (or the Accreted Value
thereof, in the case of Indebtedness issued with an original issue
discount) (the "Asset Sale Offer Price") together with accrued and unpaid
interest and Liquidated Damages, if any, to the date of payment, made
within 360 days of such Asset Sale, or
(b) within 360 days following such Asset Sale, the Asset Sale Offer
Amount is used (i) to make one or more Acquisitions or invested in assets
and property (other than notes, bonds, obligations and securities) which
in the good faith reasonable judgment of the Board of Directors of the
Company will constitute or be a part of a Related Business of the Company
or such Subsidiary (if it continues to be a Subsidiary) immediately
following such transaction or (ii) to retire permanently Indebtedness
incurred under the Credit Agreement pursuant to paragraph (c) of Section
1008 (including that in the case of a revolver or similar arrangement
that makes credit available, such commitment is so permanently reduced by
such amount), the Principal Subsidiary Notes or the Senior Discount
Debentures or other Indebtedness ranking on a parity with any of the
foregoing Indebtedness or other Senior Indebtedness incurred pursuant to
paragraph (b) of Section 1008,
(2) at least 75% of the consideration for such Asset Sale or series
of related Asset Sales consists of cash or Cash Equivalents, provided
that (x) the amount of any liabilities (as shown on the Company's most
recent consolidated balance sheet) of the Company or any Subsidiary
(other than Subordinated Indebtedness) that are assumed by the transferee
in such Asset Sale (provided that the Company and its Subsidiaries are
released from all obligations in respect thereof) and (y) any notes or
other obligations received by the Company or any such Subsidiary from
such transferee that are promptly (but in no event more than 90 days
after receipt) converted by the Company or such Subsidiary into cash or
Cash Equivalents (to the extent of the cash or Cash Equivalents, as the
case may be, received), shall be deemed to be cash or Cash Equivalents,
as the case may be, for purposes of this provision, and such cash and
Cash Equivalents shall be deemed to be Net Cash Proceeds received from
the Asset Sale of the related property sold for such notes or other
obligations, for purposes of this covenant, and,
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provided, further, this clause (2) shall not apply to the sale or
disposition of assets as a result of a foreclosure (or a secured party
taking ownership of such assets in lieu of foreclosure) or as a result of
an involuntary proceeding in which the Company cannot, directly or
through its Subsidiaries, direct the type of proceeds received, and
(3) with respect to any Asset Sale or series of related Asset Sales,
the Net Cash Proceeds of which exceed $2.0 million, the Board of
Directors of the Company determines in good faith that the Company or
such Subsidiary, as applicable, receives fair market value for such Asset
Sale.
An acquisition of Debentures pursuant to an Asset Sale Offer may be
deferred until the accumulated Net Cash Proceeds from Asset Sales not applied
to the uses set forth in clause (1)(b) above (the "Excess Proceeds") exceeds
$10.0 million and that each Asset Sale Offer shall remain open for 20 Business
Days following its commencement (the "Asset Sale Offer Period"). Upon
expiration of the Asset Sale Offer Period, the Company shall apply the Asset
Sale Offer Amount plus an amount equal to accrued and unpaid interest and
Liquidated Damages, if any, to the purchase of all Indebtedness properly
tendered (on a pro rata basis if the Asset Sale Offer Amount is insufficient to
purchase all Indebtedness so tendered) at the Asset Sale Offer Price (together
with accrued interest and Liquidated Damages, if any). To the extent that the
aggregate amount of Indebtedness tendered pursuant to an Asset Sale Offer is
less than the Asset Sale Offer Amount, the Company may use any remaining Net
Cash Proceeds for general corporate purposes as otherwise permitted by the
Indenture and following each Asset Sale Offer the Excess Proceeds amount shall
be reset to zero.
Notwithstanding the foregoing provisions of this covenant, the
following transactions shall not be deemed Asset Sales:
(i) the Company and each of its Subsidiaries may convey, sell,
lease, transfer, assign or otherwise dispose of property in the ordinary
course of business;
(ii) the Company and each of its Subsidiaries may (x) convey, sell,
lease, transfer, assign or otherwise dispose of assets pursuant to and in
accordance with
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the limitation on mergers, sales or consolidations provisions in the
Indenture, (y) make Restricted Payments permitted by Section 1009 and (z)
engage in Exempted Affiliate Transactions;
(iii) the Company and each of its Subsidiaries may convey, sell,
transfer, assign or otherwise dispose of assets or issue Capital Stock to
the Company or any of the Subsidiaries;
(iv) the Company and each of its Subsidiaries may sell or dispose of
damaged, worn out or other obsolete property in the ordinary course of
business so long as such property is no longer necessary for the proper
conduct of the business of the Company or such Subsidiary, as applicable;
(v) the Company and each of its Subsidiaries may exchange assets
held by the Company or a Subsidiary for assets held by any Person or
entity; provided that (i) the assets received by the Company or a
Subsidiary in any such exchange in the good faith reasonable judgment of
the Board of Directors of the Company will immediately constitute, be a
part of, or be used in, a Related Business, (ii) the Board of Directors
of the Company has determined that the terms of any exchange are fair and
reasonable, and (iii) any such exchange shall be deemed to be an Asset
Sale to the extent that the Company or any Subsidiary receive cash or
Cash Equivalents in such exchange;
(vi) the Company and each of its Subsidiaries may engage in Sale and
Leaseback Transactions with respect to property acquired after the Issue
Date (other than property acquired in exchange for or with the proceeds
from the sale or other disposition of property held by the Company or any
Subsidiary on the Issue Date);
(vii) the Company and each of its Subsidiaries may liquidate Cash
Equivalents in the ordinary course of business;
(viii) the Company and each of its Subsidiaries may create or assume
Liens (or permit any foreclosure thereon) not prohibited by the
Indenture;
(ix) the Company and each of its Subsidiaries may surrender or waive
contract rights or the settlement,
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release or surrender of contract, tort or other claims of any kind; and
(x) the Company and its Subsidiaries, collectively, may convey,
sell, transfer, assign or otherwise dispose of assets having an aggregate
fair market value not exceeding $2.0 million in any fiscal year.
All Net Cash Proceeds from an Event of Loss (other than the proceeds
of any business interruption insurance) shall be invested or otherwise used as
provided in clause (1) of the first paragraph of this Section, all within 18
months from the occurrence of such Event of Loss.
Any Asset Sale Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable Federal and
state securities laws and any provisions of the Indenture which conflict with
such laws shall be deemed to be superseded by the provisions of such laws.
If the payment date in connection with an Asset Sale Offer
hereunder is on or after an interest payment Record Date and on or before the
associated Interest Payment Date, any accrued and unpaid interest (and
Liquidated Damages, if any, due on such Interest Payment Date) will be paid to
the Person in whose name a Debenture is registered at the close of business on
such Record Date, and such interest (and Liquidated Damages, if applicable)
will not be payable to Holders who tender Debentures pursuant to such Asset
Sale Offer.
The Company and the Trustee shall perform their respective
obligations specified in the Asset Sale Offer. On or prior to the Purchase
Date, the Company shall (i) accept for payment (on a pro rata basis, if
necessary) Debentures or portions thereof tendered pursuant to the Offer, (ii)
deposit with the paying agent (or, if the Company is acting as its own paying
agent, segregate and hold in trust as provided in Section 1003) money
sufficient to pay the purchase price of all Debentures or portions thereof so
accepted and (iii) deliver or cause to be delivered to the Trustee all
Debentures so accepted together with an Officers' Certificate stating the
Debentures or portions thereof accepted for payment by the Company. The paying
agent (or the Company, if so acting) shall promptly
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mail or deliver to Holders of Debentures so accepted payment in an amount equal
to the purchase price, and the Trustee shall promptly authenticate and mail or
deliver to such Holders a new Debenture equal in principal amount to any
unpurchased portion of the Debenture surrendered. Any Debenture not accepted
for payment shall be promptly mailed or delivered by the Company to the Holder
thereof.
SECTION 1014. Limitation on Issuances and Sales of
Capital Stock of Wholly Owned Subsidiaries.
The Company will not sell, and its Subsidiaries will not issue or sell,
any shares of Capital Stock (other than directors qualifying shares) of any
Subsidiary of the Company to any Person other than the Company or a wholly
owned Subsidiary of the Company, except for shares of common stock with no
preferences or special rights or privileges and with no redemption or
prepayment provisions. Notwithstanding the foregoing, (a) the Company and its
Subsidiaries may consummate an Asset Sale of all of the Capital Stock owned by
the Company and its Subsidiaries of any Subsidiary and (b) the Company or any
Subsidiary may pledge, hypothecate or otherwise grant a Lien on any Capital
Stock of any Subsidiary to the extent not prohibited under Section 1011.
SECTION 1015. Repurchase of Debentures at the Option of the Holder Upon a
Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of
Debentures will have the right, at such Holder's option, pursuant to an offer
(subject only to conditions required by applicable law, if any) by the Company
(the "Change of Control Offer"), to require the Company to repurchase all or
any part of such Holder's Debentures (provided, that the principal amount of
such Debentures must be $1,000 or an integral multiple thereof) on a date (the
"Change of Control Purchase Date") that is no later than 45 days after the
occurrence of such Change of Control, at a cash price equal to 101% of the
principal amount thereof (the "Change of Control Purchase Price") plus accrued
and unpaid interest and Liquidated Damages, if any, to the Change of Control
Purchase Date. The Change of Control Offer shall be made within 15 business
days following a Change of Control and shall remain open for 20 Business Days
following its commencement (the "Change of
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Control Offer Period"). Upon expiration of the Change of Control Offer Period,
the Company promptly shall purchase all Debentures properly tendered in
response to the Change of Control Offer.
(b) As used herein, a "Change of Control" means:
(i) any merger or consolidation of the Company with or into any
Person or any sale, transfer or other conveyance, whether direct or
indirect, of all or substantially all of the assets of the Company on a
consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction(s),
any "Person" or "group" (as such terms are used for purposes of Sections
13(d) and 14(d) of the Exchange Act, whether or not applicable), other
than any Excluded Person or Excluded Persons, is or becomes the
Beneficial Owner, directly or indirectly, of more than 50% of the total
voting power in the aggregate normally entitled to vote in the election
of directors, managers or trustees, as applicable, of the transferee(s)
or surviving entity or entities,
(ii) any "Person" or "group," other than any Excluded Person or
Excluded Persons, becomes the Beneficial Owner, directly or indirectly,
of more than 50% of the total voting power in the aggregate of all
classes of Capital Stock of the Company then outstanding normally
entitled to vote in elections of directors, or
(iii) during any period of 12 consecutive months after the Issue
Date, individuals who at the beginning of any such 12-month period
constituted the Board of Directors of the Company (together, in each
case, with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company was
approved by LGP or a Related Party of LGP or by the Excluded Persons or
by a vote of a majority of the directors then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority of the Board of Directors of the Company then in
office, as applicable.
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(c) On or before the Change of Control Purchase Date, the Company will
(i) accept for payment Debentures or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent
cash sufficient to pay the Change of Control Purchase Price (together with
accrued and unpaid interest and Liquidated Damages, if any) of all Debentures
so tendered and (iii) deliver to the Trustee Debentures so accepted together
with an Officers' Certificate listing the Debentures or portions thereof being
purchased by the Company. The Paying Agent (or the Company, if so acting)
promptly will pay the Holders of Debentures so accepted an amount equal to the
Change of Control Purchase Price (together with accrued and unpaid interest and
Liquidated Damages, if any), and the Trustee promptly will authenticate and
deliver to such Holders a new Debenture equal in principal amount to any
unpurchased portion of the Debenture surrendered. Any Debentures not so
accepted will be delivered promptly by the Company to the Holder thereof. The
Company publicly will announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Purchase Date.
(d) Any Change of Control Offer will be made in compliance with all
applicable laws, rules and regulations, including, if applicable, Regulation
14E under the Exchange Act and the rules thereunder and all other applicable
Federal and state securities laws and any provisions of the Indenture which
conflict with such laws shall be deemed to be superseded by the provisions of
such laws.
(e) If the Change of Control Purchase Date hereunder is on or after an
interest payment Record Date and on or before the associated Interest Payment
Date, any accrued and unpaid interest (and Liquidated Damages, if any) due on
such Interest Payment Date will be paid to the Person in whose name a Debenture
is registered at the close of business on such Record Date, and such interest
(and Liquidated Damages, if applicable) will not be payable to Holders who
tender the Debentures pursuant to such Change of Control Offer.
(f) Prior to making a Change of Control Offer pursuant to paragraph
(a), but in any event within 90 days following such Change of Control, the
Company will (i) obtain any required consents under the Credit Agreement, the
Senior Discount Debentures and the Principal Subsidiary Notes to permit the
making of the Change of Control Offer and the purchase of Debentures pursuant
to this
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Section 1015, or (ii) repay all or a portion of the outstanding Indebtedness of
its Subsidiaries to the extent necessary (including, if necessary, payment in
full of such Indebtedness and payment of any prepayment premiums, fees,
expenses or penalties) to permit the repurchase of the Debentures pursuant to
this Section 1015 without such consent.
(g) The obligations with respect to Change of Control Offer shall be
satisfied to the extent actually performed by a third party in accordance with
the terms of this Indenture.
SECTION 1016. Investment Company.
The Company will not, and will not permit any of its Subsidiaries to,
be required to register as an "investment company" (as that term is defined in
the Investment Company Act of 1940, as amended), or otherwise become subject to
registration under the Investment Company Act.
SECTION 1017. Limitation on Lines of Business.
Neither the Company nor any of its Subsidiaries will directly or
indirectly engage to any substantial extent in any line or lines of business
activity other than that which, in the reasonable good faith judgment of the
Board of Directors of the Company, is a Related Business.
SECTION 1018. Statement by Officers as to
Default; Compliance Certificates.
(a) The Company will deliver to the Trustee, within 90 days after the
end of each fiscal year, and within 60 days after the end of each fiscal
quarter (other than the fourth fiscal quarter), of the Company ending after the
date hereof an Officers' Certificate, stating whether or not to the best
knowledge of the signers thereof the Company is in default in the performance
and observance of any of the terms, provisions and conditions of Section 801 or
Sections 1004 to 1017, inclusive, and if the Company shall be in default,
specifying all such Defaults and the nature and status thereof of which they
may have knowledge.
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(b) The Company shall deliver to the Trustee, as soon as possible and
in any event within 10 days after the Company becomes aware or should
reasonably become aware of the occurrence of a Default or an Event of Default,
an Officers' Certificate setting forth the details of such Default or Event of
Default, and the action which the Company proposes to take with respect
thereto.
(c) The Company shall deliver to the Trustee within 90 days after the
end of each fiscal year a written statement by the Company's independent public
accountants stating (A) that their audit examination has included a review of
the terms of this Indenture and the Debentures as they relate to accounting
matters, and (B) whether, in connection with their audit examination, any
Default has come to their attention and, if such a Default has come to their
attention, specifying the nature and period of the existence thereof.
SECTION 1019. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Section 801 and Sections 1004 to 1017, if
before the time for such compliance the Holders of at least a majority in
principal amount of the Outstanding Debentures shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance
with such covenant or condition, but no such waiver shall extend to or affect
such covenant or condition except to the extent so expressly waived, and, until
such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such covenant or condition shall remain
in full force and effect; provided, however, with respect to any provision
requiring a supermajority approval to waive, such provision may only be waived
by such a supermajority, and with respect to a covenant or provision which
cannot be modified or amended without the consent of the Holder of each
outstanding Debenture affected, such provision may only be waived by the
consent of each and every Holder of outstanding Debenture affected.
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ARTICLE ELEVEN
Redemption of Debentures
SECTION 1101. Right of Redemption.
The Company will not have the right to redeem any Debentures prior to
February 1, 1999. The Debentures will be redeemable at the option of the
Company, in whole or in part, at any time on or after February 1, 1999, at the
Redemption Prices specified in the form of Debenture hereinbefore set forth
together with any applicable accrued interest and Liquidated Damages, if any,
thereon to the Redemption Date.
SECTION 1102. Applicability of Article.
Redemption of Debentures at the election of the Company, as permitted
by any provision of this Indenture, shall be made in accordance with such
provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Debentures pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any
redemption at the election of the Company of less than all the Debentures, the
Company shall, at least 30 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee of such Redemption Date and of the principal amount of Debentures
to be redeemed.
SECTION 1104. Selection by Trustee of Debentures to Be
Redeemed.
If less than all the Debentures are to be redeemed, the particular
Debentures to be redeemed shall be selected not more than 30 days prior to the
Redemption Date by the Trustee, from the Outstanding Debentures not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
(equal to $1,000 or
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any integral multiple thereof) of the principal amount of Debentures of a
denomination larger than $1,000.
The Trustee shall promptly notify the Company and each Debenture
Registrar in writing of the Debentures selected for redemption and, in the case
of any Debentures selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Debentures shall relate,
in the case of any Debentures redeemed or to be redeemed only in part, to the
portion of the principal amount of such Debentures which has been or is to be
redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Debentures to be redeemed, at his address appearing in
the Debenture Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Debentures are to be redeemed,
the identification (and, in the case of partial redemption, the principal
amounts) of the particular Debentures to be redeemed, and in the case of
partial redemption, a statement as to the effect that upon surrender of
such Debentures, a new Debenture in a principal amount equal to the
unredeemed portion thereof will be issued,
(4) that on the Redemption Date the Redemption Price will become
due and payable upon each such Debenture to be redeemed, and
(5) the place or places where such Debentures are to be surrendered
for payment of the Redemption Price.
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Notice of redemption of Debentures to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company if the Company gives
notice to the Trustee at least 45 days prior to the Redemption Date.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and any applicable accrued
interest and Liquidated Damages on, all the Debentures which are to be redeemed
on that date.
SECTION 1107. Debentures Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Debentures so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price any applicable
accrued interest) such Debentures shall not bear interest. Upon surrender of
any such Debenture for redemption in accordance with said notice, such
Debenture shall be paid by the Company at the Redemption Price, together with
any applicable accrued interest and Liquidated Damages to the Redemption Date;
provided, however, that installments of interest whose Interest Payment Date is
on or prior to the Redemption Date shall be payable to the Holders of such
Debentures, or one or more Predecessor Debentures, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 307.
If any Debenture called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate provided by the
Debenture.
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SECTION 1108. Debentures Redeemed in Part.
Any Debenture which is to be redeemed only in part shall be surrendered
at an office or agency of the Company designated for that purpose pursuant to
Section 1002 (with, if the Company or the Trustee so requires, due endorsement
by, or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing), and the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder of such Debenture without service
charge, a new Debenture or Debentures, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Debenture so
surrendered.
ARTICLE TWELVE
Defeasance and Covenant Defeasance
SECTION 1201. Company's Option to Effect Defeasance or
Covenant Defeasance.
The Company may, at its option, elect to have its obligations
discharged with respect to the Outstanding Debentures upon compliance with the
conditions set forth below in this Article Twelve.
SECTION 1202. Defeasance and Discharge.
Upon the Company's exercise of the option provided in Section 1201
applicable to this Section, the Company shall be deemed to have paid and
discharged the entire indebtedness represented, and this Indenture shall cease
to be of further effect as to all outstanding Debentures ("Legal Defeasance"),
except as to (i) rights of Holders to receive payments in respect of the
principal of, premium, if any, and interest (and Liquidated Damages, if any) on
such Debentures when such payments are due from the trust funds; (ii) the
Company's obligations with respect to such Debentures concerning issuing
temporary Debentures, registration of Debentures, mutilated, destroyed, lost or
stolen Debentures, and the maintenance of an office or agency for payment and
money for security payments held in trust; (iii) the rights, powers, trust,
duties, and immunities of the Trustee, and the Company's obligations in
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connection therewith; and (iv) the Legal Defeasance provisions of this Article
Twelve, all of which shall survive until otherwise terminated or discharged
hereunder. Subject to compliance with this Article Twelve, the Company may
exercise its option under this Section 1202 notwithstanding the prior exercise
of its option under Section 1203.
SECTION 1203. Covenant Defeasance.
Upon the Company's exercise of the option provided in Section 1201
applicable to this Section, the Company may, at its option and at any time,
elect to have the obligations of the Company released with respect to its (i)
obligations under Sections 1005 through 1017, inclusive, and clauses (3) and
(4) of Section 801 and (ii) the occurrence of an event specified in Sections
501(3), (with respect to any of Sections 1005 through 1017, inclusive), 501(6)
and 501(7) shall not be deemed to be an Event of Default on and after the date
the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"). For this purpose, such covenant defeasance means that the
Company may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such Section or clause, whether
directly or indirectly by reason of any reference elsewhere herein to any such
Section or clause or by reason of any reference in any such Section or clause
to any other provision herein or in any other document, but the remainder of
this Indenture and such Debentures shall be unaffected thereby.
SECTION 1204. Conditions to Defeasance or
Covenant Defeasance.
The following shall be the conditions to application of either Section
1202 or Section 1203 to the then Outstanding Debentures:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 609 who shall agree to comply with the provisions
of this Article Twelve applicable to it) as trust funds in trust for the
purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of such
Debentures, (A) U.S. legal tender in an amount, or
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(B) U.S. Government Obligations which through the scheduled payment of
principal and interest in respect thereof in accordance with their terms
will provide, not later than one day before the due date of any payment,
money in an amount, or (C) a combination thereof, sufficient, in the
opinion of a nationally recognized firm of independent public accountants
or investment bankers expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, and which shall be
applied by the Trustee (or other qualifying trustee) to pay and
discharge, the principal of, premium, if any, and interest (and
Liquidated Damages, if any) on such Debentures on the stated date for
payment thereof or on the redemption date of such principal or
installment of principal of, premium, if any, or interest (or Liquidated
Damages, if any) on such Debentures. The Holders of Debentures must have
a valid, perfected, exclusive security interest in such trust. For this
purpose, "U.S. Government Obligations" means securities that are (x)
direct obligations of the United States of America for the payment of
which its full faith and credit is pledged or (y) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of
the United States of America the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act of
1933, as amended) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such
U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt, provided that (except as required by
law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount
received by the custodian in respect of the U.S. Government Obligation or
the specific payment of principal of or interest on the U.S. Government
Obligation evidenced by such depository receipt.
(2) In the case of an election of Legal Defeasance under Section
1202, before the date that is one year prior to the Stated Maturity, the
Company shall have delivered to the Trustee an Opinion of
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Counsel in the United States stating that (x) the Company has received
from, or there has been published by the Internal Revenue Service, a
ruling or (y) since the date of this Indenture there has been a change in
the applicable Federal income tax law, in either case to the effect that,
and based thereon such opinion shall confirm that, the Holders of the
Outstanding Debentures will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to Federal income tax on the same amount,
in the same manner and at the same times as would have been the case if
such deposit, defeasance and discharge had not occurred.
(3) In the case of an election of Covenant Defeasance under Section
1203, before the date that is one year prior to the Stated Maturity, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States, reasonably acceptable to such Trustee, to the effect that
the Holders of the Outstanding Debentures will not recognize income, gain
or loss for Federal income tax purposes as a result of such deposit and
Covenant Defeasance and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would have been the
case if such deposit and covenant defeasance had not occurred.
(4) The Company shall have delivered to the Trustee an Officer's
Certificate to the effect that the Debentures, if then listed on any
Debentures exchange, will not be delisted as a result of such deposit.
(5) Such defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest as defined in Section 608 and for
purposes of the Trust Indenture Act with respect to any Debentures of the
Company.
(6) No Default or Event of Default which with notice or lapse of
time or both would become an Event of Default shall have occurred and be
continuing on the date of such deposit.
(7) Such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a Default under, this Indenture
or any other
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material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound.
(8) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
interest of preferring the Holders of such Debentures over any other
creditors of the Company or with the intent of defeating, hindering, or
delaying or defrauding any other creditors of the Company or others.
(9) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the Legal Defeasance under
Section 1202 or the Covenant Defeasance under Section 1203 (as the case
may be) have been complied with.
(10) Such defeasance or covenant defeasance shall not result in the
trust arising from such deposit constituting an investment company as
defined in the Investment Company Act of 1940, as amended, or such trust
shall be qualified under such act or exempt from regulation thereunder.
SECTION 1205. Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee--collectively, for
purposes of this Section 1205, the "Trustee") pursuant to Section 1204 in
respect of the Debentures shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Debentures and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Holders of
such Debentures, of all sums due and to become due thereon in respect of
principal (and premium, if any) and interest, but such money need not be
segregated from other funds except to the extent required by law.
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The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1204 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 Debentures.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 1204 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance.
SECTION 1206. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with Section 1202 or 1203 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, or if a Default from a bankruptcy or insolvency event occurs
at any time during the period ending on the 91st day after the date of a
deposit by the Company hereunder, then the Company's obligations under this
Indenture and the Debentures shall be revived and reinstated as though no
deposit had occurred pursuant to this Article Twelve until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1202 or 1203; provided, however, that if the Company makes any payment
of principal of (and premium, if any) or interest (and Liquidated Damages, if
any) on any Debenture following the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Debentures to
receive such payment from the money held by the Trustee or the Paying Agent.
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ARTICLE THIRTEEN
Subordination
SECTION 1301. Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Debenture agrees,
that the Indebtedness evidenced by the Debentures and all Obligations in
respect of the Debentures are subordinated in right of payment, to the extent
and in the manner provided in this Article Thirteen, to the prior payment in
full in cash of all Senior Indebtedness (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 Indebtedness.
SECTION 1302. Liquidation; Dissolution; Bankruptcy.
Upon any distribution of assets of the Company upon any dissolution,
winding up, total or partial liquidation or reorganization of the Company,
whether voluntary or involuntary, in bankruptcy, insolvency, receivership or
similar proceeding or upon assignment for the benefit of creditors or any
marshaling of the Company's assets and liabilities:
(1) the holders of all Senior Indebtedness of the Company shall
first be entitled to receive payment in full in cash or Cash Equivalents
of all Senior Indebtedness (including Post-Commencement Interest and
Expense Claims) before the Holders are entitled to receive any payment on
account of the principal of, premium, if any, and interest on the
Debentures or any Obligation in respect to the Debentures (other than
Junior Securities); and
(2) any payment or distribution of assets of the Company of any kind
or character from any source, whether in cash, property or securities
(other than Junior Securities), to which the Holders or the Trustee on
behalf of the Holders would be entitled (by set-off or otherwise), except
for this Article, shall be paid by the liquidating trustee or agent or
other Person making such a payment or distribution directly to the
holders of such Senior Indebtedness or their representatives to the
extent necessary to make payment in full of all such Senior Indebtedness
(including
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Post-Commencement Interest and Expense Claims) remaining unpaid, after
giving effect to any concurrent payment or distribution to the holders of
Senior Indebtedness.
SECTION 1303. Default on Senior Indebtedness.
No payment (by set-off or otherwise) may be made by or on behalf of the
Company or a Subsidiary, as applicable, on account of the principal of,
premium, if any, or interest on the Debentures (including any repurchases of
Debentures), or on account of the redemption provisions of the Debentures or
any Obligation in respect of the Debentures, for cash or property, (i) upon the
maturity of any Senior Indebtedness of the Company or such Subsidiary, as
applicable, by lapse of time, acceleration (unless waived) or otherwise, unless
and until all principal of, premium, if any, and the interest on and fees in
respect of such Senior Indebtedness are paid in full in cash or Cash
Equivalents, or (ii) in the event of default in the payment of any principal
of, premium, if any, or interest on or fee in respect of Senior Indebtedness of
the Company or such Subsidiary, as applicable, when it becomes due and payable,
whether at maturity or at a date fixed for prepayment or by declaration or
otherwise (a "Payment Default"), unless and until such Payment Default has been
cured or waived or otherwise has ceased to exist; provided, however, that
nothing in this Section shall prevent the issuance of Secondary Debentures in
lieu of a cash payment of any or all interest due on any Interest Payment Date.
Upon (i) the happening of an event of default (other than a Payment
Default) that permits the holders of Senior Indebtedness to declare such Senior
Indebtedness to be due and payable and (ii) written notice of such event of
default is given to the Company and the Trustee by the Senior Discount
Debentures Trustee, the Senior Bank Representative or the holders of an
aggregate of at least $25.0 million principal amount outstanding of any other
Senior Indebtedness or their representative (a "Payment Notice"), then, unless
and until such event of default has been cured or waived or otherwise has
ceased to exist, no payment (by set-off or otherwise) may be made by or on
behalf of the Company, if the Company is an obligor on such Senior
Indebtedness, or any Subsidiary which is an obligor under such Senior
Indebtedness on account of the principal of, premium, if any, or interest on
the Debentures
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(including any repurchases of any of the Debentures), or on account of the
redemption provisions of the Debentures or any Obligation in respect of the
Debentures, in any such case; provided, however, that nothing in this Section
shall prevent the issuance of Secondary Debentures in lieu of a cash payment of
any or all interest due on any Interest Payment Period. Notwithstanding the
foregoing, unless the Senior Indebtedness in respect of which such event of
default exists has been declared due and payable in its entirety within 179
days after the Payment Notice is delivered as set forth above (the "Payment
Blockage Period") (and such declaration has not been rescinded or waived), at
the end of the Payment Blockage Period, the Company and its Subsidiaries shall
be required to pay all sums not paid to the Holders of the Debentures during
the Payment Blockage Period due to the foregoing prohibitions and to resume all
other payments as and when due on the Debentures. Any number of Payment
Notices may be given; provided, however, that (i) not more than one Payment
Notice shall be given within a period of any 360 consecutive days and (ii) no
default that existed upon the date of such Payment Notice or the commencement
of such Payment Blockage Period (whether or not such event of default is on the
same issue of Senior Indebtedness) shall be made the basis for the commencement
of any other Payment Blockage Period.
SECTION 1304. Acceleration of Debentures.
If payment of the Debentures is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Indebtedness of
the acceleration.
SECTION 1305. When Distribution Must Be Paid Over.
In the event that, notwithstanding the other provisions of this Article
Thirteen, the Trustee receives any payment or distribution of the Debentures or
of any Obligations with respect to the Debentures at a time when the Trustee
has actual knowledge that such payment or distribution is prohibited by Section
1303 hereof, such payment or distribution shall be held by the Trustee in trust
for the benefit of, and shall be paid forthwith over and delivered, upon
written request, to, the holders of Senior Indebtedness remaining unpaid or
unprovided for or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any
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instruments representing any of such Senior Indebtedness may have been issued,
ratably according to aggregate principal amounts remaining unpaid on account of
such Senior Indebtedness held or represented by each, for application to the
payment of all obligations with respect to Senior Indebtedness remaining
unpaid, to the extent necessary to pay or to provide for the payment of all
such obligations (including Post-Commencement Interest and Expense Claims) in
full in cash or Cash Equivalents in accordance with their terms, after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness.
In the event that, notwithstanding the other provisions of this Article
Thirteen, a Holder receives any payment or distribution of any Obligations with
respect to the Debentures at a time when such payment or distribution is
prohibited by Section 1303 hereof, such payment or distribution shall be paid
forthwith over and delivered, upon written request, to, the holders of Senior
Indebtedness remaining unpaid or unprovided for or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments representing any of such Senior Indebtedness may have
been issued, ratably according to aggregate principal amounts remaining unpaid
on account of such Senior Indebtedness held or represented by such, for
application to the payment of all obligations with respect to Senior
Indebtedness remaining unpaid, to the extent necessary to pay or to provide for
the payment of all such obligations (including Post-Commencement Interest and
Expense Claims) in full in cash or Cash Equivalents in accordance with their
terms, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article Thirteen, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Company or any other Person money or assets to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
Thirteen, except if such payment is made as
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a result of the willful misconduct or gross negligence of the Trustee.
SECTION 1306. Notice by Company.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Debentures to violate this Article Thirteen, but failure to
give such notice shall not affect the subordination of the Debentures to the
Senior Indebtedness as provided in this Article Thirteen.
SECTION 1307. Subrogation.
After all Senior Indebtedness is paid in full in cash or Cash
Equivalents and until the Debentures are paid in full, Holders shall be
subrogated (equally and ratably with all other Indebtedness pari passu with the
Debentures) to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Indebtedness. A distribution made under this Article Thirteen to
holders of Senior Indebtedness that otherwise would have been made to Holders
is not, as between the Company and Holders, a payment by the Company on the
Debentures. No holder of Senior Indebtedness shall be obligated to create,
warrant, preserve or protect any such subrogation right or shall suffer any
loss or diminution of its rights hereunder if for any reason (including,
without limitation, the lack of enforceability or disallowance of any
Post-Commencement Interest and Expense Claim) such right of subrogation is not
available to any Holder.
SECTION 1308. Relative Rights.
This Article defines the relative rights of Holders and holders of
Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of (and
premium, if
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any) and interest (and Liquidated Damages, if any) on the Debentures in
accordance with their terms;
(2) affect the relative rights of Holders and creditors of the
Company other than their rights in relation to holders of Senior
Indebtedness; or
(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders of Senior Indebtedness to receive distributions and payments
otherwise payable to Holders.
If the Company fails because of this Article to pay principal of (or
premium, if any) or interest (or Liquidated Damages, if any) on a Debenture on
the due date, the failure is still a Default or Event of Default.
SECTION 1309. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by the Debentures shall be impaired
by any act or failure to act by the Company or any Holder or by the failure of
the Company or any holder of Senior Indebtedness to comply with this Indenture.
Without in any way limiting the generality of the foregoing
paragraph, the holders of the Senior Indebtedness may, at any time and from
time to time, without the consent of or notice to the Trustee or Holders,
without incurring responsibility to the Holders and without impairing or
releasing the subordination provided in this Article Thirteen or the
obligations hereunder of the Holders to the holders of Senior Indebtedness, do
any one or more of the following: (a) change the manner, place or terms of
payment or extend the time or payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (b) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (c) release any Person in any manner for the collection of Senior
Indebtedness; and (d) exercise or refrain from exercising any rights against
the Company or any other Person; provided, however, that in no event shall any
such actions limit the right of the Holders to take any action to accelerate
the maturity of the Debentures in
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accordance with the provisions set forth in Section 502 or to pursue any rights
or remedies against the parties to this Indenture under this Indenture or under
applicable laws if the taking of such action does not otherwise violate the
terms of this Article Thirteen.
SECTION 1310. Distribution or Notice to Senior Discount
Debentures Trustee.
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to the
Senior Discount Debentures Trustee.
Upon any payment or distribution of assets of the Company referred to
in this Article Thirteen, the Trustee and the Holders shall be entitled to
conclusively rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Senior Discount Debentures Trustee
or of the liquidating trustee or agent or other Person making any distribution
to the Trustee or to the Holders for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article Thirteen. Notwithstanding the
foregoing, with respect only to obligations under the Senior Discount
Debentures, the Trustee and the Holders shall be entitled to rely only upon the
order or decree made by any court of competent jurisdiction or upon a
certificate of the Senior Bank Representative for the purpose of ascertaining
the matters described in the preceding sentence.
SECTION 1311. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article Thirteen 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 Debentures, 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
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cause the payment of any Obligations with respect to the Debentures to violate
this Article. Only the Company or the Senior Discount Debentures Trustee may
give the notice. Nothing in this Article Thirteen shall impair the claims of,
or payments to, the Trustee under or pursuant to Section 607 hereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee.
SECTION 1312. Authorization to Effect Subordination.
Each Holder of a Debenture by the Holder's acceptance thereof
authorizes and directs the Trustee on the Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination as provided
in this Article Thirteen, and appoints the Trustee to act as the 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 Indebtedness in the form required in any
proceeding referred to in Section 504 hereof at least 30 days before the
expiration of the time to file such claim, the Senior Discount Debentures
Trustee is hereby authorized to file an appropriate claim for and on behalf of
the Holders of the Debentures.
SECTION 1313. Amendments.
The provisions of this Article Thirteen or any related definitions
shall not be amended or modified in a manner adverse to the holders of Senior
Indebtedness without the written consent of the holders of all Senior
Indebtedness.
____________________
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This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
LIBERTY GROUP PUBLISHING, INC.
By /s/ Kenneth L. Serota
______________________________
Name:Kenneth L. Serota
Title: President and Chief
Executive Officer
Attest:
/s/ Elizabeth M. Lyons
__________________________
Name: Elizabeth M. Lyons
Title: Assistant Secretary
STATE STREET BANK AND TRUST COMPANY
By /s/ Michael Hopkins
______________________________
Name:Michael Hopkins
Title: Vice President
Attest:
/s/ Susan C. Merker
__________________________
Name: Susan C. Merker
Title: Assistant Vice President
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STATE OF ILLINOIS ) ss.:
COUNTY OF COOK )
On the 26th day of January, 1998, before me personally came Kenneth L.
Serota, to me known, who, being by me duly sworn, did depose and say that he is
the President and Chief Executive Officer of Liberty Group Publishing, Inc.,
one of the corporations described in and which executed the foregoing
instrument, and that he signed his name to the foregoing instrument in his
authorized capacity.
/s/ Shelia E. Pyburn
______________________________
STATE OF CONNECTICUT ) ss.:
COUNTY OF HARTFORD )
On the 23rd day of January, 1998, before me personally came Michael
Hopkins, to me known, who, being by me duly sworn, did depose and say that he
is Vice President of State Street Bank and Trust Company, one of the business
entities described in and which executed the foregoing instrument, and that he
signed his name to the foregoing instrument in his authorized capacity.
/s/ Dawn P. Heintz
______________________________
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Annex A
[FORM OF DEBENTURE]
Unless and until it is exchanged in whole or in part for Debentures in
definitive form, this Debenture may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. Unless this
certificate is presented by an authorized representative of The Depositary
Trust Company (55 Water Street, New York, New York)(the "Depositary"), to the
Company or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name
as requested by an authorized representative of the Depositary (and any payment
is made to Cede & Co. or such other entity as is requested by an authorized
representative of the Depositary), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.(1)
THE DEBENTURES (OR THEIR PREDECESSORS) EVIDENCED HEREBY WERE 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
DEBENTURES EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE DEBENTURES 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. THE HOLDER OF THE DEBENTURES
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH DEBENTURES
MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (a) INSIDE THE
UNITED STATES TO A PERSON WHOM 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) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (c) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (d) TO THE
- ---------------------
(1) This paragraph should only be added if the Debenture is issued in global
form.
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<PAGE> 133
COMPANY, (e) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR (f) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS) 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 DEBENTURES EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE.(2)
THIS DEBENTURE IS A REGULATION S TEMPORARY GLOBAL DEBENTURE AS SPECIFIED
IN THE INDENTURE. EXCEPT IN THE CIRCUMSTANCES DESCRIBED IN SECTION 305 OF THE
INDENTURE, NO TRANSFER OR EXCHANGE OF AN INTEREST IN THIS REGULATION S
TEMPORARY GLOBAL DEBENTURE MAY BE MADE FOR AN INTEREST IN A REGULATION S
PERMANENT GLOBAL DEBENTURE OR A RULE 144A GLOBAL DEBENTURE DURING THE
RESTRICTED PERIOD.(3)
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND MAY
NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, UNLESS THIS DEBENTURE IS REGISTERED
UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
THEREOF IS AVAILABLE.(4)
LIBERTY GROUP PUBLISHING, INC.
14 3/4% SENIOR SUBORDINATED DEBENTURES DUE 2010
CUSIP No.
No. $_________________
Liberty Group Publishing, Inc., a corporation duly organized and existing
under the laws of Delaware (herein called the "Company", which term includes
any successor Person under the Indenture hereinafter referred to), for value
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(2) This sentence should be included only for the Transfer Restricted
Debentures.
(3) This paragraph should be included only for Regulation S Temporary Global
Debentures.
(4) This paragraph should be included only for Regulation S Permanent Global
Debentures.
A-2
<PAGE> 134
received, hereby promises to pay to ____________________, or registered
assigns, the principal sum of _____________ million dollars on February 1,
2010, and to pay interest thereon from the Exchange Date or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, semi-annually on February 1 and August 1 in each year, commencing the
earlier of the first February 1 or August 1 immediately following the Exchange
Date, at 14 3/4% until the principal hereof is paid or made available for
payment, and (to the extent that the payment of such interest shall be legally
enforceable) at the rate of 16 3/4% per annum on any overdue principal and
premium and on any overdue installment of interest and Liquidated Damages, if
any, until paid as specified on the reverse hereof.
The interest so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Debenture (or one or more Predecessor Debentures) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the January 15 or July 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Debenture (or one or more Predecessor Debentures) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Debentures not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Debentures may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture.
On each Interest Payment Date, the Company may, at its option, subject to
and in accordance with the provisions of this Debenture and the Indenture,
issue Secondary Debentures (as hereinafter defined) in lieu of the payment in
cash of any portion of the interest due and payable on such Interest Payment
Date. If the Company elects to issue Secondary Debentures in lieu of the
payment in cash of such portion of interest, it shall give notice of such
election to the Holders and the Trustee not less than 15 nor more than
45 days prior to the Regular Record Date for such Interest Payment Date, and
shall execute and deliver to the Trustee for authentication, and the Trustee
shall authenticate and deliver
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<PAGE> 135
to the Person in whose name this Debenture (or one or more Predecessor
Debentures) is registered at the close of business on such Regular Record Date,
additional Debentures dated such Interest Payment Date in a principal amount
equal to such portion of interest (such additional Debentures being referred to
herein as the "Secondary Debentures"), and the due issuance of such Secondary
Debentures shall constitute full payment of such portion of interest; provided,
however, in lieu of the issuance of any Secondary Debenture (x) the principal
amount of which would be less than $1,000 or (y) would exceed the largest
integral multiple of $1,000 which is less than or equal to such principal
amount (in each case, a "Fractional Secondary Debenture"), the Company shall,
in the case of Clause (y), issue a Secondary Debenture with a principal amount
equal to such largest integral multiple and shall, in the case of Clauses (x)
and (y), in its sole discretion, either (1) on behalf of and for the accounts
of all Holders of Debentures who would be entitled to Fractional Secondary
Debentures, aggregate all such Fractional Secondary Debentures and, on or
before the tenth Business Day following the applicable Interest Payment Date,
sell such aggregated Fractional Secondary Debentures and, within six Business
Days of such sale, pay each such Holder his proportionate share of the net
proceeds of such sale, or (2) pay (on the Interest Payment Date) each such
Holder, with respect to any Fractional Secondary Debenture that such Holder
would otherwise be entitled to receive, an amount in cash equal to the average
closing price per $1,000 principal amount of Debentures for the ten trading
days preceding the Business Day immediately preceding the applicable Interest
Payment Date multiplied by a fraction, the numerator of which is the principal
amount of such Fractional Secondary Debenture otherwise issuable to such Holder
and the denominator of which is $1,000. Each issuance of Secondary Debentures
in lieu of the payment of all or any portion of interest in cash on the
Debentures shall be made pro rata with respect to the Outstanding Debentures.
Payment of the principal of (and premium, if any) and interest (and
Liquidated Damages, if any) on this Debenture will be made at the office or
agency of the Company maintained for that purpose in the Borough of Manhattan,
The City of New York, in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts; provided, however, that at the option of the Company payment of interest
may be made by check mailed to the address of the Person entitled thereto as
such address shall appear in the Debenture Register.
A-4
<PAGE> 136
Reference is hereby made to the further provisions of this Debenture
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this
Debenture shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated:
LIBERTY GROUP PUBLISHING, INC.
By_______________________
Name:
Title:
Attest:
______________________________
Name:
Title:
A-5
<PAGE> 137
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debentures referred to in the within-mentioned
Indenture.
Dated:
STATE STREET BANK AND TRUST COMPANY
as Trustee
By ______________________
Authorized Officer
A-6
<PAGE> 138
The [Rule 144A] [Regulation S Temporary] [Regulation S Permanent] [Global]
Debenture is one of a duly authorized issue of Debentures of the Company
designated as its 14 3/4% Senior Subordinated Debentures due 2010 (herein
called the "Debentures"), limited (except as otherwise provided in the
Indenture referred to below) in aggregate principal amount to $___________,
issued and to be issued under an Indenture, dated as of January 27, 1998
(herein called the "Indenture"), between the Company and State Street Bank and
Trust Company, as Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee, the holders of Senior Indebtedness and the Holders of the
Debentures and of the terms upon which the Debentures are, and are to be,
authenticated and delivered.
The Debentures are subject to redemption upon not less than 30 nor more
than 60 days' notice by mail, at any time on or after February 1, 1999, as a
whole or in part, at the election of the Company, at a Redemption Price which,
if during the twelve month period beginning February 1, 1999 is equal to 105.0%
of the principal amount of this Debenture; if during the twelve month period
beginning February 1, 2000 is equal to 104.0% of the principal amount of this
Debenture; if during the twelve month period beginning February 1, 2001 is
equal to 103.0% of the principal amount of this Debenture; if during the twelve
month period beginning February 1, 2002 is equal to 102.0% of the principal
amount of this Debenture; if during the twelve month period beginning February
1, 2003 is equal to 101.0% of the principal amount of this Debenture; and
thereafter is equal to 100% of the principal amount of this Debenture, in each
case plus interest thereon accruing from the most recent Interest Payment Date
to which interest has been paid or duly provided for, at the rate of 14 3/4%
per annum, provided that interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such
Debentures, or one or more Predecessor Debentures, of record at the close of
business on the relevant Record Dates referred to on the face hereof, all as
provided in the Indenture.
The Debentures do not have the benefit of any sinking fund obligations.
A-7
<PAGE> 139
In the event of redemption or purchase pursuant to an Asset Sale Offer or
Change of Control Offer of this Debenture in part only, a new Debenture or
Debentures for the unredeemed portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
The indebtedness evidenced by this Debenture is, to the extent provided in
the Indenture, subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness, and this Debenture is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this
Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes.
If an Event of Default shall occur and be continuing, there may be
declared due and payable the principal amount of the Debentures, in the manner
and with the effect provided in the Indenture. Upon any acceleration of
maturity of the Debentures, all principal of and accrued interest and
Liquidated Damages, if any, on the Debentures shall be due and payable
immediately.
The Indenture provides that, subject to certain conditions, if (i) certain
Net Cash Proceeds are available to the Company as a result of Asset Sales or
(ii) a Change of Control occurs, the Company shall be required to make an Asset
Sale Offer or Change of Control Offer, respectively, for all of the Debentures.
The Indenture contains provisions for defeasance at any time of (i) the
entire indebtedness of this Debenture or (ii) certain restrictive covenants and
Events of Default with respect to this Debenture, in each case upon compliance
with certain conditions set forth therein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Debentures under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Debentures at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the Debentures at the
time
A-8
<PAGE> 140
Outstanding, on behalf of the Holders of all the Debentures, to waive
compliance by the Company with certain provisions of the Indenture and certain
past Defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Debenture shall be conclusive and binding upon
such Holder and upon all future Holders of this Debenture and of any Debenture
issued upon the registration of transfer hereof or in exchange herefor or in
lieu hereof, whether or not notation of such consent or waiver is made upon
this Debenture.
No reference herein to the Indenture and no provision of this Debenture or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of (and premium, if any) and
interest (and Liquidated Damages, if any) on this Debenture at the times, place
and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Debenture is registrable in the Debenture
Register, upon surrender of this Debenture for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York and at any other office or agency maintained by the Company for such
purpose, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Debenture Registrar duly executed
by, the Holder hereof or his attorney duly authorized in writing, and thereupon
one or more new Debentures, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Debentures are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Debentures are
exchangeable for a like aggregate principal amount of Debentures of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Debenture for registration of transfer,
the Company, the Trustee and any
A-9
<PAGE> 141
agent of the Company or the Trustee may treat the Person in whose name this
Debenture is registered as the owner hereof for all purposes, whether or not
this Debenture be overdue, and neither the Company, the Trustee nor any such
agent shall be affected by notice to the contrary.
Interest on this Debenture shall be computed on the basis of a 360-day
year of twelve 30-day months.
No direct or indirect stockholder, employee, officer or director, as such,
past, present or future of the Company, the Subsidiaries or any successor
entity shall have any personal liability in connection with this Debenture
solely by reason of his or its status as such stockholder, employee, officer or
director. Each Holder by accepting this Debenture waives and releases all such
liability, acknowledges and consents to the transactions described under "The
Acquisition" in the Offering Memorandum and further acknowledges the waiver and
release are part of the consideration for the issuance of this Debenture.
All terms used in this Debenture which are defined in the Indenture shall
have the meanings assigned to them in the Indenture. In addition to the rights
provided to Holders of the Debentures under the Indenture, Holders of
Debentures shall have all the rights set forth in the Registration Rights
Agreement.(5)
The Indenture and this Debenture shall be governed by and construed in
accordance with the laws of the State of New York.
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(5) This sentence should be included only for the Initial Debentures.
A-10
<PAGE> 142
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Debenture purchased in its entirety by
the Company pursuant to Section 1013 or 1015 of the Indenture, check the box:
[ ]
If you want to elect to have only a part of this Debenture purchased by
the Company pursuant to Section 1013 or 1015 of the Indenture, state the
amount: $
Dated: Your Signature:____________________
(Sign exactly as name appears on the
other side of this Debenture)
Signature Guarantee:_______________________________________________
(Signature must be guaranteed by
a member firm of the New York Stock
Exchange or a commercial bank or
trust company)
A-11
<PAGE> 143
SCHEDULE OF EXCHANGES(6)
The following exchanges relating to this Global Debenture have been made:
<TABLE>
<S> <C> <C> <C> <C>
Principal
Amount of Amount of Amount of Signature of
decrease in increase in this Global authorized
Principal Principal Debenture officer of
Amount of this Amount of this following Trustee or
Date of Global Global such decrease Debentures
Exchange Debenture Debenture (or increase) Custodian
_________________________________________________________________________________________
</TABLE>
- ------------------
(6) This schedule should only be added if the Debenture is issued in global
form.
A-12
<PAGE> 144
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
TRANSFER RESTRICTED DEBENTURES(7)
Re: 14 3/4% SENIOR SUBORDINATED DEBENTURES DUE 2010 OF LIBERTY GROUP
PUBLISHING, INC.
This Certificate relates to $___________ principal amount of Debentures
held in (check applicable space) _____ book-entry or _____ definitive form by
_________________ (the "Transferor").
The Transferor (check applicable box):
[] This beneficial interest in the Global Debenture held by the
Depositary a Debenture or Debentures in definitive, registered form of
authorized denominations and an aggregate principal amount equal to its
beneficial interest in such Global Debenture (or the portion thereof indicated
above); or
[] has requested the Trustee by written order to exchange or register the
transfer of a Debenture or Debentures.
In connection with such request and in respect of each such Debenture, the
Transferor does hereby certify that Transferor is familiar with the Indenture
relating to the above-captioned Debentures and as provided in Section 305 of
such Indenture, the transfer of this Debenture does not require registration
under the Securities Act (as defined below) because:
[] Such Debenture is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 305(a)(ii)(A) or Section
305(d)(ii)(A) of the Indenture).
[] Such Debenture is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A promulgated under the Securities Act) that is aware
that any sale of Debentures to it will be made in reliance on Rule 144A under
the Securities Act and that is acquiring such Transfer Restricted Debenture for
its own account, or
- -----------------
(7) This Certificate shall be included only for Initial Debentures.
A-13
<PAGE> 145
for the account of another such "qualified institutional buyer" (in
satisfaction of Section 305(a)(ii)(B) or Section 305(d)(ii)(B) of the
Indenture).
[] Such Debenture is being transferred pursuant to an exemption from
registration in accordance with Rule 144, or outside the United States in an
Offshore Transaction in compliance with Rule 904 under the Securities Act, or
pursuant to an effective registration statement under the Securities Act (in
satisfaction of Section 305(a)(ii)(C) or Section 305(d)(ii)(C) of the
Indenture).
[] Such Debenture is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act and
in accordance with applicable securities laws of the states of the United
States, other than as provided in the immediately preceding paragraph. An
Opinion of Counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate (in
satisfaction of Section 305(a)(ii)(D) or Section 305(d)(ii)(D) of the
Indenture).
_____________________________
[INSERT NAME OF TRANSFEROR]
By:__________________________
Date:_____________________
A-14
<PAGE> 146
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
DEBENTURES(8)
Re: 14 3/4% SENIOR SUBORDINATED DEBENTURES DUE 2010 OF LIBERTY GROUP
PUBLISHING, INC.
This Certificate relates to $_____ principal amount of Debentures held
in (check applicable box) _____ book-entry or _____ definitive form by
___________ (the "Transferor").
The Transferor (check applicable box):
[ ] has requested the Trustee by written order to deliver in exchange for
its beneficial interest in the Global Debenture held by the Depositary a
Debenture or Debentures in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Debenture (or the portion thereof indicated above); or
[ ] has requested the Trustee by written order to exchange or register the
transfer of a Debenture or Debentures.
______________________________
[INSERT NAME OF TRANSFEROR]
By:___________________________
Date:_____________________
- -------------------
(8) This certificate shall be included only for the Exchange Debentures.
A-15
<PAGE> 147
Annex B
[FORM OF REGULATION S CERTIFICATE FOR HOLDER]
CERTIFICATE TO BE DELIVERED UPON RECEIPT OF PAYMENT OF PRINCIPAL OR INTEREST
WITH RESPECT TO A REGULATION S TEMPORARY GLOBAL DEBENTURE OR THE EXCHANGE OF A
REGULATION S TEMPORARY GLOBAL DEBENTURE FOR REGULATION S PERMANENT GLOBAL
DEBENTURE
Re: 14 3/4% SENIOR SUBORDINATED DEBENTURES DUE 2010 OF LIBERTY GROUP
PUBLISHING, INC.
The undersigned as the Holder of a beneficial interest in a Regulation
S Temporary Global Debenture is delivering this certificate concurrently with
(check one):
[ ] the receipt of a payment of interest or principal with respect to a
Regulation S Temporary Global Debenture; or
[ ] its written order to Euroclear or CEDEL, as the case may be, to
exchange its beneficial interest in the Regulation S Temporary Global
Debenture for beneficial interest in a Regulation S Permanent Global Debenture.
In connection with the above, the undersigned hereby certifies that:
[ ] the undersigned as the Holder of the beneficial interest in the
Regulation S Temporary Global Debenture is nota U.S. Person (as defined in
Section 305); or
[ ] the undersigned has purchased its interest in the Regulation S
Temporary Global Debenture in a transaction that is exempt from the registration
requirements under the Securities Act.
______________________________
[INSERT NAME OF HOLDER]
By:___________________________
Date:_____________________
B-1
<PAGE> 148
[FORM OF REGULATION S CERTIFICATE FOR EUROCLEAR AND CEDEL]
CERTIFICATE TO BE DELIVERED UPON RECEIPT OF PAYMENT OF PRINCIPAL OR INTEREST
WITH RESPECT TO A REGULATION S TEMPORARY GLOBAL DEBENTURE OR THE EXCHANGE OF A
REGULATION S TEMPORARY GLOBAL DEBENTURE FOR REGULATION S PERMANENT GLOBAL
DEBENTURE
Re: 14 3/4% SENIOR SUBORDINATED DEBENTURES DUE 2010 OF LIBERTY GROUP
PUBLISHING, INC.
The undersigned is delivering this certificate concurrently with (check
one):
[ ] the receipt of a payment of interest or principal with respect to a
Regulation S Temporary Global Debenture; or
[ ] the exchange of a Regulation S Temporary Global Debenture for a
Regulation S Permanent Global Debenture.
In connection with the above, the undersigned hereby certifies that:
[ ] None of the holders of beneficial interests in the Regulation S
Temporary Global Debenture is a U.S. Person (as defined in Section 305); or
[ ] Each of the holders of beneficial interests in the Regulation S
Temporary Global Debenture has purchased its interest in a transaction that is
exempt from the registration requirements under the Securities Act.
[MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, BRUSSELS OFFICE,
AS OPERATOR OF THE EUROCLEAR
CLEARANCE SYSTEM]
[CEDEL BANK, SOCIETE ANONYME]
By:___________________________
Date:_____________________
B-2
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of November 27,
1997, is between Liberty Group Operating, Inc., a Delaware corporation (the
"Company"), Kenneth L. Serota ("Executive"), and Liberty Group Publishing, Inc.,
a Delaware corporation ("Parent").
RECITALS
A. The Company will engage in the business of acquiring and publishing
community newspapers.
B. The Company desires to employ Executive as its President and Chief
Executive Officer on the terms set forth in this Agreement.
C. Executive desires to be so employed by Company.
D. Parent controls the Company and will receive substantial benefit
from this Agreement.
AGREEMENTS
In consideration of the foregoing recitals and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Employment.
1.1 Term. Subject to the terms hereof, the Company agrees to
employ Executive as its President and Chief Executive Officer, and Executive
agrees to accept such employment, for the period beginning on January 1, 1998
(the "Commencement Date") and ending on the third anniversary of the
Commencement Date subject to extension as hereinafter provided or earlier
termination pursuant to Section 3 hereof (the "Term"). After the expiration of
the initial three year term, the Term shall be automatically extended or
re-extended on each anniversary of the Commencement Date, commencing on January
1, 2001, for successive one-year periods, subject to earlier termination
pursuant to Section 3 hereof, unless the Company or Executive delivers to the
other party a notice specifying such party's intent not to extend or re-extend
the Term for an additional one-year period, at least 90 days prior to the end of
the then current Term. During the Term, Executive also shall be President and
Chief Executive Officer of Parent and each subsidiary of the Company.
1.2 Duties. During the Term, Executive shall perform such duties
and functions as are customarily performed by the chief executive officer of a
company the size and
<PAGE> 2
nature of the Company, including the duties and functions consistent with the
positions of President and Chief Executive Officer as are from time to time
assigned to him by the Board of Directors of the Company (the "Board").
1.3 Place of Performance. Executive shall perform his services
hereunder at the principal executive office of the Company which shall be
located in Chicago's central business district or the northern suburbs of
Chicago.
1.4 Time to be Devoted to Employment. Except as otherwise
specified herein and except for illness or injury and reasonable vacation
periods, Executive shall devote his full business time and efforts to his duties
and responsibilities hereunder. During the Term, Executive shall not, without
the prior written consent of the Company, accept other employment or render or
perform other services for compensation, except that Executive may serve on the
board of directors, and committees thereof, of companies other than the Company
and its subsidiaries, provided that such service does not materially interfere
with the performance by Executive of his duties and responsibilities hereunder
and provided that the Board consents to such service, which consent shall not be
unreasonably withheld. In addition, Executive's expenditure of reasonable
amounts of time on personal matters and charitable activities shall not be
deemed a breach of this Agreement, provided the same do not materially interfere
with the performance by Executive of his duties and responsibilities hereunder.
1.5 Vacations. Executive shall be entitled to such paid vacation
time as the Company customarily provides from time to time to its similarly
situated senior executives, to be taken in accordance with the then-current
employment policy of the Company regarding vacation time. Executive shall also
be entitled to all paid holidays given by the Company to its similarly situated
employees.
2. Compensation.
2.1 Base Salary. As compensation for services rendered hereunder,
Executive shall receive an annual salary of not less than (i) $350,000 for the
period beginning on the Commencement Date and ending on the first anniversary
thereof, (ii) $375,000 for the period beginning on the first anniversary of the
Commencement Date and ending on the second anniversary thereof, and (iii)
$400,000 for the period beginning on the second anniversary of the Commencement
Date until the end of the Term, to be paid in accordance with the Company's
customary payroll practices but in no event less frequently than monthly.
Subject to the foregoing, such salary shall be reviewed by the Board no less
frequently than annually. Any increase in salary granted by the Board shall in
no way limit or reduce any other obligation of the Company hereunder.
2.2 Annual Bonuses. (a) In addition to the salary payable pursuant
to Section 2.1, the Company shall pay to Executive an annual bonus, payable as
soon as reasonably practicable after the completion of the audit for each fiscal
year of the Company ("Fiscal Year") ending during the Term, but in any event
within 30 days after completion of such audit, which
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audit shall be completed within 90 days of the end of each such Fiscal Year. The
annual bonus shall be based on realistic performance standards agreeable to the
Company and Executive, including standards based on revenue growth, EBITDA
growth, completion of reasonably acceptable acquisitions and growth of acquired
properties. For each Fiscal Year during the Term (other than the Fiscal Year
ending December 31, 1998), such performance standards shall be approved by the
Board within 30 days after the first day of such Fiscal Year. The performance
standards for the Fiscal Year ending on December 31, 1998 shall be determined
and approved by the Board prior to March 31, 1998.
(b) Subject to attaining the performance standards
established pursuant to Section 2.l(a), (i) the bonus for the Fiscal Year
ending on December 31, 1998 shall equal at least $100,000, (ii) the bonus for
the Fiscal Year ending on December 31, 1999 shall equal at least $125,000 and
(iii) the bonus for the Fiscal Year ending on December 31, 2000 and each Fiscal
Year thereafter during the Term shall equal at least $150,000.
(c) With respect to any Fiscal Year, the annual bonus
determined to be earned for such Fiscal Year shall be deemed to have been earned
on the last day of such Fiscal Year.
2.3 Welfare and Pension Payments. Executive shall be eligible to
participate in the various benefit plans maintained from time to time by the
Company for its employees, including, but not limited to, group life,
disability, dental and health insurance coverage, retirement, deferred
compensation, profit sharing, and other plans in accordance with the terms of
such plans as from time to time in effect and applicable to employees of the
Company. Nothing in this Section 2.3, however, shall require the Company to
maintain any benefit plans or provide any type or level of benefits to its
employees, including Executive.
2.4 Other Benefits. Executive will receive payment for all
business-related organizational or association memberships, in accordance with
the Company's current practices.
2.5 Company Loan. On or prior to January 31, 1998, the Company
shall loan Executive on a full recourse basis the principal amount of $250,000.
Executive intends to use all or a portion of the proceeds of the loan for
investment purposes. The Company shall forgive an equal principal amount of the
loan pro rata on a daily basis during the initial three year Term (i.e., a
principal amount equal to $230 per day will be forgiven). The Company shall
forgive the entire principal amount of the loan simultaneously with the
termination of the Executive's employment by the Company without Cause (as
defined in Section 3.2), the termination of Executive's employment by the
Executive for Good Reason (as defined in Section 3.4), the death of the
Executive, the Disability (as defined in Section 3.5) of the Executive or upon
the consummation of an initial public offering of securities of Parent or the
Company. If the Company terminates Executive's employment for Cause or Executive
terminates his employment without Good Reason, the unforgiven principal amount
of the loan on the date of such termination shall become due and payable by
Executive one year after the date of such termination of employment. The loan
described in this Section 2.5 shall be evidenced by a promissory note setting
forth additional terms and conditions agreed to by the parties.
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2.6 Expenses. The Company shall reimburse Executive promptly for
all reasonable travel and other business expenses incurred by him in connection
with his duties hereunder. The Company shall also pay Executive an automobile
allowance of $500 per month during the Term, payable monthly in arrears. From
the Commencement Date through the consummation of the transactions contemplated
by the Equity Purchase Agreement (as hereinafter defined), the Company will also
reimburse Executive for the additional costs incurred by Executive to maintain
any health insurance benefits that Executive currently receives from his present
employer.
2.7 Withholding. All taxable compensation payable to Executive
pursuant to this Section 2 or otherwise under this Agreement shall be subject to
customary withholding taxes and such other employment taxes as are required
under Federal law or the law of any state or governmental body to be collected
with respect to compensation paid by a corporation to an employee.
3. Termination.
3.1 End of Term or Earlier Death. Unless Executive's employment
has terminated sooner, such employment shall terminate at the end of the Term
or, if Executive dies prior thereto, on the date of Executive's death.
3.2 Termination by the Company for Cause. The Company may
terminate Executive's employment hereunder for Cause. For purposes of this
Agreement, "Cause" shall mean Executive's conviction of, guilty plea concerning
or confession of, fraud, theft, embezzlement or any felony. In order to
terminate Executive's employment hereunder for Cause, the Company must notify
Executive of such decision in writing, specifying the Cause and the Date of
Termination (as hereinafter defined).
3.3 Termination by the Company without Cause. The Company may
terminate Executive's employment hereunder at any time without Cause upon notice
to Executive specifying the Date of Termination.
3.4 Termination by Executive for Good Reason. Executive shall be
entitled to terminate his employment hereunder for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean the occurrence of any of the following
circumstances without the prior written consent of Executive:
(a) the relocation of the Company's principal executive
office anywhere outside Chicago's central business district or the
northern suburbs of Chicago, unless Executive agrees to such relocation,
in which case, the relocation of the Company's principal executive office
to an unagreed location, or Executive being required to be based anywhere
other than the Company's principal executive office;
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(b) the requirement that Executive report to any officer,
consultant or committee or a Board that is not controlled, directly or
indirectly, by Leonard Green and Partners, L.P. ("LGP"; and such Board
being referred to as the "LGP Board"), other than a formal committee of
the LGP Board, it being the intent of the parties that Executive shall
never be required to report to anyone other than the LGP Board or a formal
committee thereof;
(c) a redelegation of any material duties of Executive to
other officers, employees, consultants or committees;
(d) the assignment of duties to Executive which are
inconsistent with those of a chief executive officer or president of a
company the size and nature of the Company;
(e) a material breach of the Company's or Parent's
obligations under this Agreement; or
(f) a Change of Control (as hereinafter defined).
For purposes of this Agreement, a "Change of Control" shall be deemed to have
occurred if at any time after the date hereof:
(A) the Company sells or otherwise disposes of all or
substantially all of its assets, except for a sale or disposition to
Executive or an entity controlled, directly or indirectly, by Executive;
or
(B) Green (as hereinafter defined) no longer owns 50 % or
more of the voting shares of stock of Parent or Parent no longer owns,
directly or indirectly, at least 95% of the voting securities of the
Company, other than as a result of a public offering of the securities of
Parent registered under the Securities Act of 1933, as amended, or an
acquisition by Executive or an entity controlled, directly or indirectly,
by Executive.
In order to terminate his employment hereunder for Good Reason, Executive shall
give the Company written notice thereof, specifying such Good Reason and the
Date of Termination, which shall be not less than ten days from the date of such
notice, the Company shall have such ten days to eliminate the basis of such Good
Reason to the reasonable satisfaction of Executive.
3.5 Termination for Disability. The Company may terminate
Executive's employment for Disability. For purposes of this Agreement,
"Disability" shall mean Executive's inability, due to physical or mental illness
or accident or injury, to perform his duties hereunder on a full-time basis for
90 or more business days within five consecutive months and thereafter Executive
shall not (a) within ten days after a written notice of intention to terminate
is received by Executive, have returned to the full-time performance of his
duties and (b) have continued during the following two months to perform his
duties full-time without absences due to physical
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or mental disability aggregating more than ten business days, If the Company
elects to terminate Executive's employment for Disability, it shall give written
notice thereof to Executive specifying the Date of Termination.
3.6 Notice and Date of Termination. Any termination by the Company
or Executive shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 7.4. As used herein, the term "Date of
Termination" shall mean the date specified in the Notice of Termination (which,
except for termination for Cause or termination for Good Reason, shall be not
less than 30 days from the date such Notice of Termination is given).
4. Payments Upon or After Termination.
4.1 Accrued Compensation. Upon termination of Executive's
employment with the Company for any reason, Executive shall be entitled to
receive the compensation earned and unpaid as of the Date of Termination. The
Company shall continue to provide Executive with all profit sharing, pension,
life, disability, accident, health insurance, and other employee benefit and
fringe benefit plans and programs through the Date of Termination in accordance
with the terms and provisions of such plans and programs in effect at the time
of that Notice of Termination is given. Except as otherwise provided in this
Section 4, the Executive shall not be entitled to any portion of his annual
bonus which has not been earned as of the Date of Termination.
4.2 Termination for Cause. Other than the Company's obligations
under Section 4. 1, if Executive's employment with the Company is terminated by
the Company for Cause, the Company shall have no further obligations to
Executive under this Agreement.
4.3 Termination by Company Without Cause or Termination by
Executive for Good Reason. In addition to the Company's obligations under
Section 4. 1, if (a) Executive's employment is terminated by the Company without
Cause or (b) Executive's employment is terminated by Executive for Good Reason
in accordance with the provisions of Section 3.4, the Company shall pay
Executive, within 30 days of the Date of Termination, an amount equal to the
greater of (i) the aggregate amount of the base salary to be paid under this
Agreement for the balance of the Term and (ii) one year's base salary at the
Executive's then current annual salary. In addition, the Company shall pay to
Executive the portion of his annual bonus (his "Pro Rata Bonus") equal to the
amount of the bonus he would have earned had he remained employed through the
last day of the Fiscal Year in which such termination occurs (based on actual
performance results for such Fiscal Year) multiplied by a fraction, the
numerator of which is the number of days the Executive was employed by the
Company during such Fiscal Year and the denominator of which is 365. His Pro
Rata Bonus shall be paid after the end of the Fiscal Year in which such
termination occurs in the same manner as if Executive had been employed for the
full Fiscal Year.
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4.4 Termination for Disability or Death. During any period that
Executive fails to perform his duties hereunder as a result of incapacity due to
physical or mental illness or accident or injury, Executive shall continue to
receive his full salary at the annual rate in effect at the commencement of such
period and all other benefits and all other compensation pursuant to this
Agreement until his employment is terminated pursuant to Section 3.5. In
addition, in the event Executive's employment is terminated as a result of
Disability or death, the Company shall pay to Executive his Pro Rata Bonus,
which shall be paid after the end of the Fiscal Year in which such termination
occurs in the same manner as if Executive had been employed for the full Fiscal
Year.
4.5 Other Termination by Executive. If Executive shall terminate
his employment hereunder for any reason other than Good Reason, other than the
Company's obligations under Section 4.1, the Company shall have no further
obligations to Executive under this Agreement.
4.6 Disclaimer of Mitigation Duty. Executive shall not be required
to mitigate the amount of any payment provided for or referred to in this
Section 4 by seeking other employment or otherwise, nor shall the amount of any
payment or benefit provided for or referred to in this Section 4 be reduced by
any compensation earned by Executive as a result of other employment, by
retirement benefits, by offset against any amount claimed to be owed to Company
or otherwise.
4.7 Other Benefits. In addition to all other amounts payable to
Executive under this Section 4, Executive shall be entitled to receive all
benefits payable to Executive under any plans or agreements relating to
retirement or other benefits in accordance with the terms and provisions
thereof.
4.8 Golden Parachute Provision. In the event that in the opinion
of tax counsel selected and compensated by Executive ("Executive's Tax
Counsel"), a payment or benefit received or to be received by Executive
following his termination (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Company or any person
affiliated with the Company) (collectively, with the payments provided for in
the foregoing provisions of this Section 4, the "Post Termination Payments")
would be subject to excise tax (in whole or part) as a result of section 28OG of
the Code, and (b) as a result of such excise tax, the net amount of Post
Termination Payments retained by Executive (taking into account such excise tax)
would be less than the net amount of Post Termination Payments retained by
Executive if the Post Termination Payments were reduced or eliminated as
described in this Section 4.8, then the Post Termination Payments shall be
reduced or eliminated until no portion of the Post Termination Payments is
subject to excise tax, or the Post Termination Payments are reduced to zero. For
purposes of this limitation (i) no portion of the Post Termination Payments the
receipt or enjoyment of which Executive shall have waived in writing prior to
the date of payment following termination of the Post Termination Payments shall
be taken into account, (ii) no portion of the Post Termination Payments shall be
taken into account which in the opinion of Executive's Tax Counsel does not
constitute a "parachute payment" within the meaning of
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section 280G(b)(2) of the Code, (iii) the Post Termination Payments shall be
reduced only to the extent necessary so that the Post Termination Payments
(other than those referred to in clauses (i) and (ii)) in their entirety
constitute reasonable compensation for services actually rendered within the
meaning of section 280G(b)(4) of the Code or are otherwise not subject to excise
tax, in the opinion of Executive's Tax Counsel, and (iv) the value of any
non-cash benefit and all deferred payments and benefits included in the Post
Termination Payments shall be determined by the mutual agreement of the Company
and Executive in accordance with the principles of sections 280G(d)(3) and (4)
of the Code.
5. Equity.
5.1 Issuance of Equity. (a) As promptly as possible (but in any
event within ten business days after the consummation of the transactions
contemplated by the Equity Purchase Agreement), Parent shall issue to Executive
2% of the fully-diluted equity of Parent (including the Purchased Shares (as
defined below)) (the "Bonus Shares"), and shall deliver to Executive a
certificate representing the Bonus Shares registered in the name of Executive.
Executive at his option may purchase up to 2% of the fully-diluted equity of
Parent (including the Bonus Shares) (the "Purchased Shares") for the price,
terms, and conditions such equity is purchased by GE Equity Investors II, L.P.
("Green"), and Parent shall deliver to Executive a certificate representing the
Purchased Shares registered in the name of Executive. At Executive's request,
the Company shall loan (the "Equity Loan") Executive up to 50% of the purchase
price of the Purchased Shares specified by Executive. The Equity Loan shall bear
interest at a rate equal to applicable federal rate for loans of the same
maturity as of the date on which the Equity Loan is made and the outstanding
principal balance of the Equity Loan, together with all interest accrued
thereon, shall be due and payable in full on the earlier of (i) a Change of
Control or (ii) January 1, 2001. The Executive may at any time make full or
partial prepayments of principal amounts due on the Equity Loan without penalty
or premium. The Bonus Shares and the Purchased Shares are collectively referred
to herein as the "Executive Shares". Upon issuance, the Executive Shares shall
be validly issued, fully paid and nonassessable. The Company agrees that it
shall pay when due and payable any and all Federal and state taxes (including,
but not limited to, income taxes) which may be payable by the Company, Parent or
Executive in respect of the issuance and receipt of the Executive Shares or the
certificates therefor. The amount of such payments shall be "grossed-up" by an
amount sufficient to pay any Federal or state income taxes payable by Executive
as a result of the inclusion of such payments (including, but not limited to,
the amount of the "gross-up") in Executive's compensation for Federal and state
income tax purposes.
(b) In the event that prior to the expiration of the initial
three year term, Executive's employment with the Company is terminated for any
reason, Parent shall have the option to repurchase, at the prices described in
(c) below (the "Repurchase Price"), the number and type of Executive Shares
determined in accordance with the following:
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(i) with respect to fifty percent (50%) of the Bonus
Shares and fifty percent (50%) of the Purchased Shares,
Parent's repurchase rights shall be terminated pro rata on a
daily basis over the initial three year Term; and
(ii) with respect to fifty percent (50%) of the Bonus
Shares and fifty percent (50%) of the Purchased Shares,
Parent's repurchase rights shall be terminated annually as to
one-third of such Bonus Shares and Purchased Shares,
respectively, based on achieving the performance standards
established in accordance with Section 2.2 (it being the
intention of the parties that such termination of repurchase
rights shall be determined on an incremental basis (rather
than on an "all or nothing" basis so that even if such
performance standards are not fully achieved in any fiscal
year an agreed-upon percentage of the repurchase rights with
respect to the applicable Bonus Shares and Purchased Shares
shall be terminated upon attaining agreed-upon percentages of
such performance standards) and cumulative from year-to-year
(so that if performance standards are exceeded in any fiscal
year by agreed-upon percentages, an agreed-upon percentage of
the repurchase rights that did not terminate in a prior fiscal
year during the Term may terminate in the fiscal year in which
the performance standards are exceeded).
If the Executive delivers to Parent a certificate representing more than the
Executive Shares to be surrendered pursuant to this paragraph, Parent shall
deliver to Executive a certificate representing the Executive Shares not
surrendered for cancellation as soon as possible after such surrender (but in
any event within three business days).
(c) If Executive's employment is terminated (i) by the
Company without Cause in accordance with the provisions of Section 3.3, (ii) by
Executive for Good Reason in accordance with the provisions of Section 3.4 or
(iii) because of death or Disability of the Executive in accordance with the
provisions of Section 3.1 or 3.5, respectively, the Repurchase Price shall be
the fair market value of the equity being repurchased (without discount for lack
of liquidity or minority interest) as determined by an appraiser (whose fees and
expenses shall be borne by Parent) mutually agreeable to Parent and Executive
(or, if applicable, Executive's personal or legal representative, executor or
administrator). In the event that Parent repurchases any securities from
Executive for a Repurchase Price calculated pursuant to the preceding sentence
and within one year of the consummation of such repurchase a Change of Control
or a public offering of securities of Parent or the Company is consummated for a
consideration per share that exceeds the amount received by Executive
("Adjustment Event"), Executive shall receive from Parent within 10 days of the
consummation of such Adjustment Event cash in an amount equal to the amount that
Executive would have received following such Adjustment Event had the repurchase
rights not been previously exercised minus the amount Executive previously
received in connection with the repurchase. If the Executive's employment is
terminated. (i) by the Company for Cause or (ii) by the Executive for any reason
other than Good Reason, the Repurchase Price shall be the price paid by
Executive for the Executive Shares.
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(d) The provisions of paragraphs (b) and (c) shall cease to
be effective immediately upon the consummation of an initial public offering of
securities of Parent or the Company.
(e) The number of shares referred to in paragraphs (a) and
(b) will be proportionately adjusted in the event the Common Stock of Parent is
combined into a lesser number or subdivided into a greater number.
(f) Parent must exercise its option under Section 5(b), if
at all, by written notice to Executive within 30 days after Executive's
employment with the Company is terminated. To the extent not exercised within
the 30 day period, Parent's option shall lapse. The repurchase option, if
exercised by Parent, must be exercised pro rata between Bonus Shares and
Purchased Shares (i.e., one-half of any shares repurchased must be Bonus Shares
and one half of any shares repurchased must be Purchased Shares).
5.2 Stockholders Agreement. Executive, Parent and Green shall
enter into a mutually agreeable Stockholders Agreement (the "Stockholders
Agreement") within 30 days after the date hereof pursuant to which (i) Parent
grants Executive Parent-paid piggyback registration rights with respect to the
Executive Shares on a pro rata basis with Green, (ii) Parent grants Executive
the right to purchase his pro rata share of issuances of equity securities of
Parent issued after the date hereof, (iii) Green grants tag-along rights to
Executive in connection with the sale by Green of any equity of Parent and (iv)
Parent agrees to take, and cause the Company to take, all actions necessary to
carry out the terms of this Agreement.
6. Board of Directors. (a) Parent agrees that at all times during the
Term Executive shall be a member of the Board of Directors of Parent ("Parent
Board") and the Board of Directors of each subsidiary of Parent (a "Subsidiary
Board").
(b) In the event that at any time, or from time to time,
during the Term the Parent Board or any Subsidiary Board establishes an
executive or similar committee of the Parent Board or a Subsidiary Board charged
with executive functions or responsibilities, Parent agrees that Executive will
be a member of such committee.
7. Miscellaneous.
7.1 Successors and Assigns: Binding Agreement. (a) The Company
will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform this Agreement if no such succession had taken place.
(b) This Agreement and all rights of Executive hereunder
shall inure to the benefit of and be enforceable by Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive shall die
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while any amounts remain unpaid hereunder, including any amounts which would be
payable to him hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's spouse or if Executive does not have a living spouse at
such time, to Executive's estate.
(c) This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns; provided, however, that the duties of
Executive hereunder are personal to Executive and may not be delegated by him.
7.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois concerning
contracts made and to be wholly-performed in such state, without regard to
conflicts of law principles. Any suit, action or proceeding brought concerning
or relating to this Agreement or the rights and obligations hereunder, whether
in contract, tort, equity or otherwise, shall be brought exclusively in the
state or federal courts sitting in Cook County, Illinois (regardless of whether
any tribunal in any other jurisdiction also has jurisdiction over the subject
matter hereof or the parties hereto). Each party hereto waives any claim or
defense that such forum is not convenient or proper. Each party hereto agrees
that any such Cook County, Illinois court shall have in personam jurisdiction
over it, consents to service of process by notice delivered in accordance with
the terms of this Agreement or in any other manner authorized by Illinois law,
and agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner specified by law.
7.3 Waivers. The waiver by either party hereto of any right
hereunder or of any failure to perform or breach by the other party hereto shall
not be deemed a waiver of any other right hereunder or of any other failure or
breach by the other party hereto, whether of the same or a similar nature or
otherwise. No waiver shall be deemed to have occurred unless set forth in a
writing executed by or on behalf of the waiving party. No such written waiver
shall be deemed a continuing waiver unless specifically stated therein, and each
such waiver shall operate only as to the specific term or condition waived and
shall not constitute a waiver of such term or condition for the future or as to
any act other than that specifically waived.
7.4 Notices. All notices and communications that are required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given when delivered personally, upon mailing by registered or
certified mail, postage prepaid, return receipt requested, or upon delivery to
an overnight courier as follows:
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If to Parent or the Company, to:
Liberty Group Publishing, Inc,
______________________________
______________________________
Attention: ___________________
with a copy to:
Mayer Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: ___________________
If to Executive, to:
Kenneth L. Serota
1325 Sunburst Lane
Northbrook, Illinois 60062
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Kenneth W. Miller, Esq.
or to such other address as may be specified in a notice given by one party to
the other party hereunder.
7.5 Severability. If for any reason any term or provision of this
Agreement is held to be invalid or unenforceable, all other valid terms and
provisions hereof shall remain in full force and effect, and all of the terms
and provisions of this Agreement shall be deemed to be severable in nature.
7.6 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute but one and the same instrument.
7.7 Legal Fees and Expenses. (a) The Company shall pay, or
reimburse Executive for, the legal fees and expenses of counsel to Executive in
connection with the preparation, negotiation, execution and delivery of this
Agreement.
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(b) In the event Parent or the Company has failed to comply
with any of its obligations under this Agreement, or in the event that the
Company, Parent or any other person takes any action to declare this Agreement
void or unenforceable, in whole or in part, or institutes any litigation
designed to deny, or to recover from, Executive any benefits intended to be
provided to Executive hereunder (a "Covered Claim"), the Company shall pay, or
reimburse Executive for, all costs and expenses (including reasonable attorneys'
fees and court costs) incurred by the Executive in connection with the
initiation or defense of any litigation, arbitration or other legal action,
whether by or against the Company or any director, officer, stockholder or other
person affiliated with the Company, in any jurisdiction (collectively,
"Actions'), with respect to a Covered Claim unless and until it shall be
ultimately determined that neither the Company nor Parent has failed to comply
with any of its obligations under this Agreement. The Company shall advance to,
or reimburse, Executive within 30 days after each written request therefor any
and all attorneys' and related fees and expenses incurred or to be incurred by
Executive in connection with Actions with respect to Covered Claims at any time
after the earlier of (i) the disposition of such Covered Claim or (ii) such time
as Executive has paid $100,000 of fees and expenses in the aggregate with
respect to such Covered Claim. Prior to the disposition of a Covered Claim, the
Company shall advance to, or reimburse, Executive only for fees and expenses in
excess of the first $100,000 of fees and expenses which is paid by Executive.
Unless Executive becomes obligated to pay or reimburse the Company for costs and
expenses as provided in the following sentence, upon the disposition of a
Covered Claim the Company shall reimburse Executive promptly for the first
$100,000 of fees and expenses paid by Executive with respect to such Covered
Claim. Executive agrees that he will reimburse the Company for all attorneys'
and related fees and expenses received by Executive from the Company under the
provisions of this Section 7.7 and pay or reimburse the Company or Parent for
all costs and expenses (including reasonable attorneys' fees and court costs)
incurred by the Company or Parent in connection with Actions with respect to a
Covered Claim in the event and only to the extent that it shall be ultimately
determined that the Company has not failed to comply with any of its obligations
under this Agreement.
7.8 Indemnification. The Company shall indemnify and hold harmless
Executive from any claim asserted against him as an employee, officer or
director of the Company or any of its subsidiaries, or as director, officer or
partner of any other enterprise if Executive serves or served in such capacity
at the request of the Company, to the fullest extent permitted. by applicable
state laws. Expenses incurred by Executive in connection with any such claim
shall be paid by the Company in advance upon the written request of Executive.
Executive shall reimburse the Company for such expenses in the event and only to
the extent that it shall be ultimately determined that Executive is not entitled
under applicable state law to be indemnified for such expenses.
7.9 Amendment. This Agreement may be amended or canceled by mutual
agreement of the parties in writing without the consent of any other person.
7.10 Entire Agreement. This Agreement, together with the
agreements executed in connection herewith, constitutes the entire agreement
between the parties, and supersedes all
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prior oral or Written understandings between the parties, relating to
Executive's employment, other than the provisions set forth under the heading
"Employment Protections" in that certain Term Sheet delivered by Executive to
Leonard Green and Partners, L.P. (the "Term Sheet"), which provisions shall
survive the execution of this Agreement, until the consummation of the
transactions contemplated by that certain Equity Purchase Agreement to which the
Company is a party, dated as of November _, 1997 (the "Equity Purchase
Agreement"), and the termination of this Agreement pursuant to Section 7.12.
7.11 No Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
7.12 Termination. In the event the transactions contemplated by the
Equity Purchase Agreement are not consummated prior to February 28, 1998, this
Agreement shall terminate, except that the Company's obligation to pay Executive
salary pursuant to Section 2.1 for the period commencing on the Commencement
Date and ending on the date of termination of this Agreement and to reimburse
Executive for expenses pursuant to Sections 2.6 and 7.7 shall survive the
termination of this Agreement.
(Remainder of page intentionally left blank.
Signature page follows.]
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<PAGE> 15
The parties hereto have executed this Agreement on the date and year first
above written.
LIBERTY GROUP OPERATING, INC.
By: /s/ Gregory J. Annick
--------------------------------------
Title: President
-----------------------------------
LIBERTY GROUP PUBLISHING, INC.
By: /s/ Gregory J. Annick
--------------------------------------
Title: President
-----------------------------------
/s/ Kenneth L. Serota
-----------------------------------------
KENNETH L. SEROTA
The undersigned, LEONARD GREEN & PARTNERS, L.P. ("Green"), agrees (i) to
cause GE Equity Investors II, L.P. to execute the Stockholders Agreement (as
defined in the Employment Agreement set forth above), (ii) to advance to the
Company funds to enable the Company to satisfy its obligations under this
Agreement to be performed prior to the consummation of the transactions
contemplated by the Equity Purchase Agreement and (iii) to honor the provisions
set forth under the heading "Employment Protections" in the Term Sheet (as
defined in the Employment Agreement).
LEONARD GREEN & PARTNERS, L.P.
By: L & P Management, Inc.
its General Partner
By: /s/ Gregory J. Annick
--------------------------------------
Title: Vice President
----------------------------------
<PAGE> 1
EXHIBIT 10.2
MANAGEMENT STOCKHOLDERS AGREEMENT
This Management Stockholders Agreement (the "Agreement") is entered
into as of January 27, 1998 by and among Liberty Group Publishing, Inc., a
Delaware corporation (the "Company"), Green Equity Investors II, L.P., a
Delaware limited partnership ("GEI"), and the person identified on Annex A
attached hereto (hereinafter referred to as the "Management Investor"), with
reference to the following facts:
WHEREAS, GEI is the principal shareholder of the Company;
WHEREAS, Management Investor is the Chief Executive Officer and
President of the Company;
WHEREAS, GEI has contributed and sold to the Management Investor 3,200
shares of the Company's common stock (the "Common Stock"), in full satisfaction
of the Company's obligations under Section 5.1(a) of the Employment Agreement
(as defined below), such contribution and sale by GEI being deemed to be
pursuant to the Employment Agreement;
WHEREAS, pursuant to the employment agreement, among the Company,
Liberty Group Operating, Inc. and the Management Investor (the "Employment
Agreement"), the Company, GEI and the Management Investor have agreed to enter
into this Agreement; and
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. Management Investor Representations.
(a) Investment Risk. The Management Investor represents and
acknowledges that (i) as a result of the Management Investor's (A) existing
relationship with the Company and by virtue of being an executive of a business
enterprise engaged in the publication of newspapers, and (B) experience in
financial matters, the Management Investor is properly able to evaluate the
capital structure of the Company, the business of the Company and its
subsidiaries and the risks inherent therein; (ii) the Management Investor has
been given the opportunity to obtain any additional information or documents
from and to ask questions, and receive answers of, the officers and
representatives of the Company and its subsidiaries to the extent necessary to
evaluate the merits and risks related to an investment in the Company; (iii) the
Management Investor has been and will be, to the extent the Management Investor
deems necessary, advised by legal counsel of the Management Investor's choice in
connection with this Agreement and the issuance and sale of Common Stock and
(IV) THE MANAGEMENT INVESTOR'S FINANCIAL CONDITION WILL BE SUCH THAT THE
MANAGEMENT INVESTOR WILL BE ABLE TO BEAR THE ECONOMIC RISK OF HOLDING
UNREGISTERED COMMON STOCK FOR WHICH THERE IS NO MARKET AND TO SUFFER A COMPLETE
LOSS OF THE MANAGEMENT INVESTOR'S INVESTMENT THEREIN. The Management Investor
further acknowledges that investment in the
<PAGE> 2
Common Stock hereunder involves significant risks and that these risks include,
without limitation, the facts that the Company is a newly-formed holding company
and that the Company will have a leveraged financial structure.
(b) Purchase for Investment.
(i) The Management Investor represents and warrants
that: (A) the Common Stock acquired by the Management Investor pursuant to the
Employment Agreement will be acquired for the Management Investor's own account
for investment, without any present intention of selling or further distributing
the same and the Management Investor does not have any reason to anticipate any
change in the Management Investor's circumstances or any other particular
occasion or event which would cause the Management Investor to sell any of such
Common Stock and (B) the Management Investor is fully aware that in agreeing to
issue such Common Stock to the Management Investor the Company and GEI will be
relying upon the truth and accuracy of these representations and warranties. The
Management Investor agrees that the Management Investor will not sell or
otherwise dispose of any Common Stock except in compliance with the Securities
Act of 1933, as amended (the "Act"), the rules and regulations of the Securities
and Exchange Commission (the "Commission") thereunder, the relevant state
securities laws applicable to the Management Investor's action and the terms of
this Agreement.
(ii) Subject to Section 6 below, in addition to the
other restrictions provided in this Agreement, the Management Investor agrees
that prior to making any disposition of any Common Stock acquired pursuant to
the Employment Agreement (other than a disposition to the Company), the
Management Investor will give not less than 10 days' advance written notice to
the Company describing the manner of such proposed disposition. The Management
Investor further agrees that the Management Investor will not effect such
proposed disposition until either (A) the Management Investor has provided to
the Company, if so requested by the Company, an opinion of counsel reasonably
satisfactory in form and substance to the Company that such proposed disposition
is exempt from registration under the Act and any applicable state securities
laws or (B) a registration statement under the Act covering such proposed
disposition has been filed by the Company under the Act and has become effective
and compliance with applicable state securities laws has been effected.
(iii) The Management Investor acknowledges that no
trading market for the Common Stock exists currently or is expected to exist at
any time in the foreseeable future and that, as a result, the Management
Investor may be unable to sell any of the Common Stock acquired pursuant to the
Employment Agreement for an indefinite period. Further, the Company has no
obligation to register any of the Common Stock, except as expressly provided in
Section 7 of this Agreement.
(iv) THE MANAGEMENT INVESTOR ACKNOWLEDGES AND AGREES
THAT NOTHING HEREIN, INCLUDING THE OPPORTUNITY TO MAKE ANY EQUITY INVESTMENT IN
THE COMPANY, SHALL BE DEEMED TO CREATE ANY IMPLICATION CONCERNING THE ADEQUACY
OF THE MANAGEMENT INVESTOR'S SERVICES TO ANY OF THE COMPANY OR ITS SUBSIDIARIES
OR SHALL BE CONSTRUED AS AN AGREEMENT BY
2
<PAGE> 3
THE COMPANY OR ITS SUBSIDIARIES, EXPRESS OR IMPLIED, TO EMPLOY THE MANAGEMENT
INVESTOR OR CONTRACT FOR THE MANAGEMENT INVESTOR'S SERVICES, TO RESTRICT THE
RIGHT OF THE COMPANY OR ITS SUBSIDIARIES TO DISCHARGE THE MANAGEMENT INVESTOR OR
CEASE CONTRACTING FOR THE MANAGEMENT INVESTOR'S SERVICES OR TO MODIFY, EXTEND OR
OTHERWISE AFFECT IN ANY MANNER WHATSOEVER THE TERMS OF ANY EMPLOYMENT AGREEMENT
OR CONTRACT FOR SERVICES WHICH MAY EXIST BETWEEN THE MANAGEMENT INVESTOR AND THE
COMPANY OR ITS SUBSIDIARIES.
2. Legend on Certificates.
Each stock certificate issued to the Management Investor, if
any, representing Common Stock issued pursuant to the Employment Agreement and
each stock certificate issued to GEI, if any, representing Common Stock shall
bear the following (or substantially equivalent) legends on the face or reverse
side thereof:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT COVERING SUCH SECURITIES, THE SALE IS
MADE IN ACCORDANCE WITH RULE 144 OR ANY SUCCESSOR RULE UNDER
THE ACT OR LIBERTY GROUP PUBLISHING, INC. (THE "COMPANY")
RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A MANAGEMENT STOCKHOLDERS AGREEMENT DATED AS OF JANUARY 27,
1998, BETWEEN THE PURCHASER PARTY THERETO AND THE COMPANY, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY,
AND THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED OR OTHERWISE DISPOSED OF UNLESS
SUCH TRANSFER, SALE, ASSIGNMENT OR OTHER DISPOSITION COMPLIES
WITH THE PROVISIONS OF SUCH AGREEMENT.
Any stock certificate issued at any time in exchange or substitution for any
certificates bearing such legends (except a new certificate issued upon the
completion of a public distribution of Common Stock represented thereby) shall
also bear such (or substantially equivalent) legends, unless the Common Stock
represented by such certificate is no longer subject to the provisions of this
Agreement and, in the opinion of counsel for the Company, the Common Stock
represented thereby need no longer be subject to restrictions pursuant to the
Act or applicable state securities law. The
3
<PAGE> 4
Company shall not be required to transfer on its books any certificate for
Common Stock in violation of the provisions of this Agreement.
3. Transfer of Stock.
(a) Transfer Procedure; Right of First Refusal. The Management
Investor may sell, pledge, give, bequeath, transfer, assign, encumber or dispose
of (a "transfer") any Common Stock (or any interest therein) acquired pursuant
to the Employment Agreement to any independent party unrelated to the Management
Investor (the "Outside Party"); provided, however, that each such Outside Party
shall first (i) execute a written consent in form and substance satisfactory to
the Company to be bound by all of the provisions of this Agreement and (ii) give
a duplicate original of such consent to the Company.
(b) Transfer to Related Transferees. The Management Investor
may transfer the Management Investor's Common Stock without restriction to the
Management Investor's Related Transferees (as defined below) provided that each
such Related Transferee shall first (i) execute a written consent in form and
substance satisfactory to the Company to be bound by all of the provisions of
this Agreement and (ii) give a duplicate original of such consent to the
Company. The "Related Transferees" of the Management Investor shall consist of
the Management Investor's spouse, the Management Investor's adult lineal
descendants, the adult spouses of such lineal descendants, trusts solely for the
benefit of the Management Investor's spouse or the Management Investor's minor
or adult lineal descendants, corporations, partnerships or limited liability
companies the sole equity owners of which are the Management Investor, the
Management Investor's spouse or the Management Investor's minor or adult lineal
descendants, and, in the event of death or incapacity, the Management Investor's
personal representatives (in their capacities as such), estate and named
beneficiaries. In the event of any transfer by the Management Investor to his
Related Transferees of all or any part of the Management Investor's Common Stock
(or in the event of any subsequent transfer by any such Related Transferee to
another Related Transferee of the Management Investor), such Related Transferees
shall receive and hold said Common Stock subject to the terms of this Agreement
and the rights and obligations hereunder of the Management Investor from whom
such Common Stock was originally transferred as though said Common Stock was
still owned by the Management Investor, and such Related Transferees shall be
deemed Management Investors for the purposes of this Agreement (except as stated
in Sections 13(b) and (c) hereof).
4. Company "Call" Option.
(a) The provisions of Section 5.1(b), (c), (d), (e), (f) of
the Employment Agreement and the defined terms contained in the Employment
Agreement that are used in such provisions are incorporated herein by reference
as if such provisions were set forth in full herein.
(b) If the Company does not elect to exercise its option set
forth in paragraph (a) of this Section 4, the Company shall give written notice
that it is not so electing to GEI within the
4
<PAGE> 5
time periods set forth in paragraph (a) of this Section 4 for the giving of
notice. Upon receipt of such notice from the Company, GEI shall have the option,
exercisable by written notice (a "GEI Purchase Notice") delivered to the
Management Investor (or, in the case of a deceased Management Investor, the
Management Investor's personal representative) within the time periods set forth
in paragraph (a) of this Section 4 for the giving of notice, to purchase from
the Management Investor (and the Related Transferees, if any, of the Management
Investor or, in the case of a deceased or incapacitated Management Investor, his
personal representative (the "Seller" ) (and, upon the giving of the GEI
Purchase Notice, GEI shall be obligated to purchase and the Seller shall be
obligated to sell) all, or any lesser portion indicated in the GEI Purchase
Notice, of the Common Stock held by the Seller at the per share price set forth
in paragraph (a) of this Section 4.
(c) In the event the Company has elected to purchase shares of
Common Stock pursuant to this Section 4 but, as of the proposed closing of such
purchase, such purchase by the Company is prohibited by law or would cause a
default under the terms of any indenture or loan agreement or other instrument
to which the Company or any of its subsidiaries may be a party, the obligations
of the Seller (with respect to the Company) and the Company pursuant to this
Section 4 shall be foregone forever and no such default would be caused;
provided, however, that in such event, if GEI so elects and no violation of law
would be caused and no default under the terms of any indenture or loan
agreement or other instrument to which the Company or any of its subsidiaries
may be a party would result, the Company shall transfer its obligations under
this Section 4 to GEI or to a subsidiary, in which case GEI or the subsidiary
(as the case may be) and the Management Investor (and the Related Transferees,
if any, of the Management Investor) shall be obligated to complete the purchase
of shares of Common Stock pursuant to this Section 4. In the event that pursuant
to GEI's election the Company has transferred its obligations under this Section
4 to GEI and a purchase of shares of Common Stock by GEI pursuant to this
Section 4 is prohibited by law or would cause a default under the terms of any
indenture or loan agreement or other instrument to which GEI may be a party, the
obligations of GEI pursuant to this Section 4 shall be foregone forever and no
such default shall be caused.
5. Purchase Price, Closing and Terms of Payment for "Call" Sales.
(a) The provisions of Sections 5.1(c), (d) and (e) of the
Employment Agreement and the defined terms contained in the Employment Agreement
that are used in such provisions are incorporated herein by reference as if such
provisions were set forth in full herein with such adjustments and modifications
necessary such that defined terms in the Employment Agreement will have the
corresponding meaning under this Agreement.
(b) The closing for all purchases and sales of Common Stock
provided for in Section 4 hereof shall be at the principal executive offices of
the Company at 10:30 a.m., Central Standard Time, on the sixtieth day after the
giving of the applicable notice set forth in paragraph (a) above or the GEI
Purchase Notice; provided, however, that if the Management Investor (or a
Related Transferee) who has become obligated to sell shares of Common Stock
hereunder is deceased or incapacitated on the closing date and such deceased
person's personal representative shall not have been appointed and qualified by
such date, then the closing shall be postponed until the tenth day
5
<PAGE> 6
after the appointment and qualification of such personal representative. If the
aforesaid closing date falls on a day which is not a business day, then the
closing shall be held on the next succeeding business day.
(c) The purchase price for the purchase and sale of Common
Stock pursuant to the provisions hereof shall be paid in cash, by certified or
by official bank check.
(d) The Seller or Sellers of shares of Common Stock sold
pursuant to Section 4 hereof, if such shares are represented by one or more
certificates issued by the Company, shall cause such certificated shares to be
delivered to the Company at the closing free and clear of all liens, charges or
encumbrances of any kind, other than restrictions set forth in this Agreement.
Such Seller or Sellers shall take all actions as the Company shall request as
necessary to vest in the Company at such closing all shares sold pursuant to
Section 4 hereof, whether in certificated or uncertificated form, free and clear
of all liens, charges and encumbrances incurred, voluntarily or involuntarily,
by or through Seller, other than restrictions set forth in this Agreement. At
each closing pursuant to Section 4, the Company shall deliver to the Seller
reasonable assurances to the effect that the Company's or a subsidiary's
purchase of shares thereat has been duly and validly authorized and complies
with applicable state securities laws.
6. Termination and Lapse of Rights and Restrictions; Application to
Other Stock.
(a) The provisions of Sections 1(b) (ii), 3, 4, 7, 9 and 10 of
this Agreement shall lapse and be of no further effect with respect to shares of
Common Stock upon the commencement of the public trading of the Company's Common
Stock (or any capital stock exchanged for or distributed upon such Common Stock
as described in paragraph (b) of this Section 6) on any national securities
exchange, on the NASDAQ National Market System or on the NASDAQ "Small Cap"
Issues System. The provisions of Section 3 shall lapse and be of no further
effect with respect to shares of Common Stock sold in a public distribution
pursuant to an effective registration statement under the Act or pursuant to the
provisions of Rule 144 under the Act.
(b) The provisions of Section 7 of this Agreement shall lapse
and be of no further effect with respect to shares of Common Stock transferred
by the Management Investor, except for transfers pursuant to Section 3(b)
hereof.
(c) In the event any capital stock of the Company or any other
corporation shall be distributed on, with respect to, or in exchange for shares
of Common Stock of the Company as a stock dividend, stock split, spin-off,
reclassification or recapitalization in connection with any merger or
reorganization, the restrictions, rights and options set forth in Sections 3, 4,
7, 8 and 9 shall apply with respect to such other capital stock to the same
extent as they are, or would have been applicable, to the Common Stock acquired
hereunder on, or with respect to, which such other capital stock was
distributed.
6
<PAGE> 7
7. Right of First Refusal - New Securities.
(a) The Management Investor shall have a right of first refusal to
purchase his proportionate number, or any lesser number, of any New Securities
which the Company may, from time to time after the date hereof, propose to sell
and issue. For purposes of this Section 7, the Management Investor's
"proportionate number" means the product obtained by multiplying (i) the number
of New Securities proposed to be sold and issued by (ii) the numerator of which
will be the number of shares of Common Stock owned by the Management Investor
(including shares owned by the Management Investor's Related Transferees) and
the denominator of which will be the total number of shares of Common Stock
owned by all holders of Common Stock.
(b) In the event the Company proposes to undertake an issuance of New
Securities, it will give the Management Investor written notice of its intention
to do so, describing the New Securities and the price and terms upon which the
Company proposes to issue the same, and setting forth the number of shares which
the Management Investor is entitled to purchase and the aggregate purchase price
therefor. The Management Investor will have 10 business days from the date of
receipt of any notice to agree to purchase up to his proportionate number of
such New Securities, for the price and upon the terms specified in the notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.
(c) In the event the Management Investor fails to exercise such right
of first refusal within said 10 business-day period, the Company will have 180
days thereafter to sell the New Securities as to which the Management Investor's
right was not exercised, at a price and upon such other terms no more favorable
to the purchasers thereof than those specified in the Company's notice. In the
event the Company has not sold such New Securities within said 180-day period,
the Company will not thereafter issue or sell any New Securities without first
offering such New Securities to the Management Investor in the manner provided
above.
(d) For purposes of this Section 7, "New Securities" means (i) any
common stock or common stock equivalents of the Company, including, but not
limited to, any common stock appreciation, phantom stock or profit participation
rights, whether now authorized or not, (ii) any rights, options, or warrants to
purchase any such common stock or common stock equivalents, or to purchase any
securities of any type whatsoever that are, or may become, convertible into any
such common stock or common stock equivalents and (iii) any securities of any
type whatsoever that are, or may become, convertible into common stock or common
stock equivalents; provided, however, that "New Securities" will not include (A)
securities offered to the public pursuant to a registration statement declared
effective by the Commission, (B) stock or options issued to employees and
directors of the Company and the issuance of stock upon exercise of such options
in accordance with their terms, and (C) securities issued in exchange for assets
of another person or entity (other than cash or marketable securities),
including securities issued in exchange for securities of another person or
entity whereby the Company ends up owning, by merger or otherwise, greater than
50% of the voting power of such person or entity. For the purposes of this
Section 7, a "common stock equivalent" means capital stock of the Company that
participates on a parity with the Common
7
<PAGE> 8
Stock with respect to dividends and distributions on liquidation. It is
expressly agreed that the preferred stock of the Company issued on the date
hereof does not constitute common stock equivalents.
8. Piggyback Registration Rights.
(a) As used in this Agreement, the term "Holder" means the
Management Investor, a Related Transferee of the Management Investor or an
Outside Party.
(b) Subject to the provisions herein, if the Company at any
time proposes to effect a public offering of Common Stock registered under the
Act (other than registration (x) on Forms S-4 or S-8 or any successor forms
thereto or (y) filed in connection with an exchange offer), the Company shall
give written notice of the proposed registration to each Holder at least thirty
(30) days prior to the filing thereof, and each Holder shall have the right to
request that all or any part of its shares of Common Stock be included in such
registration by giving written notice to the Company within fifteen (15) days
after the giving of such notice by the Company (any Holder giving the Company a
notice requesting that shares of Common Stock owned by it be included in such
proposed registration being hereinafter referred to in this Section 8 as a
"Registering Holder"); provided, however, that, the Holder shall not be entitled
to request that all or any part of its shares of Common Stock be included in an
initial public offering of Common Stock registered under the Act, unless all or
any part of GEI's Common Stock is included in such registration statement;
provided, further, however, that, (i) if the registration is in whole or in part
an underwritten primary registration on behalf of the Company and the managing
underwriters of such offering determine that the aggregate amount of securities
of the Company which all Registering Holders and all other security holders of
the Company, pursuant to contractual rights to participate in such registration
("Other Holder"), propose to include in such registration statement exceeds the
maximum amount of securities that should be included therein, the Company will
include in such registration, first, the shares which the Company proposes to
sell and, second, the shares of such Registering Holders and other securities to
be sold for the account of Other Holders, pro rata among all such Registering
Holders and Other Holders, taken together, on the basis of the relative equity
interests in the Company of all Registering Holders and Other Holders who have
requested that securities owned by them be so included (it being agreed and
understood, however, that such underwriters shall have the right to eliminate
entirely the participation in such registration of all Registering Holders and
Other Holders), and (ii) if the registration is an underwritten secondary
registration on behalf of any of the Other Holders pursuant to demand
registration rights and the managing underwriters determine that the aggregate
amount of securities which all Registering Holders and all Other Holders propose
to include in such registration exceeds the maximum amount of securities that
should be included therein, (a) if GEI does not have the right to participate in
such demand registration pro rata with those demanding registration, the Company
will include in such registration, first, the securities to be sold for the
account of the Other Holders demanding registration (but only to the extent such
Other Holders are entitled to demand inclusion thereof), second, any securities
to be sold for the account of the Company, and, third, the shares of such
Registering Holders and other securities to be sold for the account of the Other
Holders electing to include (but not being entitled to demand inclusion of)
securities in such registration, pro rata among
8
<PAGE> 9
all such Registering Holders and Other Holders, taken together, on the basis of
relative equity interests in the Company of all such Registering Holders and
such Other Holders who have requested that securities owned by them be included
(it being agreed and understood, however, that such underwriters shall have the
right to eliminate entirely the participation therein of all such Registering
Holders and Other Holders not entitled to demand inclusion of securities in such
registration), and (b) if GEI has the right to demand such registration or to
participate in such demand registration pro rata with those demanding such
registration, the Company will include in such registration, first, the
securities to be sold for the account of the Other Holders demanding
registration (but only to the extent such Other Holders are entitled to demand
inclusion thereof), the securities to be sold for the account of GEI and the
securities to be sold for the account of the Registering Holders pro rata on the
basis of their relative equity interests in the Company, second, any securities
to be sold for the account of the Company, and, third, the shares to be sold for
the account of the Other Holders electing to include (but not being entitled to
demand inclusion of) securities in such registration, pro rata among all such
Registering Holders and Other Holders, taken together, on the basis of relative
equity interests in the Company of all such Registering Holders and such Other
Holders who have requested that securities owned by them be included (it being
agreed and understood, however, that such underwriters shall have the right to
eliminate entirely the participation therein of all such Registering Holders and
Other Holders not entitled to demand inclusion of securities in such
registration). Shares of Common Stock proposed to be registered and sold for the
account of any Registering Holder shall be sold to prospective underwriters
selected or approved by the Company on the terms and subject to the conditions
of one or more underwriting agreements negotiated between the Company and/or
Other Holders demanding registration and the prospective underwriters. For the
purposes hereof, an "Affiliate" of any person or entity means any other person
or entity controlling, controlled by or under common control with such person or
entity; provided, however, that none of the Management Stockholders (defined
below) or any of their Affiliates shall be deemed to be an Affiliate of GEI.
"Management Stockholders" means, collectively, all holders of capital stock or
other securities issued by the Company who are also employees of the Company or
its subsidiaries.
In the event the Company proposes to register any of its Common Stock
under the Act on Form S-8 (or any successor thereto), if the Company determines
that it is permissible to do so and will not result in material added costs to
the Company from such registration, the Company shall, at a Registering Holder's
request, include in such registration such Registering Holder's shares of Common
Stock.
The Registering Holders shall be permitted to withdraw all or a part of
the shares of Common Stock held by such Registering Holders which were to be
included in such registration at any time prior to the effective date of such
registration. The Company shall not be required to maintain the effectiveness of
the registration statement for such registration beyond the earlier to occur of
120 days after the effective date thereof or consummation of the distribution by
the Registering Holders included in such registration statement. The Company may
withdraw any registration statement at any time before it becomes effective, or
postpone the offering of securities, without obligation or liability to any
Holder.
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<PAGE> 10
(c) The registration rights sets forth in this Section 8 shall
terminate and be of no further effect with respect to the shares of Common Stock
held by a Holder after such shares have been sold to the public pursuant to a
registration statement under the Act or pursuant to the provisions of Rule 144
under the Act.
(d) In connection with any registration of shares under the
Act pursuant to this Section 8, the Company will furnish each Holder whose
shares of Common Stock are registered thereunder with a copy of the registration
statement and all amendments thereto and will supply each such Holder with
copies of any prospectus included therein (including a preliminary prospectus
and all amendments and supplements thereto), in such quantities as may be
reasonably necessary for the purpose of the proposed sale or distribution
covered by such registration. The Company shall not, however, be required to
maintain the registration statement and to supply copies of a prospectus for a
period beyond 120 days after the effective date of such registration statement,
at the end of such period, the Company may deregister any shares of Common Stock
covered by such registration statement and not then sold or distributed. In
connection with any such registration of shares of Common Stock, the Company
will, at the request of the managing underwriter with respect thereto, use its
best efforts to qualify such registered shares for sale under the securities
laws of such state as is reasonably required to permit the distribution of such
registered shares; provided, however, that the Company shall not be required in
connection therewith or as condition thereof to qualify as a foreign corporation
or to execute a general consent to service of process in any jurisdiction or
become subject to taxation in any jurisdiction.
(e) In connection with any registration of shares under the
Act pursuant to this Section 8, the Company will cause the shares of Common
Stock registered pursuant to such registration to be listed on the principal
securities exchange or automated quotation system on which similar securities
issued by the Company are then listed or quoted (if any), if the listing or
quotation of such shares is then permitted under the rules of such exchange or
automated quotation system.
(f) Notwithstanding any other provision of this Section 8,
Holder agrees that in the event of an underwritten public offering of Common
Stock for the account of the Company, such Holder will not offer for public sale
(other than as part of such underwritten public offering) any shares of Common
Stock during the ten (10) days prior to, and such number of days (not in excess
of 180) after, the effective date of the registration statement in connection
with such pubic offering as the underwriters may request in writing, without the
consent of the underwriters; provided, however, that, in the case of death of a
Holder, if consented to by the underwriters, a Holder shall be permitted to
offer for public sale prior to the expiration of such period shares of Common
Stock reasonably necessary to generate funds of the payment of estate taxes.
(g) Except as otherwise required by state securities laws or
the rules and regulations promulgated thereunder, all expenses, disbursements
and fees incurred by the Company in connection with carrying out its obligations
under this Section 8, including, but not limited to , listing the shares
pursuant to paragraph (e) above, shall be borne by the Company; provided,
however, that each Holder shall pay (i) all costs and expenses of counsel for
such Holder, if such counsel is not also counsel for the Company, (ii) all
underwriting discounts, commissions and
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<PAGE> 11
expenses and all transfer taxes with respect to the shares of Common Stock sold
by such Holder and (iii) all other expenses incurred by such Holder and
incidental to the sale and delivery of the shares of Common Stock to be sold by
such Holder.
(h) It shall be a condition of each Holder's rights hereunder
to have shares of Common Stock owned by such Holder registered that:
(i) such Holder shall cooperate with the Company by
supplying such information and executing such customary documents
relating to such Holder or the securities of the Company owned by such
Holder in connection with such registration as the Company or the
underwriters may reasonably request;
(ii) such Holder shall enter into any undertakings
and take such other action relating to the conduct of the proposed
offering which the Company or the underwriters may reasonably request
as being necessary to insure compliance with federal and state
securities laws and the rules or other requirements of the National
Association of Securities Dealers, Inc. or which the Company or the
underwriters may reasonably request to otherwise effectuate the
offering; and
(iii) such Holder shall execute and deliver an
agreement to indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed the registration
statement, any underwriter (as defined in the Act) and each person, if
any who controls the Company or such underwriter within the meaning of
the Act, against such losses, claims, damages or liabilities (including
reimbursement for reasonable legal and other expenses) to which the
Company or any such director, officer, underwriter or controlling
person may become subject under the Act or otherwise, in such manner as
is customary for registration of the type then proposed and, in any
event, equivalent in scope to indemnities given by the Company in
connection with such registration, but only with respect to written
information furnished by such Holder in his or her capacity as a
selling shareholder in connection with such registration; provided,
however, that such Holder's aggregate liability thereunder shall be
limited to the net proceeds received from the sale of such Holder's
Common Stock in such registration.
(i) In the event of any registration under the Act of any
shares of Common Stock pursuant to this Section 8, the Company hereby agrees to
indemnify and hold harmless each Holder disposing of such shares against such
losses, claims, damages or liabilities (including reimbursement for legal and
other expenses) to which such Holder may become subject under the Act or
otherwise, in such manner as is customary for registrations of the type then
proposed, but not with respect to written information furnished by such Holder
in his capacity as a selling shareholder in connection with such registration.
To the extent the indemnification provided for in this Section 8(i) is
unavailable to an indemnified party, or is insufficient in respect of any
losses, claims, damages or liabilities referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative
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<PAGE> 12
benefits received by the Company, on the one hand, and the Holder, on the other
hand, from the registration of such shares of Common Stock or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company, on
the one hand, and the Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations.
(j) At all times after the Company has filed a registration
statement with respect to its Common Stock with the Commission pursuant to the
requirements of either the Act or the Securities Exchange Act of 1934 (the
"Securities Exchange Act") and such registration has become effective, the
Company will file in a timely manner all reports and other documents required to
be filed by it under the Act and the Securities Exchange Act and the rules and
regulations adopted by the Commission thereunder, all to the extent required to
enable such Holder to sell Common Stock pursuant to Rule 144 under the Act (as
such rule may be amended from time to time) or any similar rule or regulation
hereafter adopted by the Commission. Upon request, the Company shall deliver to
any Holder a written statement as to whether it has complied with such
requirements.
9. Tag-Along Rights.
(a) Right to Participate in Sale. If GEI enters into an
agreement to transfer, sell or otherwise dispose of (such transfer, sale or
other disposition being referred to as a "Tag-Along Sale") shares of Common
Stock of the Company held on the date hereof, then GEI shall afford the Holder
the opportunity to participate proportionately in such Tag-Along Sale in
accordance with this Section 9. The Holder shall have the right, but not the
obligation (except as provided in Section 10), to participate in such Tag-Along
Sale. The number of shares of Common Stock that the Holder will be entitled to
include in such Tag-Along Sale (the "Management Investor's Allotment") shall be
determined by multiplying (i) the number of shares of Common Stock held by the
Holder on the Tag-Along Sale Date (as defined below), by (ii) a fraction, the
numerator or which shall equal the total number of shares of Common Stock
proposed to be sold or otherwise disposed of pursuant to the Tag-Along Sale and
the denominator of which shall equal the total number of shares of Common Stock
that are beneficially owned by (a) GEI and (b) any holder of shares of Common
Stock (including the Holder) that has the right to "tag-along" in the Tag-Along
Sale on the Tag-Along Sale Date. The "Tag Along Notice Date" shall be the date
that the Tag-Along Sale Notice (as defined below) is first delivered, mailed or
sent by courier, Telex or telecopy to the Holder.
(b) Limitation on Management Investor Representations;
Indemnity. Any sales of shares of Common Stock by a Holder as a result of the
"Tag-Along Rights" granted to the Holder pursuant to this Agreement shall be on
the same terms and conditions as the proposed Tag-Along Sale by GEI; provided,
however, that in negotiating a Tag-Along Sale, GEI shall use its reasonable,
good faith efforts to provide (i) that the only representation and warranty
which the Holder shall be required to make in connection with any transfer is a
warranty with respect to the Holder's own ability to convey title thereto free
and clear of liens, encumbrances or adverse claims and (ii) that the warranty
made in connection with any transfer is the several liability of the Holder (and
not joint
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with any other person) and that such liability is limited to the amount of
proceeds actually received by such Holder.
(c) Sale Notice. GEI shall provide the Holder with written
notice (the "Tag- Along Sale Notice") not more than sixty (60) nor less than
twenty (20) days prior to the proposed date of the Tag-Along Sale (the
"Tag-Along Sale Date"). Each Tag-Along Sale Notice shall set forth: (i) the name
and address of each proposed transferee or purchaser of shares in the Tag-Along
Sale; (ii) the number of shares proposed to be transferred or sold by GEI; (iii)
the proposed amount and form of consideration to be paid for such shares and the
terms and conditions of payment offered by each proposed transferee or
purchaser; (iv) the aggregate number of shares of Common Stock held of record as
of the close of business on the day immediately preceding the Tag-Along Notice
Date by GEI; (v) the Management Investor's Allotment assuming the Holder elected
to sell the maximum number of shares of Common Stock possible; (vi) confirmation
that the proposed purchaser or transferee has been informed of the "Tag-Along
Rights" provided for herein and has agreed to purchase shares of Common Stock
(including Vested Shares) in accordance with the terms hereof and (vii) the
Tag-Along Sale Date.
(d) Tag-Along Notice. If the Holder wishes to participate in
the Tag-Along Sale, the Holder shall provide written notice (the "Tag-Along
Notice") to GEI no less than ten (10) days prior to the Tag-Along Sale Date. The
Tag-Along Notice shall set forth the number of shares of Common Stock that such
Holder elects to include in the Tag-Along Sale, which shall not exceed the
Management Investor's Allotment. The Tag-Along Notice shall also specify the
aggregate number of additional shares of Common Stock owned of record as of the
close of business on the day immediately preceding the Tag-Along Notice Date by
such Holder, if any, which such Holder desires also to include in the Tag-Along
Sale ("Additional Shares") in the event there is any under- subscription for the
entire amount of all Management Investors' Allotments of all shares that may be
included by persons having, and pursuant to, tag-along rights relative to GEI
(collectively, the "Management Investors' Allotments"). In the event there is an
under-subscription by all holders of Management Investors' Allotments for the
entire amount of the Management Investors' Allotments, GEI shall apportion the
unsubscribed Management Investors' Allotments to such holders whose tag- along
apportionment shall be on a pro rata basis among such holders in accordance with
the number of Additional Shares specified by all such holders in their Tag-Along
Notice. The Tag-Along Notices given by the Holder shall constitute the Holder's
binding agreement to sell such shares of Common Stock on the terms and
conditions applicable to the Tag-Along Sale, subjects to the provisions of
Section 9 (b) above; provided, however, that in the event that there is any
material change in the terms and conditions of such Tag-Along Sale applicable to
the Holder after the Holder gives the Tag-Along Notice, then, notwithstanding
anything herein to the contrary, the Holder shall have the right to withdraw
from participation in the Tag-Along Sale with respect to all of its shares of
Common Stock affected thereby. If the purchaser does not consummate the purchase
of all of such shares on the same terms and conditions applicable to GEI (except
as otherwise provided herein) then GEI shall not consummate the Tag-Along Sale
of any of its shares to such transferee or purchaser, unless the shares of the
Holder and GEI are reduced or limited pro rata in proportion to the respective
number of shares actually sold in any such Tag-Along Sale.
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<PAGE> 14
If a Tag-Along Notice is not received by GEI from the Holder prior to
the ten-day period specified above, GEI shall have the right to sell or
otherwise transfer the number of shares specified in the Tag-Along Notice to the
proposed purchaser or transferee without any participation by such Holder, but
only on terms and conditions which are no more favorable in any material respect
to GEI than as stated in the Tag-Along Notice to the Holder and only if such
Tag-Along Sale occurs on a date within sixty (60) business days of the Tag-Along
Sale Date.
(e) Authority to Record Transfer/Delivery of Certificates. On
the Tag-Along Sale Date, the Holder, if a participant therein, authorizes the
Company (or the Company's transfer agent, if any) to record in the Company's
books and records the transfer of all of the Holder's shares of Common Stock
which are not represented by one or more certificates issued by the Company,
from the Holder to the purchaser in the Tag-Along Sale. On the Tag-Along Sale
Date, the Holder, if a participant therein, shall also deliver all certificates,
if any, issued by the Company which represent shares of the Company's Common
Stock, duly endorsed for transfer with signatures guaranteed, to the purchaser
in the Tag-Along Sale, in the manner and at the address indicated in the
Tag-Along Notice against delivery of the purchase price for such shares;
provided, however, that in the event the Company has possession of any such
certificate(s) pursuant to this Agreement, upon the written request of the
Holder at least five (5) business days in advance of the Tag-Along Sale Date,
the Company shall deliver such certificate(s) to the purchaser at the time and
in the manner described above.
(f) Exempt Transfers. The provisions of this Section 9 shall
not apply to (i) any bona fide underwritten offering of Common Stock pursuant to
an effective registration statement under the Act; (ii) any transfer, sale or
other disposition by GEI to one of its Affiliates (except that (A) prior to any
such disposition, the party receiving such shares of Common Stock shall agree in
writing to be bound by the terms of this Agreement applicable to GEI as if such
transferee were an original party hereto and (B) any such shares of Common Stock
shall continue to be subject to this Agreement); (iii) any redemption by the
Company of its Common Stock or (iv) any GEI Distribution (as defined in Section
14).
10. Drag-Along Sales.
(a) Right to Require Sale. Notwithstanding any other provision
hereof, if GEI agrees to sell 100% of the shares of Common Stock held by it to a
third person who is not an affiliate of GEI (a "Third Party") or if GEI agrees
to sell a portion of its shares pursuant to a transaction in which more than 50%
of the total Common Stock of the Company will be sold to a Third Party (either
of such sales, a "Drag-Along Sale"), then, upon the demand of GEI, each Holder
hereby agrees to sell to such Third Party the same percentage of the total
number of shares of Common Stock held by such Holder on the date of the
Drag-Along Notice, as the number of shares GEI is selling in the Drag-Along
Sales bears to the total number of shares held be GEI as of the date of the
Drag-Along Notice (the "Sale Percentage"), at the same price and on the same
terms and conditions as GEI has agreed to with such Third Party; provided,
however, that GEI shall use its reasonable, good faith efforts to provide that
the only representation and warranty which the Holder shall be required to make
in connection with the Drag-Along Sale is a representation and warranty with
14
<PAGE> 15
respect to the Holder's own ownership of the shares of Common Stock to be sold
by it and its ability to convey title thereto free and clear of liens,
encumbrances or adverse claims; provided, further, however, that the Holder
shall not be obligated to participate in any Drag-Along Sale unless the
liability of such Holder with respect to any representation and warranty made in
connection with the Drag-Along Sale is the several liability of such Holder (and
not joint with any other person) and that such liability is limited to the
amount of proceeds actually received by such Holder in the Drag- Along Sale;
provided further, that the Holder shall not be obligated to participate in any
Drag-Along Sale unless the Holder is provided an opinion of counsel to the
effect that the Drag-Along Sale is not in violation of applicable federal or
state securities or other laws or, if the Holder is not provided with an opinion
with respect to any matters contemplated by this proviso, GEI shall (in addition
to the indemnification contemplated below) indemnify the Holder for any
violation. If the Drag-Along Sale is in the form of a merger transaction, the
Holder agrees to vote his or her shares of Common Stock in favor of such merger
and not to exercise any rights of appraisal or dissent afforded under applicable
law.
(b) Drag-Along Notice. Prior to making any Drag-Along Sale, if
GEI elects to exercise the option described in this Section 9, GEI shall provide
the Holder with written notice (the "Drag-Along Notice") not more than sixty
(60) nor less than twenty (20) days prior to the proposed date of the Drag-Along
Sale (the "Drag-Along Sale Date"). The Drag-Along Notice shall set forth: (i)
the name and address of the Third Party; (ii) the proposed amount and form of
consideration to be paid per share and the terms and conditions of payment
offered by the Third Party; (iii) the aggregate number of shares of Common Stock
held by GEI as of the date that the Drag-Along Notice is first delivered, mailed
or sent by courier, telex or telecopy to the Holder; (iv) the sale percentage;
(v) the Drag-Along Sale Date and (vi) confirmation that the proposed Third Party
has agreed to purchase the Management Investor's shares of Common Stock in
accordance with the terms hereof.
(c) Authority to Record Transfer/Delivery of Certificates. The
Company (or the Company's transfer agent, if any) shall record in the Company's
books and records the transfer of the Sale Percentage of the Holder's shares of
Common Stock which is not represented by one or more certificates issued by the
Company, from the Holder to the Third Party, on the Drag-Along Sale Date. If any
part of the Sale Percentage of the Holder's shares of Common Stock is
represented by one or more certificates issued by the Company, the Holder shall
deliver such certificate or certificates for such shares, duly endorsed for
transfer with signatures guaranteed, to such Third Party on the Drag-Along Sale
Date in the manner and at the address indicated in the Drag-Along Notice against
delivery of the purchase price for the shares; provided, however, that in the
event the Company has possession of any such certificate(s) pursuant to this
Agreement, upon the written request of the Holder at least five (5) business
days in advance of the Drag-Along Sale Date, the Company shall deliver such
certificate(s) to the purchaser at the time and in the manner described above.
(d) Consideration. The provisions of this Section 9 shall
apply regardless of the form of consideration received in the Drag-Along Sale;
provided, however, that each Holder may require that it receive its
consideration in the form of cash, cash equivalents or marketable securities of
equal value to the consideration that it would otherwise receive in the
Drag-Along Sale.
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<PAGE> 16
11. Notices. All notices or other communications under this Agreement
shall be given in writing and shall be deemed duly given and received on the
third full business day following the day of the mailing thereof by registered
or certified mail or when delivered personally or sent by facsimile transmission
as follows:
(a) if to the Company, at its principal executive offices at the
time of the giving of such notice, or at such other place as the Company shall
have designated by notice as herein provided to the Management Investor,
Attention: Gregory Annick;
(b) if to the Management Investor, at the address of the
Management Investor as it appears in Annex A or at such other place as the
Management Investor shall have designated by notice as herein provided to the
Company;
(c) if to GEI, at its principal executive offices at the time
of the giving of such notice, or at such other place as GEI shall have
designated by notice as herein provided to the Company.
12. Specific Performance. Due to the fact that the securities of the
Company cannot be readily purchased or sold in the open market and for other
reasons, the parties will be irreparably damaged in the event that this
Agreement is not specifically enforced. In the event of a breach or threatened
breach of the terms, covenants and/or conditions of this Agreement by any of the
parties hereto, the other parties shall, in addition to all other remedies, be
entitled (without any bond or other security being required) to a temporary
and/or permanent injunction, without showing any actual damage or that monetary
damages would not provide an adequate remedy, and/or a decree for specific
performance, in accordance with the provisions hereof.
13. Miscellaneous.
(a) Except as provided in the last sentence of this paragraph,
this Agreement, the Employment Agreement and the Waiver executed by Kenneth L.
Serota, dated January 27, 1998, constitutes the entire agreement of the parties
with respect to the subject matter hereof and may not be modified or amended
except by a written agreement signed by the Company, GEI and the Management
Investor. Anything in this Agreement to the contrary notwithstanding, any
modification or amendment of this Agreement by a written agreement signed by the
Management Investor shall be valid and binding upon any and all persons or
entities who may, at any time, have or claim any rights under or pursuant to
this Agreement in respect of Common Stock acquired hereunder is subject to, and
the Company and the Management Investor agree to be bound by, all of the terms
and conditions of this Agreement.
(b) No waiver of any breach or default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed a waiver
of any subsequent breach or default of the same or similar nature. Anything in
this Agreement to the contrary notwithstanding, any waiver, consent or other
instrument under or pursuant to this Agreement signed by, or binding upon, the
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<PAGE> 17
Management Investor shall be valid and binding upon any and all persons or
entities (other than the Company) who may, at any time, have or claim any rights
under or pursuant to this Agreement in respect of the Common Stock acquired
hereunder.
(c) Except as otherwise expressly provided herein, this
Agreement shall be binding upon and inure to the benefit of the Company, its
successors and assigns and the Management Investor and the Management Investor's
heirs, personal representatives, successors and assigns; provided, however, that
nothing contained herein shall be construed as granting the Management Investor
the right to transfer any Common Stock acquired hereunder except in accordance
with this Agreement and any transferee shall hold such Common Stock having only
those rights and being subject to the restrictions provided for in this
Agreement.
(d) If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein.
(e) The provisions of this Agreement shall apply to all shares
of Common Stock acquired hereunder by the Management Investor (including the
Management Investor's Related Transferees and any Outside Parties).
(f) Except as set forth in Section 12, the provisions of
Section 7.7(b) of the Employment Agreement and the defined terms contained in
the Employment Agreement that are used in such provisions are incorporated
herein by reference as if such provision was set forth in full herein with such
adjustments and modifications necessary such that defined terms in the
Employment Agreement will have the corresponding meaning under this Agreement.
(g) The section headings contained herein are for the purposes
of convenience only and are not intended to define or limit the contents of said
sections.
(h) Each party hereto shall cooperate and shall take such
further action and shall execute and deliver such further documents as may be
reasonably requested by any other party in order to carry out the provisions and
purposes of this Agreement.
(i) The Management Investor represents that, if the Management
Investor is married, the Management Investor's spouse has signed the
Acknowledgment and Agreement of Spouse relating to the Management Investor at
the end of this Agreement.
(j) Words in the singular shall be read and construed as
though in the plural and words in the plural shall be read and construed as
though in the singular in all cases where they would so apply.
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<PAGE> 18
(k) This Agreement may be executed in one or more counterparts,
all of which taken together shall be deemed one original.
(l) Except as it relates to provisions or agreements set forth
in the Employment Agreement which shall be governed by the provisions of Section
7.2 of the Employment Agreement, the Management Investor hereby irrevocably and
unconditionally consents to the jurisdiction of any Delaware State court or
federal court of the United States sitting in the State of Delaware in any
action or proceeding relating to this Agreement and consents to service of
process in connection therewith by the delivery of notice to such Management
Investor's address set forth in this Agreement.
(m) This Agreement shall be deemed to be a contract under the
laws of the State of Delaware and for all purposes shall be construed and
enforced in accordance with the internal laws of said state without regard to
the principles of conflicts of law.
14. GEI Distributions Exempt.
It is expressly understood and agreed that GEI may distribute
to its partners or equity participants, in accordance with the terms of its
limited partnership agreement, all or any part of the shares of the Company's
capital stock or other Company securities held by it (any such distribution, a
"GEI Distribution"). Notwithstanding anything to the contrary contained in this
Agreement, any GEI distribution shall not constitute a "sale," "transfer" or
"disposition" for any purpose under this Agreement and shall be exempt in all
respects from the terms and conditions of this Agreement. As an example, and
without limiting the generality of the foregoing, it is expressly understood and
agreed that a GEI Distribution shall not constitute a Tag-Along Sale for the
purposes of Section 9 hereof. Further, it is also expressly understood and
agreed that, following a GEI Distribution (i) the shares of the Company's
capital stock or other Company securities distributed to the partners or equity
participants of GEI shall in no way be subject to this Agreement and (ii) any
partner or equity participant of GEI which receives shares of the Company's
capital stock or other Company securities pursuant to a GEI Distribution shall
not be required or deemed to become a party to this Agreement or otherwise be
subject to this Agreement.
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<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Management
Stockholders Agreement as of the first date written above.
LIBERTY GROUP PUBLISHING, INC.
By: /s/ Kenneth L. Serota
--------------------------------------
Name: Kenneth L. Serota
------------------------------------
Its: President
------------------------------------
GREEN EQUITY INVESTORS II, L.P.
By: Grand Avenue Capital Partners, L.P
By: Grand Avenue Capital Corporation,
its general partner
By: /s/ Gregory J. Annick
--------------------------------------
Name: Gregory J. Annick
------------------------------------
/s/ Kenneth L. Serota
------------------------------------------
Kenneth L. Serota
<PAGE> 20
Acknowledgment and Agreement of Spouse
The undersigned, being the spouse of the Management Investor listed on
Annex A hereto, hereby agrees to be bound by the provisions of this Agreement.
By: _______________________________
Name: _____________________________
<PAGE> 21
Annex A
I. Name and Address II. Number of Shares
of Management Investor Subject to Agreement
================================================================================
Kenneth L. Serota 3,200
1325 Sunburst Lane
Northbrook, Illinois 60062
A-1
<PAGE> 1
EXECUTION COPY
EXHIBIT 10.3
NON-COMPETITION AGREEMENT
NON-COMPETITION AGREEMENT dated as of January 27, 1998
between Liberty Group Operating, Inc., a Delaware
corporation ("CNCO"), and Hollinger International Inc., a
Delaware corporation ("Hollinger").
WHEREAS, Liberty Group Publishing, Inc. ("LGP"), Green Equity
Investors II, L.P. ("Green"), CNCO, Hollinger, APAC-90 Inc. ("APAC-90),
American Publishing (1991) Inc. ("AP-91") and APAC-95 Inc. ("APAC-95")
have entered into an Asset Purchase Agreement, dated November 21, 1997
(the "Asset Purchase Agreement") and LGP, Green, CNCO, American
Publishing Company of Illinois, Hollinger, APAC-90, AP-91 and APAC-95
have entered into an Asset Purchase Agreement, dated November 21, 1997;
WHEREAS CNCO and Hollinger are both engaged in the newspaper
business; and
WHEREAS CNCO desires that Hollinger's newspaper business not compete
with CNCO's newspaper business;
Accordingly, CNCO and Hollinger hereby agree as follows:
ARTICLE I
Definitions
1. "Affiliate" means, with respect any Person, any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person directly or indirectly,
whether through ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
2. "Closing Date" shall mean the Closing Date as defined in the Asset
Purchase Agreement.
3. "Effective Date" shall mean the Effective Date as defined in the Asset
Purchase Agreement.
<PAGE> 2
2
4. "Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivisions thereof.
5. "Publication" means any daily or weekly newspaper or other paid or free
publication having regional, local or targeted markets, including a publication
having limited or no news or editorial content such as shoppers or other "total
market coverage" publications, which in the case of any daily newspaper has a
circulation of 10,000 issues or less in any one regular distribution.
6. "Voting Stock" means stock of the class or classes pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
a corporation (irrespective of whether or not at the time stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
ARTICLE II
Non-Competition Provisions
1. Non-Competition. For a period of 5 years from the Closing Date (the
"Term"), Hollinger shall not, and shall cause each of its Affiliates not to,
directly or indirectly engage in the business of distributing, including
by means of acquisition, any Publication within any postal zip code in which
any Publication owned by CNCO on the Effective Date ("Initial Publication") is
distributed (the "Restricted Area") or providing any financing for any Person
to do any of the foregoing ("Competitive Activities"); provided, however, that
if CNCO (i) discontinues the operations of any Initial Publication or (ii)
transfers, sells, pledges, conveys or disposes of substantially all of the
assets of any Initial Publication, the Restricted Area with respect to CNCO
will no longer consist of those postal zip codes in which such Initial
Publication was distributed as of the Effective Date, unless another Initial
Publication was distributed in those same postal zip codes on the Effective
Date (it being understood that, subject to the limits set forth herein, this
covenant may be assigned to certain transferees of Initial Publications
pursuant to Section 6 hereof).
<PAGE> 3
3
Notwithstanding anything to the contrary contained in this Section, CNCO
hereby agrees that the foregoing covenant shall not be deemed breached as a
result of (i) the ownership by Hollinger or any Affiliate of Hollinger of (A)
less than an aggregate of 5% of any class of stock of a Person engaged,
directly or indirectly, in Competitive Activities; (B) less than 5% in value of
any instrument of indebtedness of a Person engaged, directly or indirectly, in
Competitive Activities; or (C) a Person which engages, directly or indirectly,
in Competitive Activities if such Competitive Activities account for less than
5% of such Person's consolidated annual revenues, (ii) any Competitive
Activities conducted by any Affiliate of Hollinger (A) which Hollinger acquired
after the Effective Date and (B) the value of which at the time of the
acquisition by Hollinger represented less than 5% of the total value of the
transaction or transactions in which Hollinger acquired the Affiliate (an
"Incidental Acquisition")(provided that after such transaction such Affiliate
does not distribute at any time during the Term a new product which would
constitute a Competitive Activity), or (iii) any incidental distribution within
the Restricted Area of any Hollinger Publication that is intended to be
distributed primarily outside the Restricted Area.
2. Consideration. Upon the execution and delivery of this Agreement, CNCO
shall pay to Hollinger, by wire transfer of immediately available funds, an
amount equal to $30,915,000 as consideration for Hollinger and its Affiliates
not engaging in any Competitive Activities.
3. Interest. Concurrently with the execution and delivery of this
Agreement, CNCO shall pay to Hollinger, by wire transfer of immediately
available funds, an amount equal to interest on $30,915,000 at a rate equal to
the 30 day Treasury bill rate in effect on December 31, 1997, for the period
from but including the Effective Date through but excluding the Closing Date.
ARTICLE III
Miscellaneous
1. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Illinois, without regard to
the conflicts of law principles of such State.
<PAGE> 4
4
2. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other party.
3. No Waiver. Any failure of any party hereto to comply with any of its
obligations or agreements or to fulfill any conditions herein contained may be
waived only by written waiver from the other party. No failure by any party
hereto to exercise, and no dely in exercising, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right hereunder by any party preclude any other or future exercise of that
right or any other right hereunder by that party.
4. Notices. All notices or other communications required or permitted to
be given hereunder shall be in writing and shall be delivered by hand or sent
by prepaid telex, cable or telecopy or sent, postage prepaid, by registered,
certified or express mail or reputable overnight courier service and shall be
deemed given when so delivered by hand, telexed, cabled or telecopied, or if
mailed, three days after mailing (one business day in the case of express mail
or overnight courier service), as follows:
(i) if to CNCO,
Liberty Group Operating, Inc.
c/o Liberty Group Publishing, Inc.
3000 Dundee Road
Suite 203
Northbrook, IL 60062
Telecopy: (847) 272-6244
Attention: Kenneth L. Serota
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, IL 60603
Telecopy: (312) 701-7711
Attention: Scott J. Davis, Esq.; and
<PAGE> 5
5
(ii) if to Hollinger,
Hollinger International Inc.
401 North Wabash Avenue
Chicago, Illinois 60611
Telecopy: (312) 321-0629
Attention: General Counsel
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Telecopy: (212) 474-3700
Attention: William P. Rogers, Jr.
5. Limitation Of Scope. It is the intention of Hollinger and CNCO that if
any of the restrictions or covenants contained in this agreement is held by a
court of competent jurisdiction to cover a geographic area or to be for a
length of time that is not permitted by the Governing Law, or is in any way
construed by a court of competent jurisdiction to be too broad or to any extent
invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
the Governing Law, a court of competent jurisdiction shall construe and
interpret or reform this agreement to provide for a covenant having the maximum
enforceable geographic area, time period and other provisions (not greater than
those contained in this agreement) as shall be valid and enforceable under such
Governing Law.
6. Assignment. This agreement and the rights and obligations hereunder
shall not be assignable or transferable by CNCO (including by operation of law
in connection with a merger or consolidation) without the prior written consent
of Hollinger, its successors or assigns. Notwithstanding the foregoing, if
CNCO sells, transfers or otherwise conveys all of the assets of an Initial
Publication within the Term of this agreement to any Person ("Subsequent
Purchaser"), CNCO may assign without Hollinger's consent its rights
corresponding to such Initial Publication under this agreement to such
Subsequent Purchaser; provided that with respect to any assignment of any
rights and obligations under this agreement to a
<PAGE> 6
6
Subsequent Purchaser, "Restricted Area" as defined in Section 1 (and subject to
further limitation as provided in that Section) shall mean any postal zip code
or codes in which the Initial Publication acquired by such Subsequent
Purchaser was distributed on the Effective Date.
7. First Offer Rights. Hollinger agrees that during the Term of this
agreement, if Hollinger decides to sell or otherwise dispose of any Incidental
Acquisition (other than in circumstances where such Incidental Acquisition
represents less than 50% of the proposed transaction) (a "Proposed Sale"), it
shall provide notice of such Proposed Sale and CNCO shall have 30 days in which
to provide, in writing, the terms and conditions under which it would offer to
purchase the Incidental Acquisition (the "Offer") which is the subject of the
Proposed Sale. If such Offer is so received by Hollinger, Hollinger will not,
within six months of receipt of such Offer, enter into any agreement to sell
or otherwise dispose of such Incidental Acquisition to a third party for
consideration that has a fair market value to Hollinger which is less than the
fair market value to Hollinger of the Offer, or negotiate with a third party
with respect to such a sale. If Hollinger does not accept the Offer and does
not complete the Proposed Sale to a third party within six months of the
Offer, Hollinger must comply with the provisions of this Section 7 before
making any additional Proposed Sale.
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
Liberty Group Operating, Inc.,
by /s/ Kenneth L. Serota
----------------------------
Name: Kenneth L. Serota
Title: President
Hollinger International Inc.,
by
/s/ J. A. Boultbee
----------------------------
Name:
Title:
<PAGE> 1
EXECUTION COPY
EXHIBIT 10.4
================================================================================
TRANSITIONAL SERVICES AGREEMENT
by and between
AMERICAN PUBLISHING MANAGEMENT SERVICES INC.
and
LIBERTY GROUP OPERATING, INC.
================================================================================
<PAGE> 2
This TRANSITIONAL SERVICES AGREEMENT (the
"Transitional Services Agreement") is entered into as of
this 27th day of January, 1998 by and between AMERICAN
PUBLISHING MANAGEMENT SERVICES INC. a corporation organized
and existing under the laws of the state of Delaware
("APMS"), and LIBERTY GROUP OPERATING, INC., a Delaware
corporation ("CNCO"; the term CNCO shall include all
subsidiaries of CNCO unless the context provides
otherwise). CNCO and APMS are sometimes hereinafter
collectively referred to as the "Parties".
W I T N E S S E T H:
WHEREAS, HOLLINGER INTERNATIONAL INC., a Delaware corporation (the
"Company"), APAC-90 INC., a Delaware corporation and an indirect wholly owned
subsidiary of the Company ("APAC-90"), AMERICAN PUBLISHING (1991) INC., a
Delaware corporation and an indirect wholly owned subsidiary of the Company
("AP-91"), APAC-95 INC., a Delaware corporation and an indirect wholly owned
subsidiary of the Company ("APAC-95"), LIBERTY GROUP PUBLISHING, INC., a
Delaware Corporation (the "Investor"), GREEN EQUITY INVESTORS II, L.P., a
Delaware limited partnership (the "Guarantor") and CNCO have entered into an
Asset Purchase Agreement dated as of November 21, 1997 (the "Asset Purchase
Agreement") relating to the sale to CNCO of substantially all of the assets and
the assumption of certain liabilities of certain community newspapers and other
publications (the "Business") as further identified in Exhibit A to such Asset
Purchase Agreement.
WHEREAS, AMERICAN PUBLISHING COMPANY OF ILLINOIS, a Delaware corporation
and an indirect wholly owned subsidiary of the Company ("APC Illinois") (APC
Illinois, APAC-90, AP-91 and APAC-95 collectively, the "Subsidiaries"), CNCO,
the Company, APAC-90, AP-91 and APAC-95 have entered into an Asset Purchase
Agreement dated as of November 21, 1997 (the "Illinois Asset Purchase
Agreement") relating to the sale to CNCO of substantially all of the assets and
the assumption of certain liabilities of certain community newspapers and other
publications (the "Illinois Business") (the Business and the Illinois Business
together,
<PAGE> 3
2
the "Transferred Business") as further identified in Schedule 1 to such
Illinois Asset Purchase Agreement.
WHEREAS, CNCO is interested in purchasing certain Services (as defined in
Section 1.04) from APMS, a subsidiary of the Company which was responsible for
providing such Services to the Subsidiaries prior to the date hereof, during a
transition period from the date hereof.
NOW, THEREFORE, the Parties, intending to become legally bound, hereby
agree as follows:
ARTICLE I
Definitions
For the purposes of this Transitional Services Agreement, the following
terms shall have the definitions hereinafter specified:
SECTION 1.01. "APMS" shall mean American Publishing Management Services
Inc. and any of its subsidiaries that perform the Services.
SECTION 1.02. "CNCO" shall mean Liberty Group Operating, Inc. and its
subsidiaries unless the context requires otherwise.
SECTION 1.03. "Parties" shall mean APMS and CNCO, collectively (and each
individually, a "Party").
SECTION 1.04. "Service" or "Services" shall mean those services described
on Schedule A hereto or otherwise provided by APMS pursuant to Section 2.01.
SECTION 1.05. "Subsidiaries" shall mean APC Illinois, APAC-90, AP-91 and
APAC-95, collectively, as well as all subsidiaries of such entities.
SECTION 1.06. "Transitional Services Agreement" shall mean this contract
between the Parties and all schedules hereto.
<PAGE> 4
3
Except as otherwise defined in this Transitional Services Agreement, all
terms, the first letters of which are capitalized, shall have the meanings
assigned to them in the Asset Purchase Agreement or the Illinois Asset Purchase
Agreement, as the case may be.
ARTICLE II
Agreement to Sell and Buy
SECTION 2.01. (a) Provision of Services. APMS shall provide to CNCO,
the Services listed and described on Schedule A hereto. In addition, APMS
shall furnish to CNCO such other services ("Other Services") as CNCO may
reasonably request and to which APMS shall reasonably agree. In every case,
all of the Services shall be provided in accordance with the terms, limitations
and conditions set forth herein and on Schedule A. Other Services shall be
provided on such terms as the Parties may mutually agree, subject to the terms
and conditions of this Transitional Services Agreement. Unless otherwise
agreed by the Parties, the Services shall be performed by APMS for CNCO in a
manner that is substantially the same as the manner in which such Services were
generally performed by APMS for the Subsidiaries prior to the date of this
Transitional Services Agreement and CNCO shall use such Services for
substantially the same purposes and in substantially the same manner as the
Subsidiaries had used such Services prior to the date hereof.
(b) Use of Services. APMS shall be required to provide Services only to
CNCO in connection with its conduct of the Transferred Business and such other
newspapers and similar publications as CNCO may acquire. Notwithstanding the
foregoing, CNCO shall not be required to provide any Services or Other Services
with respect to any business conducted by CNCO other than its newspaper
publishing business, which includes shoppers and total market coverage
publications. CNCO shall not resell any Services or Other Services to any
person whatsoever or permit the use of the Services or Other Services by any
person other than in connection with the conduct of business in the ordinary
course of CNCO and its subsidiaries.
(c) Relationship of Parties. APMS shall act under this Transitional
Services Agreement solely as an
<PAGE> 5
4
independent contractor and not as an agent of CNCO. Employees or agents of
APMS rendering services to CNCO pursuant to this Transitional Services
Agreement shall not be deemed employees or agents of CNCO. APMS shall
retain the exclusive right of control with respect to such persons.
(d) Right to Shut Down. APMS shall have the right to shut down
temporarily for maintenance purposes the operation of the facilities providing
any Service or Other Service whenever in its judgment, reasonably exercised,
such action is necessary. If the maintenance is non-scheduled, CNCO shall be
notified that maintenance is required. APMS shall give CNCO as much advance
notice of any such shutdown as is practicable. Where feasible, this notice
shall be given in writing. Where written notice is not feasible, oral notice
shall be given and promptly confirmed in writing. APMS shall be relieved of
its obligations to provide Services or Other Services during the period that
its facilities are so shut down but shall use reasonable efforts to minimize
each period of shutdown for such purpose and to schedule such shutdown so as
not to inconvenience or disrupt the conduct of the Transferred Business by the
CNCO.
SECTION 2.02. (a) National Classified Advertising Program. CNCO shall
participate in the program pursuant to which individual publications owned by
the Company's subsidiaries sell national classified advertising (the "National
Classified Advertising Program") on the same basis as the publications which
comprise the Transferred Business participated in such National Classified
Advertising Program prior to the Closing Date. CNCO's participation in the
National Classified Advertising Program and the Services provided by APMS
described in item D.3. of Schedule A with respect thereto shall constitute
Services for purposes of this Transitional Services Agreement.
(b) AdQuest Advertising. APMS and CNCO shall jointly negotiate an
extension of the term of APMS's agreement with AdQuest relating to the
placement of classified advertising on the Internet if APMS and CNCO mutually
agree that such joint negotiation would be in the Parties respective best
interests.
SECTION 2.03. Mutual Cooperation. The Parties shall cooperate with each
other in connection with the performance of any Services or Other Services
hereunder and the transition at the end of the term of this Transitional
<PAGE> 6
5
Services Agreement, including, without limitation, by making available on a
timely basis all information which is reasonably requested with respect to the
performance of Services and Other Services hereunder. CNCO shall make
available on a timely basis to APMS all information and materials reasonably
requested by APMS to enable it to provide the Services and Other Services.
CNCO shall give APMS reasonable access, during regular business hours and at
such other times as are reasonably required, to the premises on which CNCO
conduct business for the purposes of providing Services and Other Services.
During the term of this Agreement, for six months following the expiration of
this Transitional Services Agreement and in connection with the year end audit
for the year that this Transitional Services Agreement expires, the Parties
shall make available to each other on a timely basis all information with
respect to the performance of Services and Other Services hereunder which is
reasonably requested.
SECTION 2.04. Books and Records. APMS shall keep books and records of
the Services and Other Services provided and reasonable supporting
documentation of all out-of-pocket costs incurred in connection with providing
such Services and Other Services, and shall make such books and records
available to CNCO, upon reasonable notice, during normal business hours.
ARTICLE III
Fees; Payment; Independent Contractor
SECTION 3.01. Fees. APMS will provide the Services to CNCO at Cost.
"Cost" means a dollar amount equal to (x) APMS's annual cost to operate its
Marion, Illinois administrative office, exclusive of costs (including employee
costs) related to services which are not of the types not provided hereunder,
multiplied by (y) a ratio (the "Ratio") equal to (i) the number of newspapers
and other publications having daily circulation owned by CNCO on the Closing
Date, after giving effect to the transactions contemplated by the Equity
Purchase Agreement, divided by (ii) the number of newspapers and other
publications having daily circulation owned by American Publishing Company
(directly or indirectly) immediately prior to the Closing; provided that Cost
shall be adjusted for (i) changes in the number of newspapers and other
<PAGE> 7
6
publications owned by CNCO, as the parties shall mutually agree and (ii)
changes (not in excess of 10% per year) in the employee and other costs to APMS
of providing the Services and the Other Services. In addition, to the extent
that APMS agrees to provide any Other Services, the fee, for such Other
Services shall be as mutually agreed to by APMS and CNCO. Notwithstanding the
foregoing, APMS shall retain the right to charge payroll fees ("Payroll Fees")
on behalf of CNCO to each location based upon the number of employees at such
location who are paid via direct deposit in accordance with the schedule of
fees then in effect with respect to the Subsidiaries. Such Payroll Fees shall
be paid directly to CNCO or a subsidiary thereof. In addition, CNCO shall
reimburse APMS, within 30 days after the receipt of any invoice therefor and
presentation of any such supporting documentation that CNCO may reasonably
request, for (i) any and all non-salary expenses related to training newspaper
staff in sourcing co-op advertising as described in item D.1. of Schedule A if
such training is requested by CNCO and (ii) any reasonable out-of-pocket
traveling expenses (including reimbursement for economy class travel and
accommodations) incurred at CNCO's request by employees of APMS in the course
of performing Services or Other Services hereunder during or any time after the
first calendar month which commences more than 90 days after the date hereof.
Notwithstanding anything to the contrary herein, the fee for the classified
advertising consulting Services provided by Dennis Wade described in item D.2.
of Schedule A shall be $300 per day plus reasonable expenses.
SECTION 3.02. Payment. Itemized statements will be rendered each month
by APMS to CNCO for Services and Other Services delivered during the preceding
month, and each such statement shall set forth in reasonable detail a
description of such Services and Other Services and the amounts charged
therefor. The amounts due under each invoice shall be paid in full within 30
days after the date thereof and such payment shall be accompanied by a copy of
the applicable invoice. Statements not paid within such 30-
<PAGE> 8
7
day period shall be subject to late charges for each month or portion
thereof the statement is overdue, calculated as the lesser of the following:
(i) the then current prime rate offered by The First National Bank
of Chicago, plus one percentage point, or
(ii) the maximum rate allowed by applicable law.
Notwithstanding the foregoing, if an invoice is disputed in good faith and APMS
receives prompt written notice of such dispute, late charges pursuant to
clauses (i) and (ii) above shall not begin to accrue until such dispute is
resolved.
SECTION 3.03. Disclaimer of Warranty. EXCEPT AS EXPRESSLY SET FORTH IN
THIS TRANSITIONAL SERVICES AGREEMENT, THE SERVICES AND OTHER SERVICES AND GOODS
TO BE PURCHASED UNDER THIS TRANSITIONAL SERVICES AGREEMENT ARE FURNISHED AS IS,
WHERE IS, WITH ALL FAULTS AND WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED,
INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE. APMS DOES NOT MAKE ANY WARRANTY THAT ANY SERVICE OR OTHER SERVICE
COMPLIES WITH ANY LAW, DOMESTIC OR FOREIGN.
SECTION 3.04. Taxes. All payments by CNCO to APMS under this
Transitional Services Agreement shall be grossed-up by CNCO to cover any sales
tax or similar tax ("Taxes") (but excluding any tax based upon the net income
of APMS) payable with respect to the provision by APMS of Services, and APMS
shall be solely responsible for paying any such Taxes to the appropriate
Governmental Authority.
ARTICLE IV
Term of Particular Services
SECTION 4.01. (a) Term of Services. The provision of Services shall
commence on the date hereof and, with respect to each Service and Other
Service, shall terminate on the third anniversary of the date hereof; provided,
however, that: (i) CNCO may cancel any Service or Other Service upon 90 days'
written notice and (ii) APMS may cease to provide any Service or Other Service
upon 60 days' written notice to CNCO if APMS ceases to provide such
<PAGE> 9
8
Service or Other Service to the Company's subsidiaries, divisions and business
units; provided that APMS may not provide such notice of its intent to cease
providing any Service or Other Service hereunder until one year from the date
hereof. Notwithstanding the foregoing, APMS may cease to provide the classified
advertising consulting Services of Dennis Wade to CNCO at any time if Mr. Wade
ceases to be employed by APMS.
(b) Return of Books and Records. Upon the termination of a Service or
Other Service with respect to which CNCO holds books, records or files,
including, but not limited to, current and archived copies of computer files,
owned by CNCO and used by APMS in connection with the provision of a Service to
CNCO, APMS shall return all of such books, records or files as soon as
reasonably practicable. APMS shall bear all costs and expenses associated with
the return of such documents. At its own expense, APMS may make a copy of such
books, records or files for its legal files.
ARTICLE V
Benefits
SECTION 5.01. Savings Plan. Prior to the Transfer Date, CNCO shall have
established a defined contribution plan within the meaning of Section 3(34) of
the Employment Retirement Income Security Act of 1974, as amended (the "CNCO
401k Plan"), which is substantially similar in all material respects to the
American Publishing Retirement Savings Plan (the "AP 401k Plan"), for the
benefit of employees of CNCO, including the Employees, after the Transfer Date.
Effective as of the Transfer Date (i) APMS shall cause the Employees to cease
participation in the AP 401k Plan and (ii) the Employees who were eligible to
participate in the AP 401K Plan immediately prior to the Transfer Date shall
become participants in the CNCO 401k Plan. Employees participating in the CNCO
401k Plan shall be vested in such CNCO 401k Plan to the same extent that they
were vested under the AP 401k Plan immediately prior to the Transfer Date.
Employees who receive an eligible rollover distribution within the meaning of
Section 402(f) of the Internal Revenue Code of 1986, as amended (the "Code"),
including a direct rollover distribution (within the meaning of Section
401(a)(31) of the Code, and regulations thereunder) from the AP 401k Plan shall
be permitted to make a rollover contribution to the CNCO 401k Plan. To the
extent that an Employee is eligible to make a rollover contribution of a direct
rollover distribution (within
<PAGE> 10
9
the meaning of Section 401(a)(31) of the Code and the regulations thereunder)
from the AP 401k Plan to the CNCO 401k Plan, such rollover contribution may
include promissory notes for loans made to such Employee under the terms of the
AP 401k Plan. Effective as of the date immediately following the Transfer
Date, APMS shall provide CNCO with certain Services described in Schedule A
hereto in connection with the management and administration of the CNCO 401K
Plan and such Other Services with respect to the CNCO 401K Plan as APMS and
CNCO may agree upon, subject to the provisions of this Transitional Service
Agreement. APMS and CNCO shall cooperate in good faith to expedite the
creation of the CNCO 401k Plan.
SECTION 5.02. Medical and Dental Benefits. Effective as of the date
immediately following the Transfer Date, (i) APMS shall cause the Employees to
cease coverage under and participation in the American Publishing Group Health
Plan and the underlying insurance policy or policies (the "AP Health Plan") and
the other health plans and the underlying insurance policies held in the names
of the community newspapers and other publications which comprise the
Transferred Business which apply to Employees not covered by the AP Health Plan
(the "Other Health Plans") and (ii) CNCO shall establish (a) health care plans
(the "CNCO Health Plans") substantially similar in all material respects to the
AP Health Plan and the Other Health Plans to cover Employees (and their
eligible dependents) who were covered by the AP Health Plan and the Other
Health Plans, as applicable, prior to the Transfer Date on the substantially
same basis and subject to substantially the same conditions that would have
applied to such Employees (and their dependents) absent the transactions
contemplated by the Equity Purchase Agreement, the Transfer Service Agreement
and the related documents and (b) a corresponding Code Section 125 plan or
plans. The CNCO Health Plans shall waive any waiting period requirement and
any pre-existing condition and actively-at-work exclusions (but only to the
extent that Employees were not subject to such requirements and exclusions
prior to the Transfer Date) and shall provide that any expenses incurred on or
before the Transfer Date under the AP Health Plan or the Other Health Plans, as
<PAGE> 11
10
applicable, shall be taken into account for purposes of satisfying applicable
deductible, coinsurance and maximum out-of-pocket provisions under the
corresponding CNCO Health Plans. Effective as of the date immediately
following the Transfer Date, APMS shall provide CNCO with certain Services
described in Schedule A hereto in connection with the management and
administration of the CNCO Health Plans and such Other Services with respect to
the CNCO Health Plans as APMS and CNCO may agree upon, subject to the
provisions of this Transitional Services Agreement. Notwithstanding the
foregoing, APMS shall not be required to provide any Services with respect to
the CNCO Health Plans if such CNCO Health Plans are not with the same health
care provider or providers and insurance carrier or carriers which covered the
Employees participating in the AP Health Plan prior to the Transfer Date unless
and until the Parties mutually agree on services to be provided, in which case
such services shall be treated as Other Services for purposes of this
Transitional Services Agreement.
SECTION 5.03. Disability Coverage. Effective as of the date immediately
following the Transfer Date (i) APMS shall cause the Employees to cease
coverage under and participation in (x) the Fortis Long-Term Disability Plan
and the underlying insurance policy or policies and (y) the American Publishing
Short Term Disability Plan and the underlying insurance policy or policies and
(ii) CNCO shall establish (x) a long-term disability plan (the "CNCO Long-Term
Disability Plan") which provides coverage to Employees which is substantially
similar in all material respects to the coverage they received under the Fortis
Long-Term Disability Plan and (y) such other short-term disability plan or
plans as it deems appropriate, if any, (the "CNCO Short-Term Disability Plan").
CNCO shall use its commercially reasonable efforts to ensure that no Employee
shall be subject to any waiting period or pre-existing condition exclusion with
respect to coverage under the CNCO Long-Term Disability Plan which would not
have applied absent his or her transfer of employment to CNCO. Effective as of
the date immediately following the Transfer Date, APMS shall provide CNCO with
certain Services described in Schedule A hereto in connection with the
management and the administration of the CNCO Long-Term Disability Plan and
such Other Services with respect to the CNCO Long-Term Disability Plan as APMS
and CNCO may agree upon, subject to the provisions of this Transitional
Services Agreement. APMS will not be required to provide any services in
<PAGE> 12
11
connection with (i) the CNCO Long-Term Disability plan if Fortis is not the
insurance provider under such plan and (ii) the CNCO Short-Term Disability
Plan, if any, unless and until the Parties mutually agree on services to be
provided, in which case such services shall be treated as Other Services for
purposes of this Transitional Services Agreement.
SECTION 5.04. Life Insurance. Effective as of the date immediately
following the Transfer Date (i) APMS shall cause the Employees to cease
coverage under and participation in the American Publishing Life Insurance Plan
and the underlying insurance policy or policies and (ii) CNCO shall establish a
life insurance plan (the "CNCO Life Insurance Plan") which provides coverage to
Employees (and their eligible dependents) which is substantially similar in all
material respects to the coverage they received under the American Publishing
Life Insurance Plan. CNCO shall use its commercially reasonable efforts to
ensure that no Employee shall be subject to any waiting period with respect to
such coverage under such CNCO Life Insurance Plan which would not have applied
absent his or her transfer of employment to CNCO. Effective as of the date
immediately following the Transfer Date, APMS shall provide CNCO with certain
services in connection with the management and the administration of the CNCO
Life Insurance Plan described in Schedule A hereto and such Other Services with
respect to the CNCO Life Insurance Plan as APMS and CNCO may agree upon,
subject to the provisions of this Transitional Services Agreement.
SECTION 5.05 Other Insurance. Effective as of the date immediately
following the Transfer Date, (i) APMS shall terminate all current policies of
liability, fire, extended coverage, fidelity, fiduciary, workers' compensation
and other forms of insurance in force as of the Transfer Date covering the
Transferred Business (the "APMS Insurance Policies") and (ii) CNCO shall obtain
such insurance policies (the "CNCO Insurance Policies") with respect to the
Transferred Business as it deems advisable; provided that CNCO shall cause the
Employees to be covered under a workers' compensation policy on the same basis
and subject to substantially the same conditions that would have applied to
such Employees absent the transactions contemplated by the Equity Purchase
Agreement, the Transfer Agreement and the other documents referred to herein
and therein. Effective as of the date immediately following the
<PAGE> 13
12
Transfer Date, APMS shall provide CNCO with certain Services described in
Schedule A hereto in connection with the administration of the CNCO Insurance
Policies and such Other Services with respect to the CNCO Insurance Policies as
APMS and CNCO shall agree upon, subject to the provisions of this Transitional
Services Agreement. Notwithstanding the foregoing, APMS shall not be required
to provide any Services with respect to the CNCO Insurance Policies if such
policies are not with the same insurance carriers which provided coverage to
the Transferred Business under the APMS Insurance Policies prior to the
Transfer Date unless and until the Parties mutually agree on services to be
provided, in which case such services shall be treated as Other Services for
purposes of this Transitional Services Agreement.
SECTION 5.06. Indemnification. Notwithstanding anything to the contrary
herein, all claims for indemnification and other claims relating to any matter
covered in Article V of this Transitional Services Agreement shall be governed
by the terms of the Transfer Agreement.
ARTICLE VI
Force Majeure
SECTION 6.01. Force Majeure. APMS shall not be liable for any
interruption of Service or Other Service, delay or failure to perform under
this Transitional Services Agreement when such interruption, delay or failure
results from causes beyond its reasonable control, including but not limited to
any strikes, lock-outs or other labor difficulties, acts or any government,
riot, insurrection or other hostilities, embargo, fuel or energy shortage,
fire, flood, acts of God, wrecks or transportation delays, or inability to
obtain necessary labor, materials or utilities. In any such event, APMS's
obligations hereunder shall be postponed for such time as its performance is
suspended or delayed on account thereof. APMS will promptly notify CNCO,
either orally or in writing, upon learning of the occurrence of such event of
force majeure. Upon the cessation of the force majeure event, APMS will use
commercially reasonable efforts to resume its performance with the least
possible delay.
<PAGE> 14
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ARTICLE VII
Liabilities
SECTION 7.01. Consequential and Other Damages. APMS shall not be liable,
whether in contract, in tort (including negligence and strict liability), or
otherwise, for any special, indirect, incidental or consequential damages
whatsoever, which in any way arise out of, relate to, or are a consequence of,
its performance or nonperformance hereunder, or the provision of or failure to
provide any Service or Other Service hereunder, including but not limited to,
loss of profits, business interruptions and claims of customers.
SECTION 7.02. Limitation of Liability. In any event, the liability of
APMS with respect to this Transitional Services Agreement or anything done in
connection herewith, including but not limited to the performance or breach
hereof, or from the sale, delivery, provision or use of any Service or Other
Service or product provided under or covered by this Transitional Services
Agreement, whether in contract, tort (including negligence or strict liability)
or otherwise, shall not exceed the fees previously paid to APMS by CNCO in
respect of the Service or Other Service from which such liability flows.
SECTION 7.03. Release and Indemnity. Except as specifically set forth in
this Transitional Services Agreement, CNCO hereby releases APMS, its employees,
agents, officers and directors ("APMS Indemnitees") and agrees to indemnify and
hold harmless APMS, its employees, agents, officers and directors, from any and
all claims, demands, complaints, liabilities, losses, damages (other than
special, indirect, incidental or consequential damages of APMS Indemnitees) and
all costs and expenses arising from or relating to the use of any Service or
Other Service or product provided hereunder by CNCO or any person using such
product or Service pursuant to Section 3.06 of this Transitional Services
Agreement to the extent not arising from the gross negligence or willful
misconduct of APMS. APMS represents and warrants that it has all necessary
right and authority to provide the Services and Other Services to CNCO
hereunder.
<PAGE> 15
14
ARTICLE VIII
Termination
SECTION 8.01. Termination. This Transitional Services Agreement shall
terminate on the earliest to occur of (i) the third anniversary of the Transfer
Date, (ii) the date on which the provision of all Services and Other Services
have terminated or been canceled pursuant to Section 4 and (iii) the date on
which this Transitional Services Agreement is terminated pursuant to Section
8.02.
SECTION 8.02. Breach of Transitional Services Agreement. If either of
the Parties shall cause or suffer to exist any breach of any of its obligations
under this Transitional Services Agreement, including but not limited to any
failure to make payments when due, and said Party does not cure such default
within 10 business days after receiving written notice thereof form the
non-breaching Party, the non-breaching Party may terminate this Transitional
Services Agreement, including the provision of Services pursuant hereto,
immediately by providing written notice of termination.
SECTION 8.03. Sums Due. In the event of a termination of this
Transitional Services Agreement, APMS shall be entitled to all outstanding
amounts due from CNCO up to the date of termination.
SECTION 8.04. Effect of Termination. Sections 3.04, 4.01(b), 6.01, 7.01,
8.03 and 9.01 and this Section 8.04 shall survive any termination of this
Transitional Services Agreement.
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. All notices or other communications made in
connection with this Transitional Services Agreement shall be in writing. Any
notice or other communication in connection herewith shall be deemed duly given
(i) two business days after it is sent by express,
<PAGE> 16
15
registered or certified mail, return receipt requested, postage prepaid or (ii)
one business day after it is sent by overnight courier, in every case,
addressed as follows:
(i) If to CNCO:
Liberty Group Operating, Inc.
c/o Liberty Group Publishing, Inc.
3000 Dundee Road
Suite 203
Northbrook, IL 60062
Telecopy: (847) 272-6244
Attention: Kenneth L. Serota
with a copy (which shall not
constitute notice) to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, IL 60603
Telecopy: (312) 701-7711
Attention: Scott J. Davis, Esq.
(ii) If to APMS:
American Publishing Management Services Inc.
606 North Van Buren
Marion, IL 62959
Telecopy: (618) 997-4018
Attention: Roland McBride
<PAGE> 17
16
with copies (which shall not
constitute notice) to:
Hollinger Inc.
10 Toronto Street
Toronto, Ontario M5C 2B7
Canada
Attn: Vice President and General Counsel
Facsimile Number: (416) 364-2088
Cravath, Swaine & Moore
Worldwide Plaza
825 8th Avenue
New York, New York 10019
Attn: William P. Rogers, Esq.
Facsimile Number: (212) 474-3700
or, in each case, at such other address as may be specified in writing to the
other Parties hereto. Any Party may give notice or other communication in
connection herewith using any other means (including, but not limited to,
personal delivery, messenger service, telecopy, telex or ordinary mail), but no
such notice or other communication shall be deemed to have been duly given
unless and until it is actually received by the individual for whom it is
intended.
SECTION 9.02. Headings. The headings contained in this Transitional
Services Agreement are for purposes of convenience only and shall not affect
the meaning or interpretation of this Transitional Services Agreement.
SECTION 9.03. Schedules. All schedules attached hereto or referred to
herein are hereby incorporated in and made a part of this Transitional Services
Agreement as if set forth in full herein. Capitalized terms used in any
schedule but not otherwise defined therein shall have the respective meanings
assigned to such terms in this Transitional Services Agreement or in the
Transfer Agreement, as applicable.
SECTION 9.04. Entire Agreement. This Transitional Services Agreement and
the other agreements, including the Transfer Agreement, referred to herein and
therein constitute the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the Parties with respect to the
subject matter hereof.
<PAGE> 18
17
SECTION 9.05. Counterparts. This Transitional Services Agreement may be
executed in several counterparts, each of which shall be deemed an original and
all of which shall together constitute one and the same instrument.
SECTION 9.06. Governing Law. This Transitional Services Agreement shall
be governed in all respects, including, but not limited to, as to validity,
interpretation and effect, by the internal laws of the state of Delaware,
without giving effect to the conflict of laws rules thereof.
SECTION 9.07. Governing Law; Consent to Jurisdiction. This Transitional
Services Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware applicable to agreements made and to be performed
wholly within such jurisdiction. All disputes, litigation, proceedings or
other legal actions by any Party to this Transitional Services Agreement in
connection with or relating to this Transitional Services Agreement or any
matters described or contemplated in this Transitional Service Agreement shall
be instituted in the courts of the State of Delaware or of the United States
sitting in the State of Delaware. Each Party to this Transitional Service
Agreement irrevocably submits to the exclusive jurisdiction of the courts of
the State of Delaware and of the United States sitting in the State of Delaware
in connection with any such dispute, litigation, action or proceeding arising
out of or relating to this Transitional Services Agreement. Each Party to this
Agreement will maintain at all times a duly appointed agent in the State of
Delaware for the service of any process or summons in connection with any such
dispute, litigation, action or proceeding brought in any such court and, if it
fails to maintain such an agent during any period, any such process or summons
may be served on it by mailing a copy of such process or summons to it at its
address set forth, and in the manner provided in Section 9.01, with such
service deemed effective on the fifteenth day after the date of such mailing.
Each Party to this Transitional Services Agreement irrevocably waives the right
to a trial by jury in connection with any matter arising out of this
Transitional Services Agreement and, to the fullest extent permitted by
applicable law, any defense or objection it may now or hereafter have to the
laying of venue of any proceeding under this Transitional Services Agreement
brought in the courts of the State of Delaware or of the United States sitting
in the State of Delaware and
<PAGE> 19
18
any claim that any proceeding under this Transitional Services Agreement
brought in any such court has been brought in an inconvenient forum.
SECTION 9.08. Binding Effect. This Transitional Services Agreement shall
be binding upon and inure to the benefit of the Parties hereto and their
respective heirs, successors and permitted assigns.
SECTION 9.09. Assignment. This Transitional Services Agreement shall not
be assignable by any Party without the prior written consent of other Parties;
provided that (a) CNCO may assign this Transitional Services Agreement to (i)
the Investor and (ii) its permitted assigns under the Equity Purchase Agreement
and (b) APMS may delegate performance of all or any part of its obligations
under this Transitional Services Agreement to (i) any subsidiary of APMS and
(ii) third parties to the extent such third parties are routinely used to
provide such Services to other businesses of the Company, provided, further,
that, in each case, no such delegation shall in any way affect APMS's
obligations under this Transitional Services Agreement. Any purported
assignment in violation of this Section 9.07 shall be void.
SECTION 9.10. No Third Party Beneficiaries. Except as provided in
Section 7.02 with respect to release and indemnity, nothing in this
Transitional Services Agreement shall confer any rights upon any person or
entity other than CNCO and APMS and each such Party's respective successors and
permitted assigns.
SECTION 9.11. Amendment; Waivers, etc. No amendment, modification or
discharge of this Transitional Services Agreement, and no waiver hereunder,
shall be valid or binding unless set forth in writing and duly executed by the
Party against whom enforcement of the amendment, modification, discharge or
waiver is sought. Any such waiver shall constitute a waiver only with respect
to the specific matter described in such writing and shall in no way impair the
rights of the Party granting such waiver in any other respect or at any other
time.
SECTION 9.12. Severability. If any provision of this Transitional
Services Agreement or the other agreements, including the Transfer Agreement,
referred to herein or therein, or the application thereof to any person
<PAGE> 20
19
or circumstance is determined by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions thereof, or the
application of such provision to persons or circumstances other than those as
to which it has been held invalid or unenforceable, shall remain in full force
and effect and shall in no way be affected, impaired or invalidated thereby, so
long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner adverse to any Party. Upon any such
determination, the Parties shall negotiate in good faith in an effort to agree
upon a suitable and equitable substitute provision to effect the original
intent of the Parties.
SECTION 9.13. (a) Confidentiality. Except as otherwise provided in this
Transitional Services Agreement, APMS will, and will cause its affiliates (and
their respective officers, employees, accountants, counsel, financial advisors
and other representatives to whom they disclose such information) to hold in
strict confidence and not use or disclose all confidential and proprietary
information relating to CNCO in the possession of APMS or to which APMS is
given access without the prior written consent of CNCO and (b) CNCO will, and
will cause its affiliates (and their respective officers, employees,
accountants, counsel, financial advisors and other representatives to whom they
disclose such information) to hold in strict confidence and not use or disclose
all confidential and proprietary information relating to APMS in the possession
of CNCO or to which CNCO is given access that is not information that relates
solely to CNCO without the prior written consent of APMS. Notwithstanding
anything herein to the contrary, the provisions of this Section 9.13 shall not
apply to the disclosure by any Party hereto or their respective affiliates of
any information, documents or materials (i) which are, or become, publicly
available, other than by reason of a breach of this Section 9.13 by the
disclosing party or by any subsidiary or any affiliate of the disclosing party,
(ii) received from a third party not bound by any confidentiality requirement
with the other Parties hereto, (iii) required by applicable law to be disclosed
by such Party, or (iv) necessary to establish such Party's rights under this
Transitional Services Agreement, the Transfer Agreement, the Equity Purchase
Agreement or any other agreement or document referred to herein or therein;
provided that, in the case of clauses (iii) and (iv), the person intending to
make disclosure of confidential
<PAGE> 21
20
information will promptly notify the Party to whom it is obliged to keep such
information confidential and, to the extent practicable, provide such Party a
reasonable opportunity to prevent such public disclosure.
(b) Title to Data. CNCO acknowledges that it will acquire no right,
title or interest (including any license rights or rights of use) in any
firmware or software, and the licenses therefor which are owned by APMS, by
reason of APMS's provision of the Services provided hereunder. APMS agrees
that all records, data, files, input materials and other information received
or computed for the benefit of CNCO and which relate to the conduct of the
Transferred Business are the property of CNCO.
<PAGE> 22
IN WITNESS WHEREOF, the Parties have executed this Transitional Services
Agreement as of the date first written above.
AMERICAN PUBLISHING MANAGEMENT SERVICES INC.
by /s/ J.A. Boultbee
-----------------------------
Name:
Title:
LIBERTY GROUP OPERATING, INC.
by /s/ Kenneth L. Serota
-----------------------------
Name: Kenneth L. Serota
Title: President
<PAGE> 23
SCHEDULE A
Services to be provided by APMS pursuant to the Transitional Services
Agreement.
A. Accounting and finance related information systems and administrative
processing support.
1. Maintenance of normal books and records, including, but not
limited to, general and subsidiary ledgers and appropriate
supporting documentation in both hard copy and electronic form.
2. Payroll system and related payroll accounting and payroll tax
processing support for Employees, including, but not limited to, the
following:
(a) Periodic payroll processing, check preparation, check
reconciliation and all related payroll record keeping.
(b) Reports and systems interfaces supporting employee benefits
processing and record keeping for both the employee benefit
programs that continue to be administered by APMS (as described
in paragraph C below) and deductions processing and reporting
for benefit programs that are no longer directly administered
by APMS but are transferred to other insurance carriers or
administrators.
(c) Access to and retrievals or reporting from the employee
information data base including the prior three years of
employee data and payroll statistics.
(d) Record retention archival and storage services.
3. Information systems, processing and administrative support
for fixed asset accounting and related tax functions, including, but
not limited to, capabilities such as the following:
<PAGE> 24
(a) Storage on APMS's information system of fixed asset records
including asset information, original costs, tax and book
depreciation and net book value (all as determined by taking
into account adjustments to basis, net book value and
depreciation lives and methods resulting from the purchase or
other acquisition of the Assets by CNCO).
(b) Access to APMS's information for the purpose of maintaining
and retrieving fixed asset records.
(c) Calculation of tax and book depreciation in a form sufficient
for generating accounting entries and any and all currently
available management reports (taking into account the
adjustments described in (a), above).
(d) Access to data and administrative processing and technical
support for preparation of personal property tax returns.
(e) Financial statement reporting, including audit support services.
(f) Accounts payable, in the same manner as provided to the
Subsidiaries on the Closing Date.
(g) Capital expenditure tracking and review.
(h) Preparation for tax return preparation.
(i) Preparation for audit preparation.
4. Assistance with the budget process.
B. APMS will provide treasury services for CNCO in connection with all
aspects of investment of funds, cash management and general banking
relations.
C. Employee Benefits and Insurance Coverage, Administration and Information
Systems Processing Support.
2
<PAGE> 25
1. APMS will provide administrative support, enrollment, premium
administration, claims processing, record keeping and administration
coordination with insurance carriers, third party administrators,
and utilization review vendors for the following CNCO health and
welfare and insurance plans:
(a) Liberty Group Management Services, Inc. Employee Benefits Plan
administered by Unicare
(b) Liberty Group Publishing Retirement Savings Plan (401K)
administered by Principal Financial Group
(c) Liberty Group Universal Life Insurance Program administered by
Principal Financial Group
(d) Unemployment Compensation
(e) Workers' Compensation
2. APMS will provide services limited to premium payroll deduction
processing for the following benefits:
(a) Fortis Long-Term Disability Plan
3. The following services will not be provided by APMS:
(a) Record keeping and reporting for other employee benefits,
including vacations and holidays
D. Advertising Services.
1. APMS will provide co-op advertising services, including
sourcing of co-op advertising and training newspaper sales staff in
sourcing co-op advertising.
2. Dennis Wade will provide classified advertising consulting
services.
3
<PAGE> 26
3. APMS will distribute the proceeds of the central cash
receipts collected through the National Classified Advertising
Program.
4
<PAGE> 1
Exhibit 10.5
===============================================================================
===============================================================================
===============================================================================
===============================================================================
CREDIT AGREEMENT
dated as of
January 27, 1998
among
LIBERTY GROUP OPERATING, INC.,
as Borrower,
LIBERTY GROUP PUBLISHING, INC.,
as the Parent Guarantor,
The LENDERS Party Hereto,
CITICORP USA, INC.,
as Administrative Agent and Swingline Lender,
CITIBANK, N.A.,
as Issuing Bank,
BT ALEX. BROWN INCORPORATED,
as Syndication Agent,
WELLS FARGO BANK, N.A.,
as Documentation Agent,
and
BANK OF AMERICA NT & SA,
as Co-Agent,
-----------------------------------------------
CITICORP SECURITIES, INC.
Arranger
===============================================================================
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS 1
SECTION 1.1. DEFINED TERMS. 1
SECTION 1.2. CLASSIFICATION OF LOANS AND BORROWINGS. 29
SECTION 1.3. TERMS GENERALLY. 29
SECTION 1.4. ACCOUNTING TERMS; GAAP. 30
SECTION 1.5. TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE. 30
SECTION 1.6. DETERMINATION OF FINANCIAL RATIOS. 31
ARTICLE II. THE CREDITS 31
SECTION 2.1. COMMITMENTS. 31
SECTION 2.2. LOANS AND BORROWINGS. 33
SECTION 2.3. REQUESTS FOR BORROWINGS. 34
SECTION 2.4. SWINGLINE LOANS. 35
SECTION 2.5. LETTERS OF CREDIT. 36
SECTION 2.6. FUNDING OF BORROWINGS. 42
SECTION 2.7. INTEREST ELECTIONS. 42
SECTION 2.8. TERMINATION AND REDUCTION OF COMMITMENTS. 45
SECTION 2.9. REPAYMENT OF LOANS: EVIDENCE OF DEBT. 46
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 2.10. PREPAYMENT OF LOANS. 47
SECTION 2.11. FEES. 49
SECTION 2.12. INTEREST. 50
SECTION 2.13. ALTERNATE RATE OF INTEREST. 51
SECTION 2.14. YIELD PROTECTION. 52
SECTION 2.15. TAXES. 54
SECTION 2.16. PAYMENTS; PRO RATA TREATMENT; SHARING OF SETOFFS. 56
SECTION 2.17. REPLACEMENT OF LENDER. 58
ARTICLE III. CONDITIONS 59
SECTION 3.1. EFFECTIVE DATE. 59
SECTION 3.2. EACH CREDIT EVENT. 64
ARTICLE IV. REPRESENTATIONS AND WARRANTIES 64
SECTION 4.1. ORGANIZATION; POWERS. 65
SECTION 4.2. AUTHORIZATION; ENFORCEABILITY. 65
SECTION 4.3. GOVERNMENTAL APPROVALS; NO CONFLICTS. 65
SECTION 4.4. FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE. 65
SECTION 4.5. PROPERTIES. 67
SECTION 4.6. LITIGATION AND ENVIRONMENTAL MATTERS. 68
SECTION 4.7. COMPLIANCE WITH LAWS AND AGREEMENTS. 69
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
SECTION 4.8. INVESTMENT AND HOLDING COMPANY STATUS. 69
SECTION 4.9. TAXES. 69
SECTION 4.10. ERISA. 69
SECTION 4.11. DISCLOSURE. 70
SECTION 4.12. SUBSIDIARIES. 70
SECTION 4.13. SOLVENCY. 70
SECTION 4.14. THE COLLATERAL. 71
SECTION 4.15. FEDERAL RESERVE REGULATIONS. 72
ARTICLE V. AFFIRMATIVE COVENANTS 73
SECTION 5.1. FINANCIAL STATEMENTS AND OTHER INFORMATION. 73
SECTION 5.2. NOTICES OF MATERIAL EVENTS. 75
SECTION 5.3. REGARDING THE COLLATERAL. 76
SECTION 5.4. EXISTENCE; CONDUCT OF BUSINESS. 77
SECTION 5.5. PAYMENT OF OBLIGATIONS. 77
SECTION 5.6. MAINTENANCE OF PROPERTIES. 77
SECTION 5.7. INSURANCE. 77
SECTION 5.8. CASUALTY AND CONDEMNATION. 78
SECTION 5.9. BOOKS AND RECORDS; INSPECTION AND AUDIT RIGHTS. 78
SECTION 5.10. COMPLIANCE WITH LAWS. 78
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
SECTION 5.11. USE OF PROCEEDS AND LETTERS OF CREDIT. 78
SECTION 5.12. ADDITIONAL BORROWER SUBSIDIARIES. 78
SECTION 5.13. FURTHER ASSURANCES. 79
SECTION 5.14. FISCAL YEAR. 81
ARTICLE VI. NEGATIVE COVENANTS 81
SECTION 6.1. INDEBTEDNESS. 81
SECTION 6.2. CERTAIN INTERESTS AND LIABILITIES. 82
SECTION 6.3. LIENS. 83
SECTION 6.4. FUNDAMENTAL CHANGES. 84
SECTION 6.5. INVESTMENTS; ACQUISITIONS. 85
SECTION 6.6. ASSET SALES. 86
SECTION 6.7. HEDGING AGREEMENTS. 87
SECTION 6.8. PAYMENT RESTRICTIONS. 87
SECTION 6.9. TRANSACTIONS WITH AFFILIATES. 89
SECTION 6.10. RESTRICTIVE AGREEMENTS. 89
SECTION 6.11. AMENDMENT OF CERTAIN DOCUMENTS. 90
SECTION 6.12. CAPITAL EXPENDITURES. 90
SECTION 6.13. MAXIMUM SENIOR LEVERAGE RATIO. 90
SECTION 6.14. MINIMUM CASH INTEREST COVERAGE RATIO. 90
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
SECTION 6.15. ADDITIONAL SUBSIDIARIES. 91
ARTICLE VII. EVENTS OF DEFAULT 91
SECTION 7.1. EVENTS OF DEFAULT. 91
ARTICLE VIII. THE ADMINISTRATIVE AGENT AND OTHER AGENTS 95
SECTION 8.1. APPOINTMENT OF AGENTS. 95
SECTION 8.2. SAME RIGHTS AND POWERS. 95
SECTION 8.3. NO DUTIES OR OBLIGATIONS; NOT LIABLE. 95
SECTION 8.4. ENTITLED TO RELY. 96
SECTION 8.5. SUB-AGENTS; RELATED PARTIES. 96
SECTION 8.6. RESIGNATION OF ADMINISTRATIVE AGENT. 96
SECTION 8.7. CONCERNING THE COLLATERAL. 97
SECTION 8.8. NO RELIANCE 98
ARTICLE IX. MISCELLANEOUS 98
SECTION 9.1. NOTICES. 98
SECTION 9.2. WAIVERS; AMENDMENTS. 99
SECTION 9.3. EXPENSES; INDEMNITY; DAMAGE WAIVER. 100
SECTION 9.4. SUCCESSORS AND ASSIGNS. 102
SECTION 9.5. SURVIVAL. 105
</TABLE>
<PAGE> 7
<TABLE>
<S> <C>
SECTION 9.6. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. 106
SECTION 9.7. SEVERABILITY. 106
SECTION 9.8. RIGHT OF SETOFF. 106
SECTION 9.9. GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS. 107
SECTION 9.10. WAIVER OF JURY TRIAL. 108
SECTION 9.11. HEADINGS. 108
SECTION 9.12. CONFIDENTIALITY. 108
SECTION 9.13. INTEREST RATE LIMITATION. 109
</TABLE>
<PAGE> 8
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Assignment and Acceptance
Exhibit B-1 Form of Borrower Pledge and Security Agreement
Exhibit B-2 Form of Guarantor Pledge and Security Agreement
Exhibit C Form of Compliance Certificate
Exhibit D Form of Copyright Security Agreement
Exhibit E Equity Documents
Exhibit F Form of Guaranty, Indemnity and Subordination Agreement
Exhibit G Form of Perfection Certificate
Exhibit H Form of Perfection Notice
Exhibit I Form of Pricing Certificate
Exhibit J Form of Subsidiary Note
Exhibit K Form of Trademark Assignment
Exhibit L Form of UCC financing statement
Exhibit M Form of Global Consent to Security Interests
Exhibit N Form of Closing Certificate
Exhibit O Form of Opinion of Counsel for the Loan Parties
SCHEDULES
Schedule 1.1-A Effective Date Capitalization
Schedule 1.6 Consolidated EBITDA for 1997 Fiscal Quarters
Schedule 2.1 Lenders, Revolving Commitments and Domestic Lending Offices
Schedule 3.1(k) Amendments to Transaction Agreements
Schedule 3.1(n) Asset Transfers to Borrower Subsidiaries and Capitalization
Schedule 4.5(a) Personal Property Title Defects
Schedule 4.5(b) Intellectual Property
Schedule 4.5(c) Real Property (owned or leased)
Schedule 4.12 Subsidiaries
Schedule 4.14(b) Pledged Collateral
Schedule 4.14(c) Jurisdictions in which Financing Statements Filed
Schedule 4.14(d) Trademarks and Copyrights
Schedule 6.3 Existing Liens
</TABLE>
<PAGE> 9
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of January 27, 1998, among LIBERTY GROUP
OPERATING, INC., a Delaware corporation (the "Borrower"), LIBERTY GROUP
PUBLISHING, INC., a Delaware corporation ("Holdings"), the LENDERS party
hereto, CITICORP USA, INC., as Administrative Agent and Swingline Lender,
CITIBANK, N.A., as Issuing Bank, BT ALEX. BROWN INCORPORATED, as Syndication
Agent, WELLS FARGO BANK, N.A., as Documentation Agent, and BANK OF AMERICA NT &
SA, as Co-Agent.
RECITALS
The Borrower has requested the Lenders to extend credit during the
Revolving Availability Period in an aggregate principal amount not in excess of
$125,000,000 at any one time outstanding, in the form of (a) Revolving Loans up
to such amount or (b) Letters of Credit issued by the Issuing Bank in an amount
up to an aggregate face amount of $10,000,000 at any one time outstanding or
(c) Swingline Loans by the Swingline Lender in an amount up to $10,000,000 at
any one time outstanding.
The Lenders, the Issuing Bank and the Swingline Lender are willing to
extend such credit to the Borrower on the terms and subject to the conditions
set forth herein.
ACCORDINGLY, the parties hereto agree as follows:
ARTICLE
DEFINITIONS
<PAGE> 10
SECTION DEFINED TERMS.
As used in this Agreement, the following terms have the meanings
specified below:
"ABR," when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Alternate Base Rate.
"ACQUIRED INDEBTEDNESS" means Indebtedness of any Person that becomes a
Borrower Subsidiary after the Effective Date, if such Indebtedness was
outstanding prior to the time such Person became a Borrower Subsidiary and was
not created in contemplation of or in connection with such Person becoming a
Borrower Subsidiary.
"ACQUISITION" means the transactions contemplated by the Asset Purchase
Agreements, including the purchase of the "Business" and the "Assets" (as such
terms are defined therein) on the terms and conditions set forth therein.
"ACQUISITION CONSIDERATION" means the purchase consideration for any
Permitted Acquisition and all other payments made and liabilities incurred by
any member of the Holdings Group in exchange for, or as part of, or in
connection with any Permitted Acquisition, whether paid in cash or by exchange
of assets or otherwise and whether payable at or prior to the consummation of
such Permitted Acquisition or deferred for payment at any future time, whether
or not any such future payment is subject to the occurrence of any contingency,
and includes any and all payments and liabilities representing the purchase
price and any assumptions of liabilities, "earn-outs' and other Profit Payment
Agreements, consulting agreements, services agreements and non-competition
agreements and other liabilities of every type and description.
"ADJUSTED LIBO RATE" means, with respect to any Eurodollar Borrowing for
any day in any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the then Eurodollar Reserve Rate.
"ADJUSTED PRO FORMA EBITDA" means, for any period, Pro Forma EBITDA for
such period plus Approved Cost Adjustments for such period.
"ADMINISTRATIVE AGENT" means Citicorp USA, in its capacity as
<PAGE> 11
administrative agent for the Lenders hereunder.
"ADMINISTRATIVE QUESTIONNAIRE" means an Administrative Questionnaire in a
form supplied by the Administrative Agent.
"AFFILIATE" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"AGENTS" has the meaning assigned to such term in Section 8.1.
"ALTERNATE BASE RATE" means, for any day in any period, a fluctuating
interest rate per annum equal at all times for each day during such period to
the highest of (a) the rate of interest announced publicly by Citibank in New
York City from time to time as Citibank's base rate as in effect for such day;
or (b) the sum (adjusted to the nearest 0.25% or, if there is no nearest 0.25%,
to the next higher 0.25%) of (i) 0.50% per annum plus (ii) the rate per annum
obtained by dividing (A) the latest three-week moving average of secondary
market morning offering rates in the United States for three-month certificates
of deposit of major United States money market banks, such three-week moving
average being determined weekly on each Monday (or, if such day is not a
Business Day, on the next succeeding Business Day) for the three-week period
ending on the previous Friday by Citibank on the basis of such rates reported
by certificate of deposit dealers to, and published by, the Federal Reserve
Bank of New York, or, if such publication shall be suspended or terminated, on
the basis of quotations for such rates received by Citibank from three New York
certificate of deposit dealers of recognized standing selected by Citibank, by
(B) a percentage equal to 100% minus the average of the daily percentages
specified during such three-week period by the Federal Reserve Board (or any
successor) for determining the maximum reserve requirement (including, but not
limited to, any emergency, supplemental or other marginal reserve requirement)
for Citibank in respect of liabilities which consist of or which include (among
other liabilities) three-month Dollar nonpersonal time deposits in the United
States each in the amount of at least $100,000 plus (iii) the average during
such three-week period of the annual assessment rates estimated by Citibank for
determining the then current annual assessment payable by Citibank to the
Federal Deposit Insurance Corporation (or any successor) for insuring Dollar
deposits of Citibank in the United States; or (c) 0.50% per annum above the
Federal Funds Rate for such day.
<PAGE> 12
"APPLICABLE PERCENTAGE" means, with respect to any Lender, the percentage
of the total Revolving Commitments represented by such Lender's Revolving
Commitment. If the Revolving Commitments have terminated or expired, the
Applicable Percentages shall be determined based upon the Revolving Commitments
most recently in effect, giving effect to any assignments.
"APPLICABLE ABR MARGIN" and "APPLICABLE EURODOLLAR MARGIN" mean, with
respect to any ABR Loan or any Eurodollar Loan, respectively, for any day in
any Pricing Period, the applicable rate per annum set forth below under the
caption "ABR Spread" or "Eurodollar Spread," respectively, based upon the Total
Leverage Ratio as of the most recent Pricing Determination Date, except
[Remainder of Page Intentionally Left Blank]
<PAGE> 13
that at all times during the six-month period immediately following the
Effective Date the Applicable ABR Margin or Applicable Eurodollar Margin shall
be equal to the applicable rate per annum set forth below in Category 3:
<TABLE>
<CAPTION>
===============================================================================
TOTAL LEVERAGE RATIO: ABR SPREAD EURODOLLAR SPREAD
(P.A.) (P.A.)
- -------------------------------------------------------------------------------
<S> <C> <C>
CATEGORY 1
Greater than 6.75 to 1.00 1.25% 2.50%
- -------------------------------------------------------------------------------
CATEGORY 2
Greater than 6.25 to 1.00 but
less than or equal
to 6.75 to 1.00 1.00% 2.25%
- -------------------------------------------------------------------------------
CATEGORY 3
Greater than 5.50 to 1.00 but
less than or equal
to 6.25 to 1.00 0.75% 2.00%
- -------------------------------------------------------------------------------
CATEGORY 4
Greater than 4.50 to 1.00 but
less than or equal
to 5.50 to 1.00 0.625% 1.875%
- -------------------------------------------------------------------------------
CATEGORY 5
Less than or equal to
4.50 to 1.00 0.50% 1.75%
- -------------------------------------------------------------------------------
</TABLE>
For these purposes, (a) the Total Leverage Ratio shall be determined as of
the last day of each fiscal quarter (a "Pricing Determination Date") in each
fiscal year of the Borrower and shall be certified in a Pricing Certificate
delivered to the Administrative Agent within 45 days after such Pricing
Determination Date, (b) the Applicable ABR Margin or Applicable Eurodollar
Margin determined on the basis of the Total Leverage Ratio certified as of any
Pricing Determination Date in any Pricing Certificate shall be effective for a
period (a "Pricing Period") that commences on the 46th day after such Pricing
Determination Date and ends on the 45th day after the next following Pricing
Determination Date, and (c) if and whenever the Borrower fails to deliver a
Pricing Certificate for any Pricing Period prior to the commencement of such
Pricing Period, then for each day of such Pricing Period until the first
Business Day following the Business Day on which such Pricing Certificate is
delivered to the
<PAGE> 14
Administrative Agent, the Applicable ABR Margin and Applicable Eurodollar
Margin shall be the rate per annum set forth above in Category 1.
"APPROVED COST ADJUSTMENTS" means, for any period, charges against the
income of any business or Person acquired in a Permitted Acquisition for the
portion of such period prior to the consummation of such Permitted Acquisition,
to the extent such charges are taken into account in the computation of Pro
Forma EBITDA pursuant to the provisions of clause (b) in the definition of "Pro
Forma EBITDA," but only if and to the extent such charges either (a) would be
adjusted pursuant to Article 11 of Regulation S-X of the Securities and
Exchange Commission subject to agreed upon procedures to be performed by the
Borrower's independent accountants, if within 60 days after the consummation of
such Permitted Acquisition the Borrower delivers to the Administrative Agent
and the Lenders a certificate signed by a Financial Officer of the Borrower
describing such adjustments in reasonable detail and stating that such
procedures have been performed by such Financial Officer and that such
adjustments are permitted under Article 11 of Regulation S-X, or (b) reflect
cost savings attributable to termination of non-recurring costs (such as costs
of employee compensation or raw materials) by the Borrower or any Borrower
Subsidiary after the consummation of such Permitted Acquisition, if (i) within
60 days after the consummation of such Permitted Acquisition the Borrower
delivers to the Administrative Agent a certificate signed by a Financial
Officer of the Borrower describing such non-recurring costs in reasonable
detail and stating when such costs were, or are to be, terminated, (ii) the
Borrower does not receive written notice given by the Administrative Agent or
the Required Lenders at any time during the period of five Business Days after
their receipt of the certificate referred to in clause (i) of this clause (b),
to the effect that the Administrative Agent or the Required Lenders have
determined, in their sole and individual discretion, that such cost savings
have not been satisfactorily demonstrated and shall not constitute Approved
Cost Adjustments.
"ARRANGER" means CSI.
"ASSET PURCHASE AGREEMENTS" means the Asset Purchase Agreements dated as
of November 21, 1997 by and among Holdings, the Borrower, Hollinger
International Inc. and certain of its subsidiaries, and, for the limited
purposes described therein, GEI II, together with each and all of the
instruments, agreements and documents delivered pursuant thereto or a copy or
form of which is attached thereto (including specifically the Transitional
Services Agreement attached thereto as Exhibit 5.12 and the Non-Competition
Agreement
<PAGE> 15
attached thereto as Exhibit 7.4(c)), in each case as originally
executed and amended through the date of this Agreement as set forth in
Schedule 3.1(k) and as hereafter amended from time to time in compliance with
Section 6.11.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered
into by a Lender and an assignee (with the consent of any party whose consent
is required by Section 9.4), and accepted by the Administrative Agent, in the
form of Exhibit A or any other form approved by the Administrative Agent.
"ATTRIBUTABLE REVENUES" means, for any period and as to any assets or
Borrower Subsidiary, that portion of the revenues of Holdings and its
consolidated Subsidiaries that was earned by or derived from the business in
which such assets were used or generated or the business conducted by such
Borrower Subsidiary.
"BOARD" means the Board of Governors of the Federal Reserve System of the
United States of America.
"BORROWER" means Liberty Group Operating, Inc., a Delaware corporation.
"BORROWER PLEDGE AND SECURITY AGREEMENT" means the Pledge and Security
Agreement substantially in the form of Exhibit B-1, entered into by the
Borrower and the Administrative Agent for the benefit of the holders of
Obligations.
"BORROWER SUBSIDIARY" means any subsidiary of the Borrower.
"BORROWING" means (a) Loans of the same Class and Type, made, converted or
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect or (b) a Swingline Loan.
"BORROWING REQUEST" means a request by the Borrower for a Borrowing in
accordance with Section 2.3.
"BUSINESS DAY" means any day that is not (a) a Saturday, Sunday, (b) any
other day on which commercial banks in New York City are authorized or required
by law to remain closed (c) or, when used in connection with a Eurodollar Loan,
a day on which banks are not open for dealings in dollar deposits
<PAGE> 16
in the London interbank market.
"CAPITAL EXPENDITURES" means, for any period, any and all expenditures
made by any member of the Holdings Group in such period for assets added to or
reflected in its property, plant and equipment accounts or other similar
capital asset accounts on a balance sheet statement prepared in accordance with
GAAP, whether such asset is purchased for cash or financed as an account
payable or by the incurrence of Indebtedness or otherwise, except any such
expenditure made with (or in the amount of) the proceeds of insurance,
condemnation awards (or payment in lieu thereof) or indemnity payments received
from third parties for purposes of replacing or repairing the assets in respect
of which such proceeds, awards or payments were received, so long as such
expenditures are made within 18 months of the occurrence of the damage to or
loss of the assets being repaired or replaced.
"CAPITAL LEASE OBLIGATIONS" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination
thereof, which obligations are required to be classified and accounted for as
capital leases on a balance sheet of such Person under GAAP, and the amount of
such obligations shall be the capitalized amount thereof determined in
accordance with GAAP.
"CASH INTEREST COVERAGE RATIO" means, as of any day, the ratio of (i)
Adjusted Pro Forma EBITDA for the 12-month period then ended (taken as a single
period) to (ii) Pro Forma Cash Interest Expense for such period.
"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 et seq.
"CHANGE IN CONTROL" means, at any time, (a) the failure of GEI II to own,
directly or indirectly, beneficially or of record, shares representing in
excess of 50% of the aggregate ordinary voting power represented by the issued
and outstanding capital stock of Holdings; (b) the failure of LG&P (or any
Affiliate thereof) to act as the sole general partner of GEI II; (c) a majority
of the directors of Holdings are Persons who were neither nominated by the
board of directors of Holdings nor appointed by directors so nominated; (d) a
majority of the directors of the Borrower are Persons who were neither
nominated by the board of directors of Borrower or Holdings nor appointed by
directors so nominated; (e) the acquisition of direct or indirect Control of
Holdings or the Borrower by any
<PAGE> 17
Person or group other than LG&P (or a limited partnership fund for which LG&P
or any Affiliate thereof acts as the sole general partner); (f) the failure of
Holdings to own directly or indirectly 100% of the outstanding Equity Interests
in the Borrower, free and clear of all Liens (other than Liens under the Loan
Documents); or (g) the occurrence of any event that constitutes a "Change of
Control," as such term is defined in the Senior Subordinated Note Indenture or
the Discount Debenture Indenture.
"CHANGE IN LAW" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender or the Issuing
Bank (or, for purposes of Section 2.14(b), by any lending office of such Lender
or by such Lender's or the Issuing Bank's holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"CITIBANK" means Citibank, N.A., a national banking association.
"CITICORP USA" means Citicorp USA, Inc., a Delaware corporation.
"CLASS," when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans.
"CO-AGENT" means Bank of America NT & SA, in its capacity as co-agent for
the Lenders hereunder.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL" means any and all property upon which any Lien in favor of
the Administrative Agent is purported to be granted pursuant to any Security
Document.
"COMPLIANCE CERTIFICATE" means a certificate in substantially the form of
Exhibit C or any other form approved by the Administrative Agent, signed by a
Financial Officer of the Borrower.
"CONSOLIDATED EBITDA" means, for any period, (a) Consolidated
<PAGE> 18
Net Income for such period plus, (b) without duplication and to the extent
deducted from revenues in determining Consolidated Net Income, the sum of (i)
Consolidated Interest Expense for such period, (ii) charges for income tax
expense for such period, and (iii) charges for depreciation and amortization
for such period minus (c) without duplication and to the extent added to
revenues in determining Consolidated Net Income for such period, all
extraordinary and nonrecurring gains and all non-cash gains during such period,
all as determined on a consolidated basis with respect to the Borrower and the
Borrower Subsidiaries in accordance with GAAP and plus (d) without duplication
and to the extent charged against revenues in determining Consolidated Net
Income for such period, all extraordinary and nonrecurring losses and all
non-cash losses during such period, all as determined on a consolidated basis
with respect to the Borrower and the Borrower Subsidiaries in accordance with
GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, all interest
expense, whether currently incurred or previously incurred and capitalized
(including amortization of debt issuance costs, original issue discount,
interest paid in kind and the interest component in respect of Capital Lease
Obligations), accrued or paid by the Borrower and the Borrower Subsidiaries
during such period, determined on a consolidated basis in accordance with GAAP
and in any event including (i) interest, commitment fees, letter of credit
fees, agent fees, closing fees and all other costs and expenses under or in
respect of this Agreement, (ii) interest, accretion or amortization of original
issue discount, underwriting discounts, closing fees and costs and registration
rights costs and liquidated damages in respect of the Senior Subordinated Notes
and all other Indebtedness of the Borrower or any Borrower Subsidiary, and
(iii) costs of interest rate Hedging Agreements.
"CONSOLIDATED NET INCOME" means, for any period, net income or loss of the
Borrower and the Borrower Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, excluding (a) the income (if
positive) of any Partially-Owned Subsidiary or any other Person in which any
Person other than a Loan Party has any interest, except to the extent of the
amount of dividends or other distributions actually paid to the Borrower or a
Wholly-Owned Borrower Subsidiary by such Person during such period, and (b) the
income (or loss) of any Person accrued prior to the date it becomes a
Subsidiary or is merged into or consolidated with any member of the Holdings
Group or the date that Person's assets are acquired by any member of the
Holdings Group.
<PAGE> 19
"CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
The terms "Controlling" and "Controlled" have meanings correlative thereto.
"COPYRIGHT SECURITY AGREEMENT" means a Copyright Security Agreement in
substantially the form of Exhibit D, duly executed by the Loan Parties in form
sufficient for filing in the United States Copyright Office.
"CSI" means Citicorp Securities, Inc., a Delaware corporation.
"DEBT ISSUANCE DOCUMENTS" means the Purchase Agreements dated as of
January 15, 1998 and the Registration Rights Agreements dated as of January 27,
1998 in the form delivered to the Lenders prior to the Effective Date, as so
delivered and amended from time to time thereafter in compliance with Section
6.11.
"DEFAULT" means any event or condition that constitutes an Event of
Default or that upon notice or lapse of time (or both) would become an Event of
Default.
"DEFERRED ACQUISITION CONSIDERATION" means, as to any Permitted
Acquisition effective at the consummation thereof, all Acquisition
Consideration for such Permitted Acquisition except Acquisition Consideration
that was paid in cash or by transfer of assets at or prior to the consummation
of such Permitted Acquisition.
"DISCLOSED MATTERS" means any matter described in the Asset Purchase
Agreements or the Disclosure Schedule thereto or in this Agreement or any
Schedule attached hereto.
"DISCOUNT DEBENTURE INDENTURE" means the Indenture dated as of January 27,
1998, between Holdings and State Street Bank and Trust Company, as Trustee, as
in effect on the Effective Date and amended from time to time thereafter in
compliance with Section 6.11.
"DISCOUNT DEBENTURES" means any and all securities issued and outstanding
under the Discount Debenture Indenture.
"DISQUALIFIED STOCK" means, as to any Person, all outstanding
<PAGE> 20
Equity Interests issued by such Person or by any Affiliate of such Person:
(a) that such Person is, or upon the lapse of any period of time or
occurrence of any event (including consent thereto by any creditor of such
Person) might become, obligated to redeem, purchase or exchange for cash or
Indebtedness or any other form of consideration except (i) an undertaking to
exchange such Equity Interests solely for Equity Interests that are issued by
Holdings and do not constitute Disqualified Stock, (ii) an undertaking by
Holdings to redeem preferred Equity Interests issued by it on any date
occurring after the seventh anniversary of the Effective Date, if such
redemption is permitted at the time under any and all indentures and agreements
governing Indebtedness of Holdings or the Borrower then outstanding and if such
redemption obligation is subordinated to such Indebtedness on the terms set
forth in the Holdings Certificate of Designations as in effect on the Effective
Date, and (iii) an undertaking by Holdings to purchase preferred Equity
Interests issued by it upon the occurrence of a "Change of Control," as such
term is defined in the Holdings Certificate of Designations, if such
undertaking can become enforceable only if permitted under this Agreement and
any and all indentures and agreements governing Indebtedness of Holdings and,
if it becomes enforceable, is subordinated to all Indebtedness of Holdings or
the Borrower then outstanding on the terms set forth in the Holdings
Certificate of Designations as in effect on the Effective Date, or
(b) in respect of which such Person is, or upon the lapse of any period of
time or occurrence of any event (including consent thereto by any creditor of
such Person) might become, obligated to pay dividends or make distributions
except dividends and distributions that are to be paid or made solely by
issuance of Equity Interests that are issued by Holdings and do not constitute
Disqualified Stock.
"DOCUMENTATION AGENT" means Wells Fargo Bank, N.A., in its capacity as
documentation agent for the Lenders.
"DOLLARS" or "$" refers to lawful money of the United States of America.
"EFFECTIVE DATE" means the date on which the conditions specified in
Section 3.1 are satisfied (or waived in accordance with Section 9.2).
"EFFECTIVE DATE CAPITALIZATION TABLE" means the information set
<PAGE> 21
forth on Schedule 1.1-A.
"ENVIRONMENTAL LAWS" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by or with any Governmental
Authority, relating in any way to the environment, preservation or
reclamation of natural resources, handling, treatment, storage, disposal,
Release or threatened Release of any Hazardous Material or to health and safety
matters.
"ENVIRONMENTAL LIABILITY" means any liability, contingent or otherwise
(including any liability for damages, natural resource damage, costs of
environmental remediation, administrative oversight costs, fines, penalties or
indemnities), of any member of the Holdings Group directly or indirectly
resulting from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of
any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the
release or threatened release of any Hazardous Materials into the environment
or (e) any contract, agreement or other consensual arrangement pursuant to
which liability is assumed or imposed with respect to any of the foregoing.
"EQUITY DOCUMENTS" means (i) the Amended and Restated Certificate of
Incorporation of Holdings, a copy of which is attached as Exhibit E-1, (ii)
the Certificate of Incorporation of the Borrower, a copy of which is attached
as Exhibit E-2, (iii) the By-laws of Holdings, a copy of which is attached as
Exhibit E-3, (iv) the By-Laws of the Borrower, a copy of which is attached as
Exhibit E-4, (v) the Holdings Certificate of Designations, a copy of which is
attached as Exhibit E-5, and (vi) the resolutions of the board of directors of
each Loan Party authorizing the Financing Transactions adopted on or prior to
the Effective Date, in each case as in effect on the Effective Date and
amended from time to time thereafter in compliance with Section 6.11.
"EQUITY INTERESTS" means, with respect to any Person, any capital stock of
such Person or membership interests, partnership interests (whether general or
limited) or other equity interests in such Person, regardless of type, class,
preference or designation, and all warrants, options, purchase rights,
conversion or exchange rights, voting rights, calls or claims of any character
with respect thereto, in each case whether outstanding on the Effective Date or
issued or granted at any time thereafter.
"ERISA" means the Employee Retirement Income Security Act of
<PAGE> 22
1974, as amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that, together with the Borrower, is (or at any relevant time
was) treated as a single employer under Section 414(b) or (c) of the Code or,
solely for purposes of Section 302 of ERISA and Section 412 of the Code, is
treated as a single employer under Section 414 of the Code.
"ERISA EVENT" means (a) any "reportable event," as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan, other
than an event for which the 30-day notice period is waived (except that
a reportable event arising from the disqualification of a Plan or the distress
termination of a Plan under Section 4041(c) of ERISA shall be an ERISA Event
without regard to any waiver of notice provided by the PBGC by regulation or
otherwise); (b) the existence with respect to any Plan of an "accumulated
funding deficiency" (as defined in Section 412 of the Code or Section 302 of
ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the
Code or Section 303(d) of ERISA of an application for a waiver of the minimum
funding standard with respect to any Plan; (d) the receipt by any Loan Party or
any of its ERISA Affiliates from the PBGC or a plan administrator of any notice
relating to an intention by the PBGC to terminate any Plan or Plans or to
appoint a trustee to administer any Plan; (e) the incurrence by any Loan Party
or any of its ERISA Affiliates of any liability with respect to the withdrawal
or partial withdrawal from any Plan or Multiemployer Plan; if such liability is
in a material amount or has, or would reasonably be expected to have, a
Material Adverse Effect; (f) the cessation of operations at a facility of any
Loan Party or any of its ERISA Affiliates in the circumstances described in
Section 4062(e) of ERISA; (g) fulfillment with respect to any Plan of the
conditions for imposition of a Lien under Section 302(f) of ERISA; (h) adoption
of an amendment to a Plan requiring the provision of security to such Plan
pursuant to Section 307 of ERISA; or (i) the receipt by any Loan Party or any
of its ERISA Affiliates of any notice that a Multiemployer Plan with respect to
which any Loan Party or its ERISA Affiliate has a contribution obligation is,
or is expected to be, terminated, insolvent or in reorganization, within the
meaning of Title IV of ERISA.
"EURODOLLAR," when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Adjusted LIBO Rate.
"EURODOLLAR RESERVE RATE" means, at any time, a fraction
<PAGE> 23
(expressed as a decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate (expressed as a
decimal) of the maximum reserve percentages (including any marginal, special,
emergency or supplemental reserves) established by the Board and then in effect
as to Citibank or any Lender or any other bank that is a member bank of the
Federal Reserve System for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D. For
purposes solely of the compensation required by Section 2.14(e), Eurodollar
Loans shall be deemed to constitute eurocurrency funding and to be subject to
such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation and without regard to
whether any Lender actually obtains or maintains eurocurrency funding for its
Eurodollar Loans. The Eurodollar Reserve Rate shall be adjusted automatically
on and as of the effective date of any change in any reserve percentage.
"EVENT OF DEFAULT" has the meaning assigned to such term in Section 7.1.
"EXCLUDED ASSETS" means (a) rights, licenses and franchises granted by any
Governmental Authority in which it is unlawful to create a Lien, (b) any
leasehold interest in real estate, except the tenant's interest in Fixtures
thereon, and (c) any owned real estate, except Fixtures thereon.
"EXCLUDED TAXES" means, with respect to the Agents, any Lender, the
Issuing Bank or any other recipient of any payment to be made by or on account
of any obligation of the Borrower hereunder, (a) income or franchise taxes
imposed on (or measured by) its net income by the United States of America, or
by the jurisdiction under the laws of which such recipient is organized or in
which its principal office is located or, in the case of any Lender, in which
its applicable lending office is located, (b) any branch profits taxes imposed
by the United States of America or any similar tax imposed by any other
jurisdiction in which the Borrower is located and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by the Borrower under
Section 2.17), any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this
Agreement (or designates a new lending office) or is attributable to such
Foreign Lender's failure to comply with Section 2.15(e), except to the extent
that such Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new lending office (or
<PAGE> 24
assignment), to receive additional amounts from the Borrower
with respect to such withholding tax pursuant to Section 2.15(a).
"FACILITY AMOUNT" means, at any time, the then aggregate amount of the
Revolving Commitments and shall be $125,000,000 on the Effective Date, as such
amount may be increased pursuant to Section 2.1(b) and reduced pursuant to
Section 2.8 or Section 7.1 or any other provision of this Agreement.
"FEDERAL FUNDS RATE" means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1 %) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1 %) of the quotations for such day for such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.
"FINANCIAL OFFICER" means, with respect to any Loan Party, the chief
financial officer or treasurer of such Loan Party.
"FINANCING TRANSACTIONS" means the execution, delivery and performance by
each Loan Party of the Loan Documents to which it is to be a party, the
borrowing of Loans on or at any time after the Effective Date and the use of
the proceeds thereof and the issuance of Letters of Credit on or at any time
after the Effective Date.
"FOREIGN LENDER" means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"GAAP" means generally accepted accounting principles in the United States
of America.
"GEI II" means Green Equity Investors II, L.P., an investment fund
controlled by LG&P.
"GOVERNMENTAL AUTHORITY" means the government of the United States of
America, any other nation or any political subdivision thereof, whether
<PAGE> 25
state or local, and any agency, authority, instrumentality, regulatory body,
court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"GUARANTOR PLEDGE AND SECURITY AGREEMENT" means the Pledge and Security
Agreement substantially in the form of Exhibit B-2, entered into by the
Guarantors and the Administrative Agent for the benefit of the holders of
Obligations.
"GUARANTORS" means Holdings and each Borrower Subsidiary that has executed
a counterpart of the Guaranty, Indemnity and Subordination Agreement.
"GUARANTY" of or "GUARANTEE" by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having
the economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly (except endorsements for collection or deposit in the ordinary
course of business), and shall include any obligation of the guarantor, direct
or indirect, (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation or to purchase
(or to advance or supply funds for the purchase of) any security for the
payment thereof, (b) to purchase or lease property, securities or services for
the purpose of assuring the owner of such Indebtedness or other obligation of
the payment thereof, (c) to maintain working capital, equity capital or any
other financial statement condition or liquidity of the primary obligor so as
to enable the primary obligor to pay such Indebtedness or other obligation or
(d) as an account party in respect of any letter of credit or letter of
guaranty issued to support such Indebtedness or obligation.
"GUARANTY, INDEMNITY AND SUBORDINATION AGREEMENT" means the Guaranty,
Indemnity and Subordination Agreement substantially in the form of Exhibit F,
entered into by the Guarantors for the benefit of the holders of Obligations
and other Beneficiaries described therein.
"HAZARDOUS MATERIALS" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law, including any material listed as a hazardous substance under
<PAGE> 26
Section 101(14) of CERCLA.
"HEDGING AGREEMENT" means any interest rate protection agreement, foreign
currency exchange agreement, commodity price protection agreement or other
interest or currency exchange rate or commodity price hedging arrangement.
"HOLDINGS" means Liberty Group Publishing, Inc., a Delaware corporation.
"HOLDINGS CERTIFICATE OF DESIGNATIONS" means the Certificate of
Designations of the Powers, Preferences, and Relative Participating, Optional
and Other Special Rights of Series A 14 3/4% Senior Redeemable Exchangeable
Cumulative Preferred Stock and Series B Junior Redeemable Cumulative Preferred
Stock, and Qualifications, Limitations and Restrictions Thereof, adopted by
Holdings on or about January 23, 1998.
"HOLDINGS GROUP" means, collectively, Holdings and the Subsidiaries,
including the Borrower.
"INDEBTEDNESS" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all Deferred Acquisition Consideration
(counted at the face amount thereof, without any discount or allowance or
reduction for any imputed interest, original issue discount or present value
discount or for any payment contingency) and all obligations of such Person in
respect of the deferred purchase price of property or services, but excluding
current accounts payable incurred in the ordinary course of business or (if so
incurred prior to a Permitted Acquisition) assumed in a Permitted Acquisition,
(f) all obligations of such Person or any other Person secured by (or for which
the holder of such obligation has an existing right, contingent or otherwise,
to be secured by) any Lien (except a Permitted Encumbrance) on property then
owned or thereafter to be acquired by such Person, whether or not such Person
has assumed liability for the payment of such obligations, (g) all Guaranties
by such Person of Indebtedness or any other liability of any other Person, (h)
all Capital Lease Obligations of such Person, (i) all obligations of such
Person, contingent or otherwise, in respect of letters of
<PAGE> 27
credit (including all LC Exposure), letters of guaranty or bankers
acceptances, (j) all obligations of such Person, contingent or otherwise, in
respect of Hedging Agreements, (k) all obligations of such Person, contingent
or otherwise, under Profit Payment Agreements, and (l) all Equity Interests
that are, as to such Person, Disqualified Stock.
"INDEMNIFIED TAXES" means Taxes other than Excluded Taxes.
"INFORMATION MEMORANDUM" means the information relating to Holdings and
the Borrower and the Transactions submitted to the Administrative Agent or any
Lender by LG&P, Holdings or the Borrower and includes, (a) Liberty Group
Publishing Co-Investment Memorandum dated November 1997 prepared by LG&P, (b)
the financial projections prepared by LG&P dated 11/19/97 and identified as
"Hollinger Model Co-Investment Case," and all supplements and additions thereto
and replacements therefor prepare by LG&P or the Borrower or Holdings and
delivered at any time prior to the Effective Date, (c) LG&P's slide
presentation booklet related to the Acquisition, (d) the Offering Memorandum
dated January 15, 1998 relating to the Senior Subordinated Notes, and (e) the
Offering Memorandum dated January 15, 1998, as supplemented January 20, 1998,
relating to the Discount Debentures.
"INTEREST ELECTION REQUEST" means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.7.
"INTEREST PAYMENT DATE" means (a) with respect to any ABR Loan (other than
a Swingline Loan), the last day of each month, (b) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part and, in the case of a Eurodollar
Borrowing with an Interest Period of more than three months' duration, each day
prior to the last day of such Interest Period that occurs at intervals of three
months' duration after the first day of such Interest Period, and (c) with
respect to any Swingline Loan, the last day of each month or, if earlier, the
day on which such Loan is required to be repaid.
"INTEREST PERIOD" means, with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect, except that (a) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
<PAGE> 28
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For these purposes, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter
shall be the effective date of the most recent conversion or continuation of
such Borrowing.
"INVESTMENT" means any purchase or acquisition of any Equity Interest in
any Person, any merger or consolidation with any Person, any purchase of the
assets of a business from any Person, any loan or advance to any Person, any
Guaranty of any Indebtedness or any other liability of any Person, any purchase
or acquisition of any Indebtedness or any other liability of any Person, and
any other transaction described in or restricted pursuant to Section 6.5.
"ISSUING BANK" means Citibank, in its capacity as the issuer of Letters of
Credit hereunder, and its successors in such capacity as provided in Section
2.5(i). The Issuing Bank may, in its discretion, arrange for one or more
Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case
the term "Issuing Bank" shall include any such Affiliate with respect to
Letters of Credit issued by such Affiliate.
"LC AVAILABILITY PERIOD" means the period from and including the Effective
Date to but excluding the earlier of (a) the date that is five Business Days
prior to the Maturity Date and (b) the date of termination of the Revolving
Commitments.
"LC DISBURSEMENT" means a payment made by the Issuing Bank pursuant to a
Letter of Credit.
"LC EXPOSURE" means, at any time, the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on
behalf of the Borrower at such time. The LC Exposure of any Lender at any time
shall be its Applicable Percentage of the total LC Exposure at such time.
"LENDERS" means the Persons listed on Schedule 2.1 and any other Person
that shall have become a party hereto pursuant to an Assignment and Acceptance,
other than any such Person that ceases to be a party hereto pursuant
<PAGE> 29
to an Assignment and Acceptance. Unless the context otherwise requires, the
term "Lenders" includes the Swingline Lender.
"LETTER OF CREDIT" means any letter of credit issued pursuant to this
Agreement.
"LG&P" means Leonard Green & Partners, L.P., a Delaware limited
partnership.
"LIBO RATE" means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is
not available at such time for any reason, then the "LIBO Rate" with respect to
such Eurodollar Borrowing for such Interest Period shall be the rate at which
dollar deposits of $5,000,000 and for a maturity comparable to such Interest
Period are offered by the principal London office of Citibank in immediately
available funds in the London interbank market at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period.
"LIEN" means, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing)
relating to such asset and (c) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
"LOAN DOCUMENTS" means this Agreement, each promissory note issued
pursuant to Section 2.9(e), the Letters of Credit, the Guaranty, Indemnity and
Subordination Agreement, the Security Documents and each other certificate,
instrument or agreement executed and delivered by any Loan Party in favor of
the Administrative Agent, Issuing Bank or any Lender pursuant to the provisions
hereof or thereof.
<PAGE> 30
"LOAN PARTIES" means the Borrower and the Guarantors.
"LOANS" means the loans made by the Lenders to the Borrower pursuant to
this Agreement.
"MANAGEMENT AGREEMENT" means the Management Services Agreement dated
January 27, 1998, between the Borrower and LG&P, as in effect on the Effective
Date and amended from time to time thereafter in compliance with Section 6.11.
"MARGIN STOCK" has the meaning assigned to such term in Regulation U.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, property, assets, prospects or condition, financial or
otherwise, of Holdings and the Subsidiaries, taken as a whole, or the Borrower
and Borrower Subsidiaries, taken as a whole, (b) the ability of the Borrower to
pay the Obligations or perform its agreements under the Loan Documents, or (c)
the validity or enforceability of this Agreement or any of the other Loan
Documents or any of the material rights or remedies of the Administrative
Agent, the Issuing Bank or any Lender hereunder or thereunder.
"MATERIAL INDEBTEDNESS" means Indebtedness (other than the Loans and
Letters of Credit), or obligations in respect of one or more Hedging
Agreements, of any one or more of Holdings, the Borrower and the Subsidiaries
in an aggregate principal amount exceeding $5,000,000. For purposes of
determining the amount of Material Indebtedness at any time, the "principal
amount" of the obligations of Holdings, the Borrower or any Subsidiary in
respect of any Hedging Agreement at such time shall be the maximum aggregate
amount (giving effect to any netting agreements) that Holdings, the Borrower or
such Subsidiary would be required to pay if such Hedging Agreement were
terminated at such time.
"MATURITY DATE" means January 27, 2003.
"MISCELLANEOUS UNPLEDGED ASSETS" means, at any time of determination,
assets of the Loan Parties (a) upon which a security interest cannot be created
and perfected by the filing of a financing statement under the provisions of
Article 9 of the Uniform Commercial Code, as in effect in the jurisdiction in
which such assets or the owner of such assets is located and (b) that have, in
the
<PAGE> 31
aggregate for all such assets owned by all Loan Parties, a fair value not
exceeding the sum of (i) $2,000,000 and (ii) the aggregate amount then on
deposit in any and all collection accounts that are automatically cleared on at
least a weekly basis to a concentration account which is maintained, and as to
which a Perfection Notice is in effect, as set forth in Section 5.13(b), other
than any minimum balances that are maintained in such collection accounts and
counted against the $2,000,000 amount set forth in clause (i).
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"NET CASH PROCEEDS" means:
(a) all cash proceeds received by the Borrower or Holdings from
the issuance and sale of any Equity Interests at any time after the
Effective Date (except Equity Interests sold to management employees of
the Borrower or any Subsidiary) or from the incurrence of any
Indebtedness (other than Indebtedness described in clauses (i) through
(vii) of Section 6.1), in each case net of underwriting discounts and
commissions and issuance costs, and
(b) all cash proceeds in excess of $1,500,000 received by the
Borrower or any Borrower Subsidiary or Holdings from the Transfer of
any assets (except Transfers described in clauses (i) through (ii) of
Section 6.6) or from the sale, collection or other disposition or
liquidation of any promissory note or other obligation issued in
consideration of any such Transfer of assets, determined as of the
300th day following the receipt of such cash proceeds net of (i) costs
of the sale or disposition incurred and paid by members of the Holdings
Group, (ii) income or gains taxes currently payable in cash by any
member of the Holdings Group by reason of the sale or disposition,
(iii) any such cash proceeds that are applied to the repayment of any
Capital Lease or purchase money Indebtedness secured by the property
sold in such Transfer, and (iv) any such cash proceeds that are applied
by the Borrower, within 300 days after they are received by any member
of the Holdings Group, to the payment of Acquisition Consideration for
any Permitted Acquisition consummated within such 300-day period.
<PAGE> 32
"OBLIGATIONS" means all direct or indirect debts, liabilities and other
obligations of the Borrower or any other Loan Party of any and every type and
description at any time arising under or in connection with this Agreement or
any other Loan Document, to the Administrative Agent, the Arranger, the
Syndication Agent, the Documentation Agent, the Issuing Bank, Citibank, any
Lender, any Person entitled to indemnification pursuant to Section 9.3(b), or
any of their respective Related Persons or their respective successors,
transferees or assigns, whether or not the right of such Person to payment in
respect of such obligations and liabilities is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured and whether or not such claim is
discharged, stayed or otherwise affected by any bankruptcy case or insolvency
or liquidation proceeding, and shall include (a) all liabilities of the
Borrower for principal of and interest on the Loans, (b) all liabilities of the
Borrower in respect of Letters of Credit, (c) all liabilities of the Borrower
under the Loan Documents for any fees, costs, taxes, expenses, indemnification
and other amounts payable thereunder, (d) all liabilities under the Guaranty,
Indemnity and Subordination Agreement, the Subsidiary Notes and the other
Security Documents, and (e) all other liabilities of the Borrower or any other
Loan Party to any such Person under or in respect of any of the Loan Documents
or the Financing Transactions.
"OTHER TAXES" means any and all current or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made under any Loan Document or from the execution, delivery
or enforcement of, or otherwise with respect to, any Loan Document.
"PARTIALLY-OWNED SUBSIDIARY" means any Borrower Subsidiary that is not a
Wholly-Owned Subsidiary.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
"PERFECTION CERTIFICATE" means a certificate in substantially the form of
Exhibit G or any other form approved by the Administrative Agent, signed by a
Financial Officer of the Borrower.
"PERFECTION NOTICE" means a notice to a depositary bank in substantially
the form of Exhibit H or any other form approved by the Administrative Agent.
<PAGE> 33
"PERMITTED ACQUISITION" means any acquisition by the Borrower or a
Borrower Subsidiary of assets of a business from any Person or of outstanding
Equity Interests in any Person, if all of the following conditions are met:
(a) immediately after giving effect thereto, no Default has occurred and
is continuing or would result therefrom;
(b) such acquisition has not been preceded by an unsolicited tender offer
for such Person by the Borrower or any of its Affiliates;
(c) all transactions related thereto are consummated in compliance, in all
material respects, with applicable laws;
(d) in the case of any acquisition of any Equity Interest in any Person,
such acquisition either (i) results in such Person becoming a Partially-Owned
Subsidiary that is Controlled solely by the Borrower, if the Acquisition
Consideration for such acquisition, when added to the then aggregate amount of
the Unrecovered Investment in all Partially-Owned Subsidiaries, does not exceed
$20,000,000 or (ii) is an acquisition of 100% of the Equity Interests in such
Person (or is an acquisition of at least 90% of the outstanding shares of each
class of the stock of such Person, if such Person is merged with the acquiror
pursuant to Section 253 of the Delaware General Corporation Law, or an
analogous short-form merger provision of another state of the United States,
within 30 days of such acquisition) and after giving effect to such acquisition
(or such short-form merger) such Person becomes a Wholly-Owned Subsidiary of
the Borrower;
(e) all actions, if any, required to be taken under Section 5.12 with
respect to any acquired or newly formed Subsidiary are taken as and when
required under Section 5.12;
(f) such assets are used for, or such Person is engaged in, a line of
business permitted under Section 6.4(b);
(g) on a pro forma basis, after giving effect to such acquisition and all
Deferred Acquisition Consideration therefor and all other Indebtedness assumed
or incurred by any Loan Party in connection therewith or to finance payment of
the Acquisition Consideration and costs therefor, all as if closed, assumed or
incurred on the first day of the 12-month period ending on the last day of the
fiscal quarter most recently ended prior to the consummation of such
<PAGE> 34
acquisition, (A) the Borrower is in compliance with the covenants set forth in
Section 6.13 and Section 6.14 and (B) the Borrower can reasonably be expected
to remain in compliance with such covenants through the Maturity Date and to
have sufficient cash liquidity to conduct its business and pay its debts and
other liabilities as they become due;
(h) on or before the date of such acquisition (or, if any Approved Cost
Adjustments must be determined and approved in order for the condition in
clause (g) in this definition to be satisfied, at least five Business Days (or,
if the Acquisition Consideration for such acquisition exceeds $10,000,000, at
least ten Business Days) before any member of the Holdings Group enters into
such acquisition or any agreement therefor that is not contingent upon such
acquisition being permitted under this Agreement), the Borrower delivers to the
Administrative Agent and Lenders a certificate signed by a Financial Officer of
the Borrower:
attaching financial statements of the business or Person to
be acquired, including income statements or statements of
operations and, if available, balance sheet statements for at
least the fiscal year or the four fiscal quarters then most
recently ended, certified by a Financial Officer of the Borrower
to the best of his or her knowledge,
describing all Acquisition Consideration for such
acquisition and, if such Acquisition Consideration exceeds
$10,000,000, demonstrating that such Acquisition Consideration
is not greater than three times the annual revenues reported by
such business or Person for the period of four fiscal quarter
then most recently ended,
setting forth the costs of such business or Person
reflected in such financial statements that the Borrower asserts
to be non-recurring costs that should be approved as Approved Cost
Adjustments, to the extent such costs have been identified by the
Borrower at such time, and
demonstrating that the condition in clause (g) of this
definition is, or in case of approval of such Approved Cost
Adjustments would be, satisfied; and
<PAGE> 35
(i) neither Holdings nor the Borrower nor any Borrower Subsidiary shall
incur, assume or otherwise become liable for or subject to any Indebtedness in
connection with such acquisition, except Indebtedness permitted by Section 6.1.
"PERMITTED CASH INVESTMENTS" means:
(a) direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States of America (or by
any agency thereof to the extent such obligations are backed by the full faith
and credit of the United States of America), in each case maturing within 180
days from the date of acquisition thereof;
(b) investments in commercial paper maturing within 180 days from the date
of acquisition thereof and having, at such date of acquisition, the highest
credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and time
deposits maturing within 180 days from the date of acquisition thereof issued
or guaranteed by or placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank organized under the laws
of the United States of America or any State thereof that has a combined
capital and surplus and undivided profits of not less than $500,000,000; and
(d) fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) above (without regard to
the limitation on maturity contained in such clause) and entered into with a
financial institution satisfying the criteria described in clause (c) above.
"PERMITTED ENCUMBRANCES" means any of the following, so long as it is not
a Lien securing Indebtedness:
(a) Liens imposed by law for taxes that are not yet due or are being
contested in compliance with Section 5.5;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and
other like Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 60 days or are being
contested in compliance with Section 5.5;
<PAGE> 36
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other social
security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course of business;
(e) judgment liens in respect of judgments that do not constitute an Event
of Default under Section 7.1(l); and
(f) easements, zoning restrictions, rights-of-way and similar encumbrances
on real property imposed by law or arising in the ordinary course of business
that do not secure any monetary obligations and do not materially detract from
the value of the affected property or interfere with the ordinary conduct of
business of the Borrower or any Borrower Subsidiary.
"PERSON" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
"PLAN" means any employee pension benefit plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA, whether or not terminated, and in respect of which the
Borrower or any ERISA Affiliate is or was (or, if such plan were terminated,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"PLEDGE AND SECURITY AGREEMENTS" means the Borrower Pledge and Security
Agreement and the Guarantor Pledge and Security Agreement.
"PRICING CERTIFICATE" means a certificate in substantially the form of
Exhibit I, signed by a Financial Officer of the Borrower.
"PROFIT PAYMENT AGREEMENT" means any agreement to make any payment the
amount of which is, or the terms of payment of which are, in any respect
subject to or contingent upon the revenues, income, cash flow or profits (or
the like) of any Person or business.
"PRO FORMA CASH INTEREST EXPENSE" means, for any period,
<PAGE> 37
(a) Consolidated Interest Expense for such period, plus (b) all interest
expense of Holdings and all other charges that would be added to Consolidated
Interest Expense if Consolidated Interest Expense were determined on a
consolidated basis for Holdings and its Subsidiaries (rather than the Borrower
and the Borrower Subsidiaries), minus (c) to the extent taken into account in
determining such Consolidated Interest Expense, all charges in such period for
accretion or amortization of (i) original issue discount for the Discount
Debentures, (ii) capitalized closing fees and costs of the Financing
Transactions, or (iii) capitalized closing fees and costs of the issuance and
sale of Senior Subordinated Notes and the Discount Debentures, plus (d)
interest on Acquired Indebtedness of any Person that became a Borrower
Subsidiary during such Period accrued in such period prior to the time such
Person became a Borrower Subsidiary, plus (e) if and to the extent the proceeds
of any Loans are used in such period to pay the purchase price or any
non-competition payment or other Acquisition Consideration or costs for any
Permitted Acquisition or any other Indebtedness (including Deferred Acquisition
Consideration) is incurred in such period as part of or to finance a Permitted
Acquisition, the amount of all interest charges that would be added to
Consolidated Interest Expense for such period if such Loans and other
Indebtedness had been outstanding from the first day of such period.
"PRO FORMA EBITDA" means, for any period, (a) Consolidated EBITDA for such
period, plus (or, if a negative number, minus) (b) the amount by which such
Consolidated EBITDA would have been increased (or, if a negative number,
decreased) for such period if each Permitted Acquisition that was consummated
in such period had been consummated on the first day thereof and Consolidated
EBITDA had been computed after giving affect to all revenues, charges and other
items pertinent to the determination of Consolidated EBITDA that both (i) were
actually and properly recorded in respect of the business or Person acquired in
such Permitted Acquisition for the period prior to the consummation of such
Permitted Acquisition and (ii) are set forth in financial statements certified
(to the best of his or her knowledge) by a Financial Officer of the Borrower
and delivered to the Administrative Agent as set forth in clause (h) in the
definition of "Permitted Acquisition," minus (c) all extraordinary or
non-recurring revenues, gains and other additions to income that were recorded
in respect of any such business or Person acquired in a Permitted Acquisition
prior to or by reason of the consummation of such Permitted Acquisition, minus
(d) the amount by which such Consolidated EBITDA would have been decreased for
such period if any and all items included in the calculation thereof that are
attributable to any business or Subsidiary that was sold in such period were
excluded in the
<PAGE> 38
calculation thereof, and plus (e) all extraordinary or non-recurring losses
that were recorded in respect of any such business or Person acquired in a
Permitted Acquisition prior to or by reason of the consummation of such
Permitted Acquisition.
"PRO FORMA REVENUES" means, for any period, total revenues of the Borrower
and the Borrower Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP, plus the amount by which such total revenues
would have been increased for such period (a) if each Permitted Acquisition
that was consummated in such period had been consummated on the first day
thereof and (b) for any period that ends in 1998, if the Acquisition had been
consummated on the first day of such period.
"REGISTER" has the meaning set forth in Section 9.4(c).
"REGULATION G" means Regulation G of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"REGULATION U" means Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"REGULATION X" means Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.
"RELATED PARTIES" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees,
attorneys, agents and advisors of such Person and such Person's Affiliates.
"REQUIRED LENDERS" means, at any time, Lenders having Total Exposures and
unused Revolving Commitments representing more than 50% of the sum of the Total
Exposures and unused Revolving Commitments at such time.
"RESTRICTED PAYMENT" means (a) any payment or distribution, direct or
indirect, on account or in respect of any Equity Interest in any Loan Party or
any of the Senior Subordinated Notes or Discount Debentures, (b) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any Equity Interest in any Loan
Party or any Senior Subordinated Notes or Discount Debentures, or (c) any
payment or reimbursement, direct or indirect, on account of any consulting
fees, management fees, director fees, expenses, taxes, indemnification
obligations or other costs
<PAGE> 39
incurred or payable by or on behalf of the Borrower or any other Loan Party
to or for the benefit of the holder of any Equity Interest in Holdings or any
Affiliate of any such holder.
"REVOLVING AVAILABILITY PERIOD" means the period from and including the
Effective Date to but excluding the earlier of (a) the Maturity Date and (b)
the date of termination of the Revolving Commitments.
"REVOLVING COMMITMENT" means, with respect to each Lender, the commitment
of such Lender to make Revolving Loans and to acquire participations in Letters
of Credit and Swingline Loans hereunder, expressed as an amount representing
the maximum aggregate amount of such Lender's Total Exposure hereunder, as such
commitment may be (a) reduced from time to time pursuant to Section 2.8 or 7.1
or any other provision of this Agreement and (b) reduced or increased from time
to time pursuant to assignments by or to such Lender pursuant to Section 9.4.
The initial amount of each Lender's Revolving Commitment is set forth on
Schedule 2.1, or in the Assignment and Acceptance pursuant to which such Lender
shall have assumed its Revolving Commitment, as applicable (and the initial
aggregate amount of the Lenders' Revolving Commitments is $125,000,000).
"REVOLVING LOAN" means a Loan made pursuant to Section 2.1.
"S&P" means Standard & Poor's.
"SECURITY DOCUMENTS" means the Pledge and Security Agreements, the
Trademark Assignment, the Copyright Security Agreement, the Subsidiary Notes,
and each other collateral assignment, security agreement or other instrument or
document executed and delivered pursuant to Section 5.12 or Section 5.13 to
secure any of the Obligations.
"SENIOR LEVERAGE RATIO" means, as of any day, the ratio of (a) all
Indebtedness of the Borrower and Borrower Subsidiaries outstanding on such day,
except (i) the Senior Subordinated Notes and (ii) Indebtedness of the Borrower
to a Wholly-Owned Borrower Subsidiary or of a Wholly-Owned Borrower Subsidiary
to the Borrower, to (b) Adjusted Pro Forma EBITDA for the 12-month period then
ended (taken as a single accounting period).
"SENIOR SUBORDINATED NOTE INDENTURE" means the Indenture dated as of
January 27, 1998, between the Borrower and State Street Bank and Trust
<PAGE> 40
Company, as Trustee, as in effect on the Effective Date and amended from time
to time thereafter in compliance with Section 6.11.
"SENIOR SUBORDINATED NOTES" means any and all securities issued and
outstanding under the Senior Subordinated Note Indenture.
"SUBSIDIARY" means, with respect to any Person (the "parent") at any date,
any corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent's consolidated financial statements if such financial statements
were prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other
entity of which securities or other ownership interests representing more than
50% of the equity or more than 50% of the ordinary voting power or, in the case
of a partnership, more than 50% of the general partnership interests are, as of
such date, owned, controlled or held, or that is, as of such date, otherwise
Controlled, by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent.
"SUBSIDIARY" means any subsidiary of Holdings.
"SUBSIDIARY NOTE" means a promissory note of a Borrower Subsidiary payable
to the Borrower in substantially the form of Exhibit J.
"SWINGLINE EXPOSURE" means, at any time, the aggregate principal amount of
all Swingline Loans outstanding at such time. The Swingline Exposure of any
Lender at any time shall be its Applicable Percentage of the total Swingline
Exposure at such time.
"SWINGLINE LENDER" means Citicorp USA, in its capacity as lender of
Swingline Loans hereunder.
"SWINGLINE LOAN" means a Loan made pursuant to Section 2.4.
"SYNDICATION AGENT" means BT Alex. Brown Incorporated, in its capacity as
syndication agent for the Lenders hereunder.
"TAXES" means any and all current or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
<PAGE> 41
"TOTAL EXPOSURE" means, with respect to any Lender at any time, the sum of
the outstanding principal amount of such Lender's Revolving Loans and its LC
Exposure and Swingline Exposure at such time.
"TOTAL LEVERAGE RATIO" means, as of any day, the ratio of (a) all
Indebtedness of the Borrower and Borrower Subsidiaries outstanding on such day,
except Indebtedness of the Borrower to a Wholly-Owned Borrower Subsidiary or of
a Wholly-Owned Borrower Subsidiary to the Borrower to (b) Pro Forma EBITDA for
the 12-month period then ended (taken as a single accounting period).
"TRADEMARK ASSIGNMENT" means a Trademark Collateral Assignment in
substantially the form of Exhibit K, duly executed by the Loan Parties in form
sufficient for filing in the United States Patent and Trademark Office.
"TRANSACTION AGREEMENTS" means, collectively, the Asset Purchase
Agreements and each agreement executed or delivered pursuant thereto or in
connection therewith.
"TRANSACTION PARTIES" means each party to any Transaction Agreement.
"TRANSACTIONS" means the Acquisition, the issuance and sale of the Senior
Subordinated Notes, the issuance and sale of the Discount Debentures, and the
Financing Transactions.
"TRANSFER" has the meaning set forth in Section 6.6.
"TYPE," when used in reference to any Loan or Borrowing, refers to whether
the rate of interest on such Loan, or on the Loans comprising such Borrowing,
is determined by reference to the Adjusted LIBO Rate or the Alternate Base
Rate.
"UNRECOVERED INVESTMENT" means, at any time as to any Subsidiary that is
then a Partially-Owned Subsidiary, the aggregate amount of the Acquisition
Consideration for such Partially-Owned Subsidiary and of all other Investments
in such Partially-Owned Subsidiary at any time made by any member of the
Holdings Group, net of the aggregate amount received or recovered by the
Borrower or a Wholly-Owned Borrower Subsidiary in cash on account of such
Acquisition
<PAGE> 42
Consideration or other Investments, as a return of the principal thereof and
not on account of interest thereon or earnings or income attributable thereto.
"WHOLLY-OWNED," when used in reference to any subsidiary of any Person,
means that all outstanding Equity Interests in such subsidiary are beneficially
owned solely by such Person or one or more other Wholly-Owned subsidiaries of
such Person.
"WITHDRAWAL LIABILITY" means liability of any Loan Party or any of its
ERISA Affiliates with respect to a Multiemployer Plan as a result of a complete
or partial withdrawal of such Loan Party or any of its ERISA Affiliates from
such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of
Title IV of ERISA.
SECTION CLASSIFICATION OF LOANS AND BORROWINGS.
For purposes of this Agreement, Loans may be classified and referred to
by Class (e.g., a "Revolving Loan") or by Type (e.g., a "Eurodollar Loan")
or by Class and Type (e.g., a "Eurodollar Revolving Loan"). Borrowings also
may be classified and referred to by Class (e.g., a "Revolving Borrowing") or
by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a
"Eurodollar Revolving Borrowing").
SECTION TERMS GENERALLY.
The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require,
any pronoun shall include the corresponding masculine, feminine and neuter
forms. The words "include," "includes" and "including" shall be deemed to be
followed by the phrase "without limitation." The word "will" shall be
construed to have the same meaning and effect as the word "shall." Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors,
transferees and assigns, (c) the words "herein," "hereof" and "hereunder," and
words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, (d) all references herein
to Articles, Sections, Exhibits and
<PAGE> 43
Schedules shall be construed to refer to Articles and Sections of, and
Exhibits and Schedules to, this Agreement and (e) the words "asset" and
"property" shall be construed to have the same meaning and effect and to refer
to any and all tangible and intangible assets and properties, whether real,
personal or mixed and of every type and description.
SECTION ACCOUNTING TERMS; GAAP.
Except as otherwise expressly provided herein, all terms of an accounting
or financial nature shall be construed in accordance with GAAP, as in
effect from time to time. If the Borrower notifies the Administrative Agent
that the Borrower requests an amendment to any provision hereof to eliminate
the effect of any change occurring after the date hereof in GAAP or in the
application thereof on the operation of such provision or if the Administrative
Agent notifies the Borrower that the Required Lenders request an amendment to
any provision hereof for such purpose (in each case regardless of whether any
such notice is given before or after such change in GAAP or in the application
thereof), then such provision shall be interpreted on the basis of GAAP as in
effect and applied immediately before such change became effective until such
notice is withdrawn or such provision is amended in accordance herewith.
SECTION TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE.
When capitalized, the following terms used in this Agreement or the
Security Documents have the meanings given to them in the Uniform
Commercial Code, as in effect in the State of New York on the date of this
Agreement:
Accounts
Certificated Security
Commodity Account
Commodity Contract
Commodity Intermediary
Control
<PAGE> 44
Documents
Equipment
Financial Asset
Fixtures
General Intangibles
Goods
Instruments
Inventory
Investment Property
Purchase Money Security Interest
Securities Account
Securities Intermediary
Security
Security Certificate
Security Entitlement
Uncertificated Security
SECTION DETERMINATION OF FINANCIAL RATIOS.
For purposes of determining the Cash Interest Coverage Ratio, the Total
Leverage Ratio and the Senior Leverage Ratio as of any day prior to the first
anniversary of the Effective Date, (a) Consolidated EBITDA for any period
occurring prior to the Effective Date shall be conclusively taken as equal to
the amount set forth for such period in Schedule 1.6 and (b) in computing the
Cash Interest Coverage Ratio, Pro Forma Cash Interest Expense shall be
annualized by
<PAGE> 45
multiplying the amount of Pro Forma Cash Interest Expense incurred in
that portion of the relevant 12-month period that follows the Effective Date by
a fraction, the numerator of which is 365 and the denominator of which is the
number of days in such portion of the 12-month period.
ARTICLE
THE CREDITS
SECTION COMMITMENTS.
REVOLVING LOANS.
Subject to the terms and conditions set forth herein, each Lender
severally (and not jointly) agrees to make Revolving Loans to the
Borrower from time to time during the Revolving Availability Period in an
aggregate principal amount that will not result in such Lender's Total Exposure
exceeding such Lender's Revolving Commitment in effect at such time. Within
the foregoing limits and subject to the terms and conditions set forth herein,
the Borrower may borrow, prepay and reborrow Revolving Loans.
INCREASE OPTION.
The Facility Amount may be increased by an amount up to $50,000,000, at
the request of the Borrower if such request is approved by the Administrative
Agent and each of the Lenders, each acting individually at its sole option and
discretion, as follows:
On a single occasion at any time after the first and prior
to the fourth anniversary of the Effective Date, if the
Revolving Commitments have not previously been voluntarily
reduced by the Borrower and if no Default has occurred and is
continuing, the Borrower may submit a written proposal to the
Administrative Agent for an increase of the Facility Amount by
any amount up to $50,000,000. If such proposal is satisfactory
to the Administrative Agent, at its sole option and discretion,
the Administrative Agent shall forthwith notify the Lenders of
such proposal and shall, in such notice, (A) state the proposed
effective
<PAGE> 46
date of such increase and (B) request each Lender to notify the
Administrative Agent within 15 Business Days whether such proposal is
approved by such Lender, at the sole option and election of such Lender,
and, if so, in what amount (if any) such Lender is willing to increase
its Revolving Commitment as of the effective date set forth in such
notice.
If, within 15 Business Days after such notice is given by
the Administrative Agent, each Lender signifies to the
Administrative Agent in writing that such Lender approves the
increase of the Facility Amount described in such notice and if
within such 15 Business Day period the Administrative Agent
receives, either from one or more of the Lenders or from any
other Person eligible and willing to become a Lender as set
forth in Section 9.4, written commitments (in form reasonably
satisfactory to the Borrower and the Administrative Agent) for
funding the proposed increase in the Facility Amount, then such
increase shall become effective as of the effective date set
forth in such notice.
No increase in the Facility Amount (A) shall become
effective unless the Administrative Agent and each Lender (each
acting at its sole and individual option and election) has given
its written consent thereto or (B) shall require any Lender to
increase its Revolving Commitment except in an amount committed
by such Lender in writing at the time of and in response to any
such proposed increase or any lesser amount allocated to such
Lender by the Administrative Agent prior to the effective date
of such increase.
Neither the Administrative Agent nor any Lender shall have
any obligation or liability whatsoever to the Borrower or any
other Loan Party or any other Person with respect to the
approval of any proposed increase in the Facility Amount or for
any refusal to approve, negotiate or consider any such proposal
or for any act or omission related thereto.
SECTION LOANS AND BORROWINGS.
RATABLE AND SEVERAL. Each Loan (other than a Swingline Loan)
shall be made as part of a Borrowing consisting of Loans
<PAGE> 47
of the same Class and Type made by the Lenders ratably in accordance with
their respective Commitments of the applicable Class. The failure of any
Lender to make any Loan required to be made by it shall not relieve any other
Lender of its obligations hereunder. The Revolving Commitments are several and
no Lender shall be responsible for any other Lender's failure to make Loans as
required.
TYPE. Subject to Sections 2.7(f), 2.7(g) and 2.13, each Revolving
Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans
as the Borrower may request in accordance herewith. Each Swingline
Loan shall be an ABR Loan. Each Lender at its option may make any
Eurodollar Loan by causing any domestic or foreign branch or Affiliate
of such Lender to make such Loan. The exercise of such option shall
not affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement.
AMOUNT. At the commencement of each Interest Period for any
Eurodollar Borrowing, such Borrowing shall be in an aggregate amount
that is an integral multiple of $1,000,000 and not less than
$2,000,000. At the time that each ABR Borrowing is made, such
Borrowing shall be in an aggregate amount that is an integral multiple
of $1,000,000 and not less than $2,000,000, except that an ABR
Borrowing may be in an aggregate amount that is equal to the entire
unused balance of the total Revolving Commitments or that is required
to finance the reimbursement of an LC Disbursement as contemplated by Section
2.5(e). Each Swingline Loan shall be in an amount that is an integral multiple
of $100,000 and not less than $500,000. Borrowings of more than one Type and
Class may be outstanding at the same time, but there shall not at any time be
more than a total of six Eurodollar Borrowings outstanding.
LIMITATION. Notwithstanding any other provision of this
Agreement, the Borrower shall not be entitled to request, or to elect
to convert or continue, any Borrowing if the Interest Period requested
with respect thereto would end after the Maturity Date.
SECTION REQUESTS FOR BORROWINGS.
To request a Revolving Borrowing, the Borrower shall notify the
Administrative Agent of such request by telephone (a) in the case of a
Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three
Business Days
<PAGE> 48
before the date of the proposed Borrowing or (b) in the case of an ABR
Borrowing, not later than 11:00 a.m., New York City time, one Business Day
before the date of the proposed Borrowing, provided that any such notice of an
ABR Revolving Borrowing to finance the reimbursement of an LC Disbursement as
contemplated by Section 2.5(e) may be given not later than 10:00 a.m., New York
City time, on the date of the proposed Borrowing. Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Borrowing Request
in a form approved by the Administrative Agent and signed by the Borrower.
Each such telephonic and written Borrowing Request shall specify the following
information in compliance with Section 2.2:
the aggregate amount of such Borrowing;
the date of such Borrowing, which shall be a Business Day;
subject to Section 2.2(b), whether such Borrowing is to be
an ABR Borrowing or a Eurodollar Borrowing;
in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period
contemplated by the definition of the term "Interest Period";
and
the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the
requirements of Section 2.6.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be
deemed to have selected an Interest Period of one month's duration. Promptly
following receipt of a Borrowing Request in accordance with this Section 2.3,
the Administrative Agent shall advise each Lender of the details thereof and of
the amount of such Lender's Loan to be made as part of the requested Borrowing.
SECTION SWINGLINE LOANS.
<PAGE> 49
OPTIONAL FUNDING OF SWINGLINE LOANS. Subject to the terms and
conditions set forth herein, the Swingline Lender at its option may
elect to make Swingline Loans to the Borrower from time to time during
the Revolving Availability Period, in an aggregate principal amount at
any time outstanding that will not result in (i) the aggregate
principal amount of outstanding Swingline Loans exceeding $10,000,000
or (ii) the sum of the Total Exposures exceeding the total Revolving
Commitments in effect at such time. The Swingline Lender shall not be
required to make a Swingline Loan to refinance an outstanding Swingline
Loan. Within the foregoing limits and subject to the terms and
conditions set forth herein, the Borrower may borrow, prepay and
reborrow Swingline Loans.
REQUEST FOR SWINGLINE LOAN. To request a Swingline Loan, the
Borrower shall notify the Administrative Agent of such request by
telephone (confirmed by telecopy), not later than 12:00 noon, New York
City time, on the day of a proposed Swingline Loan. Each such notice
shall be irrevocable and shall specify the requested date (which shall
be a Business Day) and amount of the requested Swingline Loan. The
Administrative Agent will promptly advise the Swingline Lender of any
such notice received from the Borrower. If the Swingline Lender
elects, at its sole option, to make such Swingline Loan, the Swingline
Lender shall make such Swingline Loan available to the Borrower by
means of a credit to the general deposit account of the Borrower with
Citibank in New York City (or, in the case of a Swingline Loan made to
finance the reimbursement of an LC Disbursement as provided in Section
2.5(e), by remittance to the Issuing Bank) by 3:00 p.m., New York City
time, on the requested date of such Swingline Loan.
PURCHASE OF PARTICIPATIONS BY LENDERS. Upon demand by the
Swingline Lender, by written notice given to the Administrative Agent
not later than 10:00 a.m., New York City time, on any Business Day,
each Lender severally (and not jointly) will purchase on such Business
Day, for a cash purchase price equal to its Applicable Percentage of
100% of the amount due, participations in all or a portion of
the Swingline Loans outstanding. Such notice shall specify the
aggregate amount of Swingline Loans in which Lenders will participate.
Promptly upon receipt of such notice, the Administrative Agent will
give notice thereof to each Lender, specifying in such notice such
Lender's Applicable Percentage of such Swingline Loans. Each Lender
hereby absolutely and unconditionally agrees, severally (and not
jointly) and upon receipt of
<PAGE> 50
notice as provided above, to pay to the Administrative Agent, for the account
of the Swingline Lender, such Lender's Applicable Percentage of such Swingline
Loans. Each Lender acknowledges and agrees that its obligation to acquire
participations in Swingline Loans pursuant to this Section 2.4(c) is absolute
and unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or reduction or
termination of the Revolving Commitments, and that each such payment shall be
made without any offset, abatement, withholding or reduction whatsoever. Each
Lender shall comply with its obligation under this Section 2.4(c) by wire
transfer of immediately available funds, in the same manner as provided in
Section 2.6 with respect to Loans made by such Lender (and Section 2.6 shall
apply, mutatis mutandis, to the payment obligations of the Lenders), and the
Administrative Agent shall promptly pay to the Swingline Lender the amounts so
received by it from the Lenders. The Administrative Agent shall notify the
Borrower of any participations in any Swingline Loan acquired pursuant to this
Section 2.4(c), and thereafter payments in respect of such Swingline Loan shall
be made to the Administrative Agent and not to the Swingline Lender. Any
amounts received by the Swingline Lender from the Borrower (or other party on
behalf of the Borrower) in respect of a Swingline Loan after receipt by the
Swingline Lender of the proceeds of a sale of participations therein shall be
promptly remitted to the Administrative Agent, and any such amounts received by
the Administrative Agent shall be promptly remitted by the Administrative Agent
to the Lenders that have made their payments pursuant to this Section 2.4(c)
and to the Swingline Lender, as their interests may appear. The purchase of
participations in a Swingline Loan pursuant to this Section 2.4(c) shall not
relieve the Borrower of any default in the payment thereof.
SECTION LETTERS OF CREDIT.
ISSUANCE OF LETTERS OF CREDIT. Subject to the terms and
conditions set forth herein, the Borrower may request the issuance of
Letters of Credit for its own account, in a form reasonably acceptable
to the Administrative Agent and the Issuing Bank, at any time and from
time to time during the LC Availability Period. In the event of any
inconsistency between the terms and conditions of this Agreement and
the terms and conditions of any form of letter of credit application or
other agreement submitted by the Borrower to, or entered into by the Borrower
with, the
<PAGE> 51
Issuing Bank relating to any Letter of Credit, the terms and conditions of
this Agreement shall control.
REQUEST FOR LETTER OF CREDIT. To request the issuance of a Letter
of Credit (or the amendment, renewal or extension of an outstanding
Letter of Credit), the Borrower shall hand deliver or telecopy (or
transmit by electronic communication, if arrangements for doing so have
been approved by the Issuing Bank) to the Issuing Bank and the
Administrative Agent (reasonably in advance of the requested date of
issuance, amendment, renewal or extension) a notice requesting the
issuance of a Letter of Credit, or identifying the Letter of Credit to
be amended, renewed or extended, and specifying the date of issuance,
amendment, renewal or extension (which shall be a Business Day), the
date on which such Letter of Credit is to expire (which shall comply
with Section 2.5(c)), the amount of such Letter of Credit, the name and
address of the beneficiary thereof and such other information as shall
be necessary to prepare, amend, renew or extend such Letter of Credit.
If requested by the Issuing Bank, the Borrower also shall submit a
letter of credit application on the Issuing Bank's standard form in
connection with any request for a Letter of Credit; PROVIDED, that in
the event of a conflict between any such application and this
Agreement, this Agreement shall govern. A Letter of Credit shall be
issued, amended, renewed or extended only if (and upon issuance,
amendment, renewal or extension of each Letter of Credit the Borrower
shall be deemed to represent and warrant that), after giving effect to
such issuance, amendment, renewal or extension (i) the LC Exposure
shall not exceed $10,000,000 and (ii) the aggregate Total Exposures
shall not exceed the aggregate Revolving Commitments in effect at such
time.
EXPIRY DATE. Each Letter of Credit shall expire at or prior to
the close of business on the earlier of (i) the date one year after the
date of the issuance of such Letter of Credit (or, in the case of any
renewal or extension thereof, one year after such renewal or extension)
and (ii) the date that is five Business Days prior to the Maturity
Date.
ACQUISITION OF PARTICIPATION BY LENDERS. By the issuance of a
Letter of Credit (or an amendment to a Letter of Credit increasing the
amount thereof) and without any further action on the part of the
Issuing Bank or the Lenders, the Issuing Bank hereby grants to each
Lender, and each Lender hereby severally (and not jointly) acquires
from
<PAGE> 52
the Issuing Bank, a participation in such Letter of Credit equal to such
Lender's Applicable Percentage of the aggregate amount available to be drawn
under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Lender hereby absolutely and unconditionally agrees
to pay to the Administrative Agent, for the account of the Issuing
Bank, such Lender's Applicable Percentage of each LC Disbursement made
by the Issuing Bank and not reimbursed by the Borrower on the date due
as provided in Section 2.5(e), or of any reimbursement payment required
to be refunded to the Borrower for any reason. Each Lender
acknowledges and agrees that its obligation to acquire participations
pursuant to this Section 2.5(d) in respect of Letters of Credit is
absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension
of any Letter of Credit or the occurrence and continuance of a Default
or reduction or termination of the Revolving Commitments, and that each
such payment shall be made without any offset, abatement, withholding
or reduction whatsoever.
BORROWER'S REIMBURSEMENT OBLIGATION; FUNDING OF PARTICIPATIONS.
If the Issuing Bank makes any LC Disbursement in respect of a Letter of
Credit, the Borrower shall reimburse such LC Disbursement by paying to
the Administrative Agent an amount equal to such LC Disbursement not
later than 12:00 noon, New York City time, on the date that such LC
Disbursement is made, if the Borrower receives notice of such LC
Disbursement prior to 10:00 a.m., New York City time, on such date and
otherwise on the Business Day on which the Borrower receives such
notice. Subject to the conditions to borrowing set forth herein, the
Borrower may request in accordance with Section 2.3 or Section 2.4 that
such payment be financed with an ABR Revolving Borrowing or a Swingline
Loan in an equivalent amount and, to the extent so financed, the
Borrower's obligation to make such payment shall be discharged and
replaced by the resulting ABR Revolving Borrowing or Swingline Loan.
If the Borrower fails to make such payment when due, the Administrative
Agent shall notify each Lender of the applicable LC Disbursement, the
payment then due from the Borrower in respect thereof and such Lender's
Applicable Percentage thereof. Promptly following receipt of such
notice, each Lender severally (and not jointly) agrees to pay to the
Administrative Agent its Applicable Percentage of the payment then due
from the Borrower, in the same manner as provided in Section 2.6 with
respect to Loans made by such Lender (and Section 2.6 shall apply,
mutatis mutandis, to the payment obligations of the Lenders), and the
<PAGE> 53
Administrative Agent shall promptly pay to the Issuing Bank the amounts
so received by it from the Lenders. Promptly following receipt by the
Administrative Agent of any payment from the Borrower pursuant to this
Section 2.5(e), the Administrative Agent shall distribute such payment
to the Issuing Bank or, to the extent that Lenders have made payments
pursuant to this Section 2.5(e) to reimburse the Issuing Bank, then to
such Lenders and the Issuing Bank as their interests may appear. Any
payment made by a Lender pursuant to this Section 2.5(e) to reimburse
the Issuing Bank for any LC Disbursement (other than the funding of ABR
Revolving Loans or a Swingline Loan as contemplated above) shall constitute the
payment of the purchase price for a participation pursuant to Section 2.5(d)
and, accordingly, shall not constitute a Loan and shall not relieve the
Borrower of its obligation to reimburse such LC Disbursement.
REIMBURSEMENT OBLIGATION ABSOLUTE, ETC. The Borrower's obligation
to reimburse LC Disbursements as provided in Section 2.5(e) shall be
absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement under any and
all circumstances whatsoever and irrespective of (i) any lack of
validity or enforceability of any Letter of Credit or this Agreement,
or any term or provision therein, (ii) any draft or other document
presented under a Letter of Credit proving to be forged, fraudulent or
invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a
Letter of Credit against presentation of a draft or other document that
does not comply with the terms of such Letter of Credit, or (iv) any
other event or circumstance whatsoever, whether or not similar to any
of the foregoing, that might, but for the provisions of this Section
2.5(f), constitute a legal or equitable discharge of or defense
against, or provide a right of setoff against, the Borrower's
obligations hereunder. None of the Administrative Agent, the Lenders,
the Issuing Bank or any of their Related Parties shall have any
liability or responsibility by reason of or in connection with the
issuance or transfer of any Letter of Credit or any payment or failure
to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error,
omission, interruption, loss or delay in transmission or delivery of
any draft, notice or other communication under or relating to any
Letter of Credit (including any document required to make a drawing
thereunder), any error in interpretation of technical terms or any
consequence arising from causes beyond the control of the Issuing Bank.
The foregoing shall not be construed to excuse the Issuing
<PAGE> 54
Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
forever waived by the Borrower) suffered by the Borrower that are caused by the
Issuing Bank's failure to exercise care when determining whether drafts and
other documents presented under a Letter of Credit comply with the terms
thereof but only if, in making such determination, the Issuing Bank acted in a
manner that constitutes gross negligence or willful misconduct on the part of
the Issuing Bank, as finally determined by a court of competent jurisdiction.
In furtherance of the foregoing and without limiting the generality thereof,
the parties agree that, with respect to documents presented that appear on
their face to be in compliance with the terms of a Letter of Credit, the
Issuing Bank may, in its sole discretion, either accept and make payment upon
such documents without responsibility for further investigation, regardless of
any notice or information to the contrary, or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such Letter of Credit.
NOTICE OF DRAWING. Whenever it honors any demand for payment
under a Letter of Credit and makes an LC Disbursement thereunder, the
Issuing Bank shall promptly notify the Administrative Agent and the
Borrower by telephone (confirmed by telecopy). No failure to give, or
delay in giving, such notice shall relieve the Borrower of its
obligation to reimburse the Issuing Bank with respect to any such LC
Disbursement or relieve any Lender of its obligation to purchase a
participation therein as set forth in this Section 2.5 or shall
otherwise put the Issuing Bank under any resulting liability to any
Person or any resulting diminution of its rights as against any Person.
INTEREST ON REIMBURSEMENT OBLIGATION. If the Issuing Bank makes
any LC Disbursement, then, unless the Borrower reimburses the Issuing
Bank for such LC Disbursement in full on the date such LC Disbursement
is made, the unpaid amount thereof shall bear interest, for each day
from and including the date such LC Disbursement is made to but
excluding the date that the Borrower reimburses such LC Disbursement,
at the rate per annum (including the Applicable ABR Margin) then
applicable to ABR Revolving Loans, except that if the Borrower fails to
reimburse such LC Disbursement when due pursuant to Section 2.5(e),
then Section 2.12(c) shall apply. Interest accrued pursuant to this
Section 2.5(h) shall be for the account of the Issuing Bank and,
<PAGE> 55
after the date of payment by any Lender pursuant to Section 2.5(d) for the
purchase of a participation, for the account of such Lender to the
extent of such participation.
REPLACEMENT OF ISSUING BANK. The Issuing Bank may be replaced at
any time by written agreement among the Borrower, the Administrative
Agent, the replaced Issuing Bank and the successor Issuing Bank. The
Administrative Agent shall notify the Lenders of any such replacement
of the Issuing Bank. At the time any such replacement shall become
effective, the Borrower shall pay all unpaid fees accrued for the
account of the replaced Issuing Bank pursuant to Section 2.11(b). From
and after the effective date of any such replacement, (i) the successor
Issuing Bank shall have all the rights and obligations of the Issuing
Bank under this Agreement with respect to Letters of Credit to be
issued thereafter and (ii) references herein to the term "Issuing Bank"
shall be deemed to refer to such successor or to any previous Issuing
Bank, or to such successor and all previous Issuing Banks, as the
context shall require. After the replacement of an Issuing Bank
hereunder, the replaced Issuing Bank shall remain a party hereto and shall
continue to have all the rights and obligations of an Issuing Bank under this
Agreement with respect to Letters of Credit issued by it prior to such
replacement, but shall not be required to issue additional Letters of Credit.
CASH COLLATERAL. If at any time when an Event of Default has
occurred and is continuing the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of
the Loans has been accelerated, Lenders with LC Exposure representing
greater than 50% of the total LC Exposure) demanding the deposit of
cash collateral pursuant to this Section 2.5(j), then on the Business
Day on which the Borrower receives such notice the Borrower shall
deposit in an account with Citibank, in the name of the Administrative
Agent and for the benefit of the Lenders, an amount in cash in Dollars
equal to 105% of the LC Exposure as of such date plus any and all
accrued and unpaid interest thereon, except that the obligation to
deposit such cash collateral shall become effective immediately, and
such deposit shall become immediately due and payable, without demand
or other notice of any kind, upon the occurrence of any Event of
Default with respect to the Borrower described in Section 7.1(i) or
7.1(j).
TERMS OF CASH COLLATERAL DEPOSIT. Each cash
<PAGE> 56
collateral deposit made pursuant to any provision of this Agreement shall
be held by Citibank for the sole account of the Administrative Agent as
collateral for the payment of the Obligations. The Administrative Agent shall
have exclusive dominion and control, including the exclusive right of
withdrawal, over such account. Other than any interest earned on the
investment of such deposits, which investments shall be made at the option and
sole discretion of the Administrative Agent at the request of the Borrower and
at the Borrower's risk and expense, such deposits shall not bear interest.
Interest or profits, if any, on such investments shall accumulate in such
account. Moneys in such account shall be applied by the Administrative Agent
to reimburse the Issuing Bank for LC Disbursements for which it has not been
reimbursed and, to the extent not so applied, shall be held for the
satisfaction of the reimbursement obligations of the Borrower for the LC
Exposure at such time or, if the maturity of the Loans has been accelerated
(but subject to the consent of Lenders with LC Exposure representing greater
than 50% of the total LC Exposure), be applied to satisfy other obligations of
the Borrower under this Agreement. The Borrower shall be entitled to any
surplus of any such cash collateral deposit that may remain unapplied after the
Revolving Commitments have been terminated, all Letters of Credit have expired
or been discharged, and all Loans, reimbursement obligations, fees, expenses,
taxes, indemnities and other Obligations then outstanding have been paid in
full in cash.
SECTION FUNDING OF BORROWINGS.
TRANSFER OF FUNDS. Each Lender shall make each Loan to be made by
it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 12:00 noon, New York City time, to the
account of the Administrative Agent most recently designated by the
Administrative Agent for such purpose by notice to the Lenders, except
that Swingline Loans shall be made as provided in Section 2.4. The
Administrative Agent will make such Loans available to the Borrower by
promptly crediting the amounts so received, in like funds, to an
account of the Borrower maintained with Citibank in New York City and
designated by the Borrower in the applicable Borrowing Request, except
that ABR Revolving Loans made to finance the reimbursement of an LC
Disbursement as provided in Section 2.5(e) shall be remitted by the
Administrative Agent to the Issuing Bank.
<PAGE> 57
FUNDING RELIANCE. Unless the Administrative Agent shall have
received notice from a Lender prior to the proposed date of any
Borrowing that such Lender will not make available to the
Administrative Agent such Lender's share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share
available on such date in accordance with Section 2.6(a) and may, in
reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made
its share of the applicable Borrowing available to the Administrative
Agent, then the applicable Lender and the Borrower severally agree to
pay to the Administrative Agent forthwith on demand such corresponding
amount with interest thereon, for each day from and including the date
such amount is made available to the Borrower to but excluding the date
of payment to the Administrative Agent, at (i) in the case of such
Lender, the greater of the Federal Funds Rate and a rate determined by
the Administrative Agent in accordance with banking industry rules on
interbank compensation or (ii) in the case of the Borrower, the
interest rate applicable to ABR Loans. If such Lender pays such amount
to the Administrative Agent, then such amount shall constitute such
Lender's Loan included in such Borrowing.
SECTION INTEREST ELECTIONS.
CONVERSION AND CONTINUATION. Each Revolving Borrowing initially
shall be of the Type specified in the applicable Borrowing Request and,
in the case of a Eurodollar Borrowing, shall have an initial Interest
Period as specified in such Borrowing Request. Thereafter, the
Borrower may elect to convert such Borrowing to a different Type or to
continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect
Interest Periods therefor, all as provided in this Section 2.7. The Borrower
may elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the
Lenders holding the Loans comprising such Borrowing, and the Loans comprising
each such portion shall be considered a separate Borrowing. This Section 2.7
shall not apply to Swingline Borrowings, which may not be converted or
continued.
NOTICE OF CONVERSION OR CONTINUATION. To make an election
pursuant to this Section 2.7, the Borrower shall notify the
Administrative Agent of such election by telephone by the time that a
<PAGE> 58
Borrowing Request would be required under Section 2.3 if the Borrower
were requesting a Revolving Borrowing of the Type resulting from such
election to be made on the effective date of such election. Each such
telephonic Interest Election Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative
Agent of a written Interest Election Request in a form approved by the
Administrative Agent and signed by the Borrower.
CONTENTS OF NOTICE. Each telephonic and written Interest Election
Request shall specify the following information in compliance with
Section 2.2:
the Borrowing to which such Interest Election Request
applies and, if different options are being elected with respect
to different portions thereof, the portions thereof to be
allocated to each resulting Borrowing (in which case the
information to be specified pursuant to Section 2.7(c)(iii) and
2.7(c)(iv) shall be specified for each resulting Borrowing);
the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
whether the resulting Borrowing is to be an ABR Borrowing
or a Eurodollar Borrowing; and
if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to
such election, which shall be a period contemplated by the
definition of the term "Interest Period."
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
NOTICE TO LENDERS. Promptly following receipt of an Interest
Election Request, the Administrative Agent shall advise each Lender of
the details thereof and of such Lender's portion of each resulting
Borrowing.
<PAGE> 59
CONVERSION TO ABR BORROWING. If the Borrower fails to deliver a
timely Interest Election Request with respect to a Eurodollar Borrowing
prior to the end of the Interest Period applicable thereto, then,
unless such Borrowing is repaid as provided herein, at the end of such
Interest Period such Borrowing shall be converted to an ABR Borrowing.
Notwithstanding any contrary provision hereof, if an Event of Default
has occurred and is continuing, then so long as an Event of Default is
continuing (i) no outstanding Borrowing may be converted to or
continued as a Eurodollar Borrowing and (ii) unless repaid, each
Eurodollar Borrowing shall be converted to an ABR Borrowing at the end
of the Interest Period applicable thereto.
EURODOLLAR FUNDING NOT AVAILABLE. If with respect to any Interest
Period Lenders holding at least 50% in principal amount of the then
outstanding Loans advise the Administrative Agent prior to the first
day of the relevant Eurodollar Interest Period that funding is not
available to such Lenders in the London interbank market in Dollars,
then the Administrative Agent shall forthwith give notice thereof to
the Borrower, whereupon (until the Administrative Agent notifies the
Borrower that the circumstances giving rise to such suspension no
longer exist) the right of the Borrower to elect to have Loans bear
interest as Eurodollar Borrowings shall be suspended, and each
outstanding Eurodollar Borrowing shall be converted into a ABR
Borrowing on the last day of the then current Interest Period therefor,
notwithstanding any prior election by the Borrower to the contrary.
ILLEGALITY. If at any time any Lender determines (which
determination shall, if made in good faith, be final and conclusive and
binding upon all parties) that the funding or continuation of, or
conversion into, a Eurodollar Borrowing has become unlawful or
impermissible by compliance by such Lender in good faith with any law,
governmental rule, regulation or order of any central bank or other
Governmental Authority or quasi-governmental authority (whether or not
having the force of law and whether or not failure to comply therewith
would be unlawful or would result in costs or penalties), then, and in
any such event, such Lender may give notice of that determination, in
writing, to the Borrower and the Administrative Agent, and the
Administrative Agent shall promptly transmit the notice to each other
Lender. When such notice is given by a Lender, (a) the Borrower's right
to request from such Lender, and such Lender's obligation (if any) to
make, Eurodollar Rate
<PAGE> 60
Loans shall be immediately suspended, and such Lender shall make an ABR
Loan as part of any requested Borrowing or continuation of or
conversion into Eurodollar Rate Loans and (b) if the affected
Eurodollar Rate Loan or Loans are then outstanding, the Borrower shall
immediately, or if permitted by applicable law, no later than the date
permitted thereby, upon at least one Business Day's written notice to
the Administrative Agent and the affected Lender, convert each such
Loan into an ABR Loan. If, at any time after a Lender gives notice
under this Section 2.7(g), such Lender determines that it may lawfully
make Eurodollar Rate Loans of the type referred to in such notice, such
Lender shall promptly give notice of that determination, in writing, to
the Borrower and the Administrative Agent, and the Administrative Agent
shall promptly transmit the notice to each other Lender. The
Borrower's right to request from such Lender, and such Lender's
obligation, if any, to make, Eurodollar Rate Loans of such type shall
then be restored.
SECTION TERMINATION AND REDUCTION OF COMMITMENTS.
MANDATORY TERMINATION AT MATURITY AND UPON A CHANGE IN CONTROL.
Unless previously terminated, the Revolving Commitments shall terminate
(i) on the Maturity Date and (ii) on the date written notice of demand
for prepayment is given by the Required Lenders pursuant to Section
2.10(a) upon the occurrence of a Change in Control.
MANDATORY REDUCTION FROM NET CASH PROCEEDS. If and whenever
Holdings or the Borrower or any Borrower Subsidiary receives any Net
Cash Proceeds, the Revolving Commitments shall be reduced (i) in the
case of any Net Cash Proceeds of the type described in clause (a) in
the definition thereof, on the first Business Day after receipt thereof
by an amount equal to the Net Cash Proceeds so received, and (ii) in
the case of any Net Cash Proceeds of the type described in clause (b)
in the definition thereof, on the 301st day after receipt thereof by an
amount equal to the amount of such Net Cash Proceeds determined (as set
forth in such clause (b)) as of the 300th day after receipt thereof.
OPTIONAL TERMINATION OR REDUCTION. The Borrower may at any time
terminate, or from time to time reduce, the Revolving Commitments,
PROVIDED that (i) each reduction of the Revolving Commitments shall be
in an amount that is an integral multiple
<PAGE> 61
of $1,000,000 and not less than $5,000,000, (ii) the Borrower shall not
terminate or reduce the Revolving Commitments if and to the extent that, after
giving effect to such termination or reduction and any concurrent prepayment of
the Revolving Loans in accordance with Section 2.10, the sum of the Total
Exposures would exceed the total Revolving Commitments, and (iii) the
Borrower shall not terminate or reduce the Revolving Commitments if and to the
extent that, after giving effect to such termination or reduction and any
concurrent discharge of Letters of Credit and the Borrower's liabilities with
respect to LC Disbursements that has been approved in writing by the Issuing
Bank in its sole discretion, the LC Exposure would exceed the total Revolving
Commitments.
NOTICE. The Borrower shall notify the Administrative Agent
whenever any reduction of the Revolving Commitments is to become
effective pursuant to Section 2.8(b) and of any election by the
Borrower to terminate or reduce the Revolving Commitments under Section
2.8(c). Such notice shall be given at least three Business Days prior
to the effective date of such termination or reduction, specifying such
termination or the amount and source of such reduction and the
effective date thereof. Promptly following receipt of any such notice,
the Administrative Agent shall advise the Lenders of the contents
thereof. Each notice delivered by the Borrower pursuant to this
Section 2.8(d) shall be irrevocable.
PERMANENT AND RATABLE. Any termination and each reduction of the
Revolving Commitments shall be permanent. Each reduction of the
Revolving Commitments shall be made ratably among the Lenders in
accordance with their respective Revolving Commitments.
DEPOSIT OF CASH COLLATERAL. If on any date the LC Exposure
exceeds the Revolving Commitments in effect on such date, the Borrower
shall on such date deposit cash collateral in an amount equal to 105%
of such excess on the terms set forth in Section 2.5(k).
SECTION REPAYMENT OF LOANS: EVIDENCE OF DEBT.
PROMISE TO PAY. The Borrower hereby unconditionally promises to
pay (i) to the Administrative Agent for the account of each Lender the
then unpaid principal amount of each Revolving Loan of such Lender on
the Maturity Date and (ii) to the
<PAGE> 62
Swingline Lender the then unpaid principal amount of each Swingline Loan
on the earlier of the Maturity Date and the first date after such Swingline
Loan is made that is the 15th or last day of a calendar month and is at least
two Business Days after such Swingline Loan is made. In addition, the Borrower
shall repay all outstanding Swingline Loans on each date that a Revolving
Borrowing is made and, in any event, upon demand by the Swingline Lender at any
time.
LENDER'S LOAN ACCOUNT. Each Lender shall maintain in accordance
with its usual practice an account or accounts evidencing the indebtedness of
the Borrower to such Lender resulting from each Loan made by such Lender,
including the amounts of principal and interest payable and paid to such Lender
from time to time hereunder.
ADMINISTRATIVE AGENT'S RECORDS. The Administrative Agent shall
maintain records in which it shall record (i) the amount of each Loan
made hereunder, the Class and Type thereof and the Interest Period
applicable thereto, (ii) the amount of any principal or interest due
and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the
Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
PRIMA FACIE EVIDENCE. The entries made in the accounts maintained
pursuant to Section 2.9(b) and Section 2.9(c) shall be prima facie
evidence of the existence and amounts of the obligations recorded
therein, but the failure of any Lender or the Administrative Agent to
maintain such accounts or any error therein shall not in any manner
affect the obligation of the Borrower to repay the Loans, and to pay
interest on the Loans, in accordance with the terms of this Agreement.
ISSUANCE OF NOTE. Any Lender may request that Loans of any Class
made by it be evidenced by a promissory note. In such event, the
Borrower shall prepare, execute and deliver to such Lender a promissory
note payable to the order of such Lender (or, if requested by such
Lender, to such Lender and its registered assigns) and in a form
approved by the Administrative Agent. Thereafter, the Loans evidenced
by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 9.4) be represented by
one or more promissory notes in such form payable to the order of the
payee named
<PAGE> 63
therein (or, if such promissory note is a registered note, to such payee and
its registered assigns).
SECTION PREPAYMENT OF LOANS.
UPON A CHANGE IN CONTROL. Upon written demand by the Required
Lenders, if such demand is made after the occurrence of any Change in
Control and prior to the 60th day following the date on which the
Borrower gives the Administrative Agent and Lenders written notice of
the occurrence of such Change in Control and if such demand has not
previously been waived in writing by the Required Lenders, the Borrower
shall, on the first Business Day after such demand, prepay in full all
outstanding Revolving Borrowings and all outstanding Swingline Loans
and deposit cash collateral in an amount equal to 105% of the then LC
Exposure on the terms set forth in Section 2.5(k).
AT THE BORROWER'S OPTION.
The Borrower shall have the right at any time and from time to time to prepay
any Borrowing in whole or in part, subject to the requirements of this Section
2.10.
UPON TERMINATION OR REDUCTION OF THE COMMITMENTS. In the event of
any termination of the Revolving Commitments, the Borrower shall, on
the effective date of such termination, repay or prepay all outstanding
Revolving Borrowings and all outstanding Swingline Loans and deposit
cash collateral in an amount equal to 105% of the then LC Exposure on
the terms set forth in Section 2.5(k). If upon any partial reduction
of the Revolving Commitments the aggregate Total Exposure would exceed
the aggregate Revolving Commitments after giving effect to such
reduction, the Borrower shall, on the effective date of such reduction,
prepay Revolving Borrowings or Swingline Loans (or a combination
thereof) in an amount sufficient to eliminate such excess and if after
giving effect to the repayment of all Revolving Borrowings and
Swingline Loans any such excess remains outstanding, deposit cash
collateral in an amount equal to 105% of such remaining excess on the
terms set forth in Section 2.5(k).
SELECTION OF BORROWINGS TO BE PREPAID. Prior to any optional or
mandatory prepayment of Borrowings hereunder, the Borrower shall select
the Borrowing or Borrowings to be prepaid and shall specify such
selection in the notice of such prepayment pursuant to
<PAGE> 64
Section 2.10(e), but, in any event, each prepayment of Borrowings shall be
applied to prepay ABR Borrowings before any other Borrowings.
NOTICE OF PREPAYMENT. The Borrower shall notify the
Administrative Agent (and, in the case of prepayment of a Swingline
Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any
prepayment hereunder (i) in the case of prepayment of a Eurodollar
Borrowing, not later than 11:00 a.m., New York City time, two Business
Days before the date of prepayment, (ii) in the case of prepayment of
an ABR Borrowing, not later than 11:00 a.m., New York City time, one
Business Day before the date of prepayment or (iii) in the case of
prepayment of a Swingline Loan, not later than 12:00 noon, New York
City time, on the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date, the principal amount
of each Borrowing or portion thereof to be prepaid and, in the case of
a mandatory prepayment, a reasonably detailed calculation of the amount
of such prepayment. Promptly following receipt of any such notice
(other than a notice relating solely to Swingline Loans), the
Administrative Agent shall advise the Lenders of the contents thereof.
Each partial prepayment of any Borrowing shall be in an amount that
would be permitted in the case of an advance of a Borrowing of the same
Type as provided in Section 2.2, except as necessary to apply fully the
required amount of a mandatory prepayment. Each prepayment of a Borrowing
shall be applied ratably to the Loans included in the prepaid Borrowing.
Prepayments shall be accompanied by accrued interest to the extent required by
Section 2.12.
SECTION FEES.
COMMITMENT FEES. The Borrower agrees to pay to the Administrative
Agent for the account of each Lender a commitment fee, which shall accrue at
the rate of 0.50% per annum applied from day to day on the unused amount of the
Revolving Commitment of such Lender on such day for the period from and
including the date of this Agreement to but excluding the date on which the
Revolving Commitments are terminated. Accrued commitment fees shall be payable
in arrears on the last day of March, June, September and December of each year
and on the date on which the Revolving Commitments terminate, commencing on
March 31, 1998. All commitment fees shall be computed on the basis of a year
of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). For purposes of
<PAGE> 65
computing commitment fees with respect to Revolving Commitments, a
Revolving Commitment of a Lender shall be deemed to be used to the
extent of the outstanding Revolving Loans and LC Exposure of such
Lender (and the Swingline Exposure of such Lender shall be disregarded
for such purpose).
LETTER OF CREDIT PARTICIPATION AND FRONTING FEES. The Borrower
agrees to pay to the Administrative Agent for the account of each
Lender a participation fee with respect to its participations in
Letters of Credit, which shall accrue at a rate equal to the Applicable
Eurodollar Margin (as in effect from day to day as such participation
fee accrues) on the day to day amount of such Lender's LC Exposure
(excluding any portion thereof attributable to unreimbursed LC
Disbursements) for each day during the period from and including the
date of this Agreement to but excluding the later of the date on which
such Lender's Revolving Commitment terminates and the date on which
such Lender ceases to have any LC Exposure. The Borrower also agrees
to pay to the Issuing Bank, solely for the Issuing Bank's own account,
a fronting fee which shall accrue at the rate of 1/4 of 1% per annum on
the day to day amount of the LC Exposure for each day during the period
from and including the date of this Agreement to but excluding the
later of the date of termination of the Revolving Commitments and the
date on which there ceases to be any LC Exposure, as well as the
Issuing Bank's standard fees with respect to the issuance, amendment,
renewal or extension of any Letter of Credit or processing of drawings
thereunder. Participation fees and fronting fees accrued through and
including the last day of March, June, September and December of each year
shall be payable on the third Business Day following such last day, commencing
on the first such date to occur after the Effective Date, and, in addition, all
such fees shall be payable on the date on which the Revolving Commitments
terminate and any such fees accruing after the date on which the Revolving
Commitments terminate shall be payable on demand. Any other fees payable to
the Issuing Bank pursuant to this Section 2.11(b) shall be payable within 10
days after demand. All participation fees and fronting fees shall be computed
on the basis of a year of 360 days and shall be payable for the actual number
of days elapsed (including the first day but excluding the last day).
CITICORP FEES. The Borrower agrees to pay to Citicorp USA, for
its own account and for account of the Arranger, fees payable in the
amounts and at the times separately agreed upon between
<PAGE> 66
the Borrower, the Administrative Agent and the Arranger.
FEES DUE AND NONREFUNDABLE. All fees payable hereunder shall be
paid on the dates due, in immediately available funds, to the
Administrative Agent (or to the Issuing Bank, in the case of fees
payable to it) for distribution, in the case of commitment fees and
participation fees, to the Lenders entitled thereto. Fees paid shall
not be refundable under any circumstances.
SECTION INTEREST.
EURODOLLAR BORROWINGS. The Loans comprising each Eurodollar
Borrowing shall bear interest for each day of each Interest Period
selected for such Borrowing in conformity with the provisions of this
Agreement at the Adjusted LIBO Rate determined for such Interest Period
plus the Applicable Eurodollar Margin determined as of such day.
ABR BORROWINGS AND OTHER OBLIGATIONS. The Loans comprising each
ABR Borrowing (including each Swingline Loan) and, except to the extent
interest accrues thereon as set forth in Section 2.12(a), all other
Loans, reimbursement liabilities for LC Disbursements and other
Obligations at any time outstanding (other than interest) shall bear
interest for each day at the Alternate Base Rate in effect for such day
plus the Applicable ABR Margin determined as of such day.
INTEREST AFTER EVENT OF DEFAULT. Notwithstanding the provisions
of Section 2.12(a) and Section 2.12(b), if and for as long as any
amount due for principal of or interest on any Loan or any
reimbursement liability for LC Disbursements remains unpaid and, in
addition, for each day on which any Event of Default has occurred and
is continuing, any and all outstanding Loans, reimbursement liabilities
for LC Disbursements and other Obligations (whether or not then due and
payable) shall bear interest, after as well as before judgment, at a
rate per annum equal to (i) in the case of any Eurodollar Borrowing for
which the Interest Period has not then expired, 2 % per annum plus the
rate (including the Applicable Eurodollar Margin) otherwise applicable
to such Eurodollar Borrowing as provided in Section 2.12(a) or (ii) in
the case of any other Loan, reimbursement liability or other Obligation
then outstanding, 2 % per annum plus the rate (including Applicable ABR
Margin) then applicable to ABR Borrowings as provided in
<PAGE> 67
Section 2.12(b).
PAYMENT OF INTEREST. Accrued interest on each Loan shall be
payable in arrears on each Interest Payment Date for such Loan and, in
the case of Revolving Loans, upon termination of the Revolving
Commitments, except that, in any event, (A) interest accrued pursuant
to Section 2.12(c) shall be payable on demand, (B) in the event of any
repayment or prepayment of any Loan (other than a prepayment of an ABR
Revolving Loan prior to the end of the Revolving Availability Period),
accrued interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment and (C) in the
event of any conversion of any Eurodollar Loan prior to the end of the
current Interest Period therefor, accrued interest on such Loan shall
be payable on the effective date of such conversion.
COMPUTATION OF INTEREST. All interest hereunder shall be computed
on the basis of a year of 360 days, except that interest computed by
reference to the Alternate Base Rate at times when the Alternate Base
Rate is based on Citibank's base rate shall be computed on the basis of
a year of 365 days (or 366 days in a leap year), and in each case shall
be payable for the actual number of days elapsed (including the first
day but excluding the last day). The applicable Alternate Base Rate or
Adjusted LIBO Rate shall be determined by the Administrative Agent, and
such determination shall be conclusive absent manifest error.
SECTION ALTERNATE RATE OF INTEREST.
If prior to the commencement of any Interest Period for a Eurodollar
Borrowing:
the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that adequate and
reasonable means do not exist for ascertaining the Adjusted LIBO
Rate for such Interest Period; or
the Administrative Agent is advised by the Required Lenders
that the Adjusted LIBO Rate for such Interest Period will not
adequately and fairly reflect the cost to such Lenders (or
Lender) of making or maintaining their Loans (or its Loan) included in
such Borrowing for such Interest Period;
<PAGE> 68
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (A) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (B) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.
SECTION YIELD PROTECTION.
INCREASED COSTS. If any Change in Law shall:
impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, any Lender or any
holding company of any Lender (except any such reserve
requirement reflected in the Adjusted LIBO Rate) or the Issuing
Bank; or
impose on any Lender or the Issuing Bank or the London
interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or
participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit
or to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing
Bank, as the case may be, for such additional costs incurred or reduction
suffered.
CAPITAL COSTS. If any Lender or the Issuing Bank determines that
any Change in Law regarding capital requirements increases or would
have the effect of increasing the amount or cost of capital required or
expected to be maintained by such Lender or any corporation controlling
such Lender or Issuing Bank, or reduces or would
<PAGE> 69
have the effect of reducing the rate of return on such capital, and such
Lender or Issuing Bank reasonably determines that the amount or cost of such
capital is increased, or the rate of return thereon is reduced, by or
based upon the existence or funding of such Lender's or Issuing Bank's
commitment to make loans and issue or participate in letters of credit
under this Agreement and other commitments of this type, to a level
below that which such Lender or the Issuing Bank or such Lender's or
the Issuing Bank's holding company could have achieved but for such
Change in Law (taking into consideration such Lender's or the Issuing
Bank's policies and the policies of such Lender's or the Issuing Bank's
holding company with respect to capital adequacy),then, within three
Business Days after demand by such Lender or Issuing Bank, the Borrower
shall pay to such Lender or Issuing Bank, from time to time as
specified by such Lender or Issuing Bank, additional amounts sufficient
to compensate such Lender or Issuing Bank in the light of such
circumstances, to the extent that such Lender or Issuing Bank in good
faith determines such increase in capital, or reduction in the rate of
return, to be allocable to the existence or funding of its commitment.
PROOF OF COSTS. A certificate of a Lender or the Issuing Bank
setting forth the amount or amounts necessary to compensate such Lender
or the Issuing Bank or its holding company, as the case may be, as
specified in Section 2.14(a) or Section 2.14(b) shall be delivered to
the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender or the Issuing Bank, as the case may be,
the amount shown as due on any such certificate within 10 days after
receipt thereof.
LOOK-BACK LIMIT. The Borrower shall not be required to compensate
a Lender or the Issuing Bank pursuant to this Section 2.14 for any
increased costs or reductions incurred more than 90 days prior to the
date that such Lender or the Issuing Bank, as the case may be, notifies
the Borrower of the Change in Law giving rise to such increased costs
or reductions and of such Lender's or the Issuing Bank's intention to
claim compensation therefor, except that, if the Change in Law giving
rise to such increased costs or reductions is retroactive, then the
90-day period referred to above shall be extended to include the period
of retroactive effect thereof. Subject to the foregoing, no failure or
delay on the part of any Lender or the Issuing Bank to demand
compensation pursuant to this Section 2.14 shall constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation.
<PAGE> 70
BREAKAGE COSTS. In the event of (i) the payment of any principal
of any Eurodollar Loan other than on the last day of an Interest Period
applicable thereto (including as a result of an Event of Default), (ii)
the conversion of any Eurodollar Loan other than on the last day of the
Interest Period applicable thereto, (iii) the failure to borrow,
convert, continue or prepay any Revolving Loan on the date specified in
any notice delivered pursuant hereto, or (iv) the assignment of any
Eurodollar Loan other than on the last day of the Interest Period
applicable thereto as a result of a request by the Borrower pursuant to
Section 2.17, then, in any such event, the Borrower shall compensate
each Lender for the loss, cost and expense attributable to such event.
In the case of a Eurodollar Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender
to be the excess, if any, of (A) the amount of interest that would have
accrued on the principal amount of such Loan had such event not
occurred, at the Adjusted LIBO Rate that would have been applicable to
such Loan, for the period from the date of such event to the last day
of the then current Interest Period therefor (or, in the case of a
failure to borrow, convert or continue, for the period that would have
been the Interest Period for such Loan), over (B) the amount of
interest that would accrue on such principal amount for such period at
the interest rate that such Lender would bid, were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount
and period from other banks in the Eurodollar market. A certificate of
any Lender setting forth any amount or amounts that such Lender is
entitled to receive pursuant to this Section 2.14 shall be delivered to
the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender the amount shown as due on any such
certificate within 10 days after receipt thereof.
SECTION TAXES.
PAYMENTS FREE FROM TAXES. Any and all payments by or on account
of any obligation of the Borrower hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes. If, nevertheless, the Borrower shall
be required to deduct any Indemnified Taxes or Other Taxes from such
payments, then (i) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.15) the
Administrative Agent, Lender or Issuing Bank (as the case may be)
<PAGE> 71
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.
PAYMENT OF OTHER TAXES. In addition, the Borrower shall pay any
Other Taxes to the relevant Governmental Authority in accordance with
applicable law.
TAX INDEMNITY. The Borrower shall indemnify the Administrative
Agent, each Lender and the Issuing Bank, within 10 days after written
demand therefor, for the full amount of any Indemnified Taxes or Other Taxes
paid by the Administrative Agent, such Lender or the Issuing Bank, as the case
may be, on or with respect to any payment by or on account of any obligation of
the Borrower hereunder or under any other Loan Document (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section 2.15) and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such Indemnified
Taxes or Other Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. A certificate as to the amount of such
payment or liability delivered to the Borrower by a Lender or the Issuing Bank,
or by the Administrative Agent on its own behalf or on behalf of a Lender or
the Issuing Bank, shall be conclusive absent manifest error.
DELIVERY OF RECEIPT. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower to a Governmental
Authority, the Borrower shall deliver to the Administrative Agent the
original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such
payment or other evidence of such payment reasonably satisfactory to
the Administrative Agent.
FOREIGN LENDER CERTIFICATION. Any Foreign Lender shall deliver to
the Borrower and the Administrative Agent two copies of either United
States Internal Revenue Service Form 1001 or Form 4224, or, in the case
of a Foreign Lender's claiming exemption from U.S. Federal withholding
tax under Section 871(h) or 881(c) of the Code with respect to payments
of "portfolio interest," a Form W-8, or any subsequent versions thereof
or successors thereto (and, if such Foreign Lender delivers
<PAGE> 72
a Form W-8, a certificate representing that such Foreign Lender is not a
bank for purposes of Section 881(c) of the Code, is not a 10-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Borrower and is not a controlled foreign corporation related to the Borrower
(within the meaning of Section 864(d)(4) of the Code)), properly completed and
duly executed by such Foreign Lender claiming complete exemption from or
reduced rate of, U.S. Federal withholding tax on payments by the Borrower under
this Agreement and the other Loan Documents. Such forms shall be delivered by
each Foreign Lender on or before the date it becomes a party to this Agreement
(or, in the case of a Transferee that is a participation holder on or before
the date such participation holder becomes a Transferee hereunder) and on or
before the date, if any, such Foreign Lender changes its applicable lending
office by designating a different lending office (a "New Lending Office"). In
addition, each Foreign Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Foreign
Lender. Notwithstanding any other provision of this Section 2.15(e), a
Foreign Lender shall not be required to deliver any form pursuant to the
preceding sentence of this Section 2.15(e) that such Foreign Lender is not
legally able to deliver.
EFFECT OF FAILURE TO COMPLY. The Borrower shall not be required
to indemnify any Foreign Lender or to pay any additional amounts to any
Foreign Lender in respect of U.S. Federal withholding tax pursuant to
Section 2.15(a) or Section 2.15(c) to the extent that the obligation to
pay such additional amounts would not have arisen but for a failure by
such Foreign Lender to comply with the provisions of Section 2.15(e).
Should a Lender become subject to Taxes because of its failure to
deliver a form required hereunder, Borrower shall, at Lender's expense,
take such steps as such Lender shall reasonably request to assist such
Lender to recover such Taxes.
SECTION PAYMENTS; PRO RATA TREATMENT; SHARING OF SETOFFS.
PLACE, TIME AND MANNER OF PAYMENT. The Borrower shall make each
payment required to be made by it hereunder or under any other Loan
Document (whether of principal, interest, fees or reimbursement of LC
Disbursements, or of amounts payable under Section 2.14 or Section 2.15
or otherwise) prior to 12:00 noon, New
<PAGE> 73
York City time, on the date when due, in immediately available funds,
without setoff or counterclaim. Any amounts received after such time on any
date may, in the discretion of the Administrative Agent, be deemed to have been
received on the next succeeding Business Day for purposes of calculating
interest thereon. All such payments shall be made to the Administrative Agent
at the offices of Citibank at 399 Park Avenue, New York, New York, except
payments to be made directly to the Issuing Bank or Swingline Lender as
expressly provided herein and except that payments pursuant to Sections 2.14,
2.15, and 9.3 shall be made directly to the Persons entitled thereto and
payments pursuant to other Loan Documents shall be made to the Persons
specified therein. The Administrative Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment under any Loan Document
shall be due on a day that is not a Business Day, the date for payment shall be
extended to the next succeeding Business Day, and, in the case of any payment
accruing interest, interest thereon shall be payable for the period of such
extension. All payments under each Loan Document shall be made in dollars.
APPLICATION OF PAYMENTS. If at any time insufficient funds are
received by and available to the Administrative Agent to pay fully all amounts
of principal, unreimbursed LC Disbursements, interest and fees then due
hereunder, such funds shall be applied (i) first, towards payment of interest
and fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and
(ii) second, towards payment of principal and unreimbursed LC Disbursements
then due hereunder, ratably among the parties entitled thereto in accordance
with the amounts of principal and unreimbursed LC Disbursements then due to
such parties.
DISPROPORTIONATE PAYMENTS. If any Lender shall, by exercising any
right of setoff or counterclaim or otherwise, obtain payment in respect
of any principal of or interest on any of its Revolving Loans or
participations in LC Disbursements or Swingline Loans resulting in such
Lender receiving payment of a greater proportion of the aggregate
amount of its Revolving Loans and participations in LC Disbursements
and Swingline Loans and accrued interest thereon than the proportion
received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in
the Revolving Loans and participations in LC Disbursements and
Swingline Loans of other
<PAGE> 74
Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Revolving Loans and
participations in LC Disbursements and Swingline Loans. If any such
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest. The
provisions of this Section 2.16(c) shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration
for the assignment of or sale of a participation in any of its Loans or
participations in LC Disbursements to any assignee or participant, other than
to the Borrower or any Borrower Subsidiary or Affiliate thereof (as to which
the provisions of this Section 2.16(c) shall apply). The Borrower consents to
the foregoing and agrees, to the extent it may effectively do so under
applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against the Borrower rights of setoff and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.
PAYMENT RELIANCE. Unless the Administrative Agent shall have
received notice from the Borrower prior to the date on which any
payment is due to the Administrative Agent for the account of
the Lenders or the Issuing Bank hereunder that the Borrower will not
make such payment, the Administrative Agent may assume that the
Borrower has made such payment on such date in accordance herewith and
may, in reliance upon such assumption, distribute to the Lenders or the
Issuing Bank, as the case may be, the amount due. In such event, if
the Borrower has not in fact made such payment, then each of the
Lenders or the Issuing Bank, as the case may be, severally agrees to
repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender or Issuing Bank with interest thereon, for
each day from and including the date such amount is distributed to it
to but excluding the date of payment to the Administrative Agent, at
the greater of the Federal Funds Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on
interbank compensation.
LENDER'S FAILURE TO FUND. If any Lender shall fail to make any
payment required to be made by it pursuant to Section 2.4(c),
<PAGE> 75
2.5(d), 2.5(e), 2.6(b), 2.16(d) or 9.3(c), then the Administrative Agent may,
in its discretion (notwithstanding any contrary provision hereof), apply any
amounts thereafter received by the Administrative Agent for the account of such
Lender to satisfy such Lender's obligations under such Sections until all such
unsatisfied obligations are fully paid.
SECTION REPLACEMENT OF LENDER.
If any Lender gives notice of illegality pursuant to Section 2.7(g) or
requests compensation under Section 2.14 (other than pursuant to Section
2.14(e), or if the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 2.15, then the Borrower may, at its sole expense and effort, upon
notice to such Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in Section 9.4), all its interests, rights and
obligations under this Agreement to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment), but (in each case) only if (i) the Borrower has received the prior
written consent of the Administrative Agent, the Issuing Bank and Swingline
Lender, which consent shall not unreasonably be withheld, (ii) such Lender has
received payment of an amount equal to the outstanding principal of its
Revolving Loans and participations in LC Disbursements and Swingline Loans,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.14 or payments required to be made pursuant to
Section 2.15, such assignment will result in a reduction in such compensation
or payments. A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.
ARTICLE
CONDITIONS
SECTION EFFECTIVE DATE.
<PAGE> 76
The obligations of the Lenders to make the initial Loans and of the
Issuing Bank to issue the initial Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 9.2):
THIS AGREEMENT. The Administrative Agent shall have received from
each party hereto either (i) a counterpart of this Agreement signed on
behalf of such party or (ii) written evidence satisfactory to the
Agents (which may include telecopy transmission of a signed signature
page of this Agreement) that such party has signed a counterpart of
this Agreement.
GUARANTY, INDEMNITY AND SUBORDINATION AGREEMENT. The
Administrative Agent shall have received counterparts of the Guaranty,
Indemnity and Subordination Agreement signed on behalf of each
Guarantor.
PLEDGE AND SECURITY AGREEMENTS; COLLATERAL. The Administrative
Agent shall have received counterparts of the Borrower Pledge and
Security Agreement signed on behalf of the Borrower and the Guarantor
Pledge and Security Agreement signed on behalf of each Guarantor, and:
the Administrative Agent shall have received delivery, in
pledge, of (A) stock certificates representing all outstanding
shares of capital stock of each member of the Holdings Group
owned by or on behalf of any Loan Party as of the Effective Date
after giving effect to the Transactions and (B) Subsidiary Notes
signed by each Borrower Subsidiary evidencing all Indebtedness
owed to the Borrower by any Borrower Subsidiary as of the
Effective Date after giving effect to the Transactions, together
(in each case) with stock powers and instruments of transfer,
endorsed in blank,
the Administrative Agent shall have received (A) the
Trademark Assignment signed and acknowledged on behalf of each
Loan Party and in form sufficient for filing in the
United States Patent and Trademark Office, (B) the Copyright
Security Agreement signed and acknowledged on behalf of each
Loan Party and in form sufficient for filing in the United States
<PAGE> 77
Copyright Office, and (C) Uniform Commercial Code financing
statements in substantially the form of Exhibit L or such other form as
any Agent or Lender may request, signed on behalf of each Loan Party and
in form sufficient for filing in the filing offices listed on Schedule
4.14(c),
the Administrative Agent shall have received evidence of
consent by each Transaction Party to the creation and
enforcement of the Administrative Agent's security interests in
any and all rights or claims of any Loan Party under the Asset
Purchase Agreements, in the form of a Global Consent to Security
Interest in substantially the form of Exhibit M,
the Administrative Agent shall have received a completed
Perfection Certificate dated the Effective Date and signed by an
executive officer or Financial Officer of the Borrower, together
with all attachments contemplated thereby, including (A) the
results of a search for Uniform Commercial Code (or equivalent)
filings made with respect to the Loan Parties in the
jurisdictions listed on Schedule 4.14(c), (B) copies of the
financing statements (or similar documents) disclosed by such
search and evidence reasonably satisfactory to the Agents that
the Liens indicated by such financing statements (or similar
documents) are permitted by Section 6.3 or have been released,
and (C) Perfection Notices duly executed by the Loan Party that
is the depositor on each deposit account as to which a
Perfection Notice is required under Section 5.13(b).
CLOSING CERTIFICATE. The Administrative Agent shall have received
a certificate in substantially the form of Exhibit N, dated the
Effective Date and signed by the President, a Vice President or a
Financial Officer of the Borrower, confirming compliance with the
conditions set forth in this Article III and confirming the other
matters set forth in Exhibit N;
CORPORATE MATTERS. The Administrative Agent shall have received
such documents and certificates as any Agent or Lender may reasonably
request relating to the organization, existence and good standing of
each Loan Party, the authorization of the Transactions and any other
legal matters relating to the Loan Parties, the Loan Documents or the
<PAGE> 78
Transactions, all in form and substance satisfactory to the
Administrative Agent and its counsel.
OPINION OF COUNSEL TO THE LOAN PARTIES. The Administrative Agent
shall have received a favorable written opinion (addressed to each
Agent and the Lenders and dated the Effective Date) of Mayer, Brown &
Platt, counsel for the Loan Parties, substantially in the form of
Exhibit O and covering such other matters relating to the Loan Parties,
the Loan Documents or the Transactions as the Administrative Agent or
the Required Lenders may reasonably request. The Borrower and Holdings
hereby request such counsel to deliver such opinions.
FACILITY FEES AND COSTS. The Agents shall have received all fees
and other amounts due and payable on or prior to the Effective Date,
including, to the extent invoiced, reimbursement or payment of all
reasonable and documented out-of-pocket expenses required to be
reimbursed or paid by any Loan Party hereunder or under any other Loan
Document.
PRO FORMA BALANCE SHEET. The Lenders shall have received a pro
forma combined balance sheet of the businesses acquired in the
Acquisition as of September 30, 1997, reflecting all pro forma
adjustments as if the Transactions had been consummated on such date
(except for any adjustments that are required by purchase accounting),
accompanied by a certificate of a Financial Officer of Holdings
describing narratively, and without quantification, any material
variances or differences between such balance sheet and a pro forma
combined balance sheet of such businesses as of the Effective Date, and
such pro forma combined balance sheet and certificate shall be
consistent in all material respects with the forecasts and other
information previously provided to the Lenders.
TRANSACTION COSTS. The aggregate amount of fees and expenses
(including underwriting discounts and commissions) payable or otherwise
borne by the Holdings Group in connection with the Transactions shall
not exceed $20,000,000.
FINANCIAL PROJECTIONS. The Lenders shall have received financial
projections for Holdings Group on a consolidated basis for fiscal years
1998 through 2007, showing no material negative variances
<PAGE> 79
from the projections previously provided to the Administrative Agent and
in form and substance reasonably satisfactory to the Agents.
NO CHANGES AS TO TRANSACTION AGREEMENTS. Except as set forth on
Schedule 3.1(k), (i) the Transaction Agreements shall not have been in
any respect modified or amended; (ii) no breach of any provision of any
of the Transaction Agreements shall have occurred, and (iii) no
condition set forth in any of the Transaction Agreements relating to the
obligation of any party thereunder or the consummation of the transactions
contemplated thereby shall have been waived.
EQUITY FUNDING. Holdings shall have received (i) $102,000,000 in
cash as paid-in equity capital from the issuance and sale of its common
and preferred stock as set forth in the Effective Date Capitalization
Table upon the terms and conditions set forth in the Equity Documents
and (ii) at least $50,000,000 in cash proceeds from the issuance and
sale of the Discount Debentures on the terms set forth in the Discount
Debenture Indenture and the Debt Issuance Documents and shall have
transferred such cash to the Borrower as a contribution to the
Borrower's common equity capital.
SENIOR SUBORDINATED NOTES. The Borrower shall have received
$180,000,000 in cash proceeds from the issuance and sale of the Senior
Subordinated Notes on the terms set forth in the Senior Subordinated
Note Indenture and the Debt Issuance Documents.
ACQUISITION CLOSING. The Closing under the Asset Purchase
Agreements shall have been consummated in accordance with the terms and
conditions therein set forth and applicable law, including transfer of
title to the "Assets" described therein to the Borrower Subsidiaries as
set forth on Schedule 3.1(n) and capitalization of the Borrower
Subsidiaries as set forth in the Contribution Agreement attached
thereto, and payment of the purchase price, consideration for
non-competition agreements and other consideration payable thereunder,
and all fees, costs and expenses relating to the Transactions that are
chargeable to or payable or reimburseable by any member of the Holdings
Group shall have been paid. The Administrative Agent shall have
received copies of the Transaction Agreements and all instruments,
agreements, certificates, opinions and other documents delivered
thereunder, certified by a Financial Officer of Holdings as complete
and correct.
<PAGE> 80
UNDRAWN AVAILABILITY. After giving effect any Loans or Letters of
Credit requested on the Effective Date and the Borrower's disbursement
of funds to pay all fees, costs, expenses and other amounts for which
any member of the Holdings Group becomes liable in connection with the
Transactions on or prior to the Effective Date, the aggregate Total
Exposure shall not exceed $10,000,000.
NO OTHER DEBT. After giving effect to the Transactions and the
other transactions contemplated hereby, no member of the Holdings Group
shall have any outstanding Indebtedness or preferred stock other than
(i) Indebtedness created and outstanding under the Loan Documents, (ii)
Senior Subordinated Notes issued by the Borrower and guaranteed (on a
subordinated basis) by Borrower Subsidiaries and outstanding on the terms set
forth in the Senior Subordinated Note Indenture, (iii) Discount Debentures
issued by Holdings and outstanding on the terms set forth in the Discount
Debenture Indenture and not in any respect Guaranteed by the Borrower or any
Borrower Subsidiary, (iv) the Holdings Preferred Stock described in the
Effective Date Capitalization Table issued by Holdings and outstanding on the
terms set forth in Holdings' Equity Documents, and (v) other Indebtedness not
exceeding $9,750.
NO LEGAL PROCEEDINGS. There shall be no litigation or
administrative proceeding pending or threatened that, in the opinion of
the Required Lenders, could reasonably be expected to have a Material
Adverse Effect or to adversely affect the ability of the parties to
consummate the Transactions.
NO VIOLATION. The consummation of the Transactions and the other
transactions contemplated hereby shall not (a) violate any applicable
law, statute, rule or regulation or (b) conflict with, or result in a
default or event of default under, any material agreement of any member
of the Holdings Group (including the Transaction Documents), and the
Lenders shall have received one or more legal opinions to such effect,
satisfactory to the Agents, from counsel to the Loan Parties
satisfactory to the Agents.
CONSENTS AND APPROVALS. All consents and approvals required to be
obtained from any Governmental Authority or other Person in connection
with the Acquisition and the other Transactions
<PAGE> 81
shall have been obtained, all applicable waiting periods and appeal periods
shall have expired, in each case without the imposition of any burdensome
conditions and there shall be no action by any Governmental Authority, actual
or threatened, that could reasonably be expected to restrain, prevent or impose
burdensome conditions on the Transactions or the other transactions
contemplated hereby
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.2) at or prior to 3:00 p.m., New York City time, on
February 28, 1998 (and, in the event such conditions are not so satisfied or
waived, the Revolving Commitments shall terminate at such time).
SECTION EACH CREDIT EVENT.
The obligation of each Lender to make a Loan on the occasion of any
Borrowing, and of the Issuing Bank to issue, amend, renew or extend any
Letter of Credit, is subject to the satisfaction of the following conditions:
RENEWAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of each Loan Party set forth in the Loan Documents shall
be true and correct in all material respects on and as of the date of
such Borrowing or the date of issuance, amendment, renewal or extension
of such Letter of Credit, as applicable, as though made on and as of
such date, other than any such representations or warranties that by
their terms refer to a date other than the date of such Borrowing,
issuance, amendment, renewal or extension, in which case such
representations and warranties shall be true and correct as of such
other date.
NO DEFAULT. At the time of and immediately after giving effect to
such Borrowing or the issuance, amendment, renewal or extension of such
Letter of Credit, as applicable, no Default shall have occurred and be
continuing.
NO MATERIAL ADVERSE CHANGE. No event shall have occurred that has
had, or could reasonably be expected to have, a Material Adverse
Effect.
<PAGE> 82
PRO FORMA COVENANT COMPLIANCE. After giving effect pro forma to
such Borrowing and the application of the proceeds thereof and after
giving effect pro forma to such issuance, amendment, renewal or
extension, the Senior Leverage Ratio (computed on the basis of (i)
Indebtedness outstanding on the day of such Borrowing, issuance,
amendment, renewal or extension and (ii) Adjusted Pro Forma EBITDA
determined as of the last day of the fiscal quarter then most recently
ended) shall not be greater than 3.25.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter
of Credit shall be deemed to constitute a representation and warranty by the
Borrower and Holdings Party on the date thereof as to the matters specified in
this Section 3.2.
ARTICLE
REPRESENTATIONS AND WARRANTIES
Each of the Borrower and Holdings represents and warrants to the Agents,
Lenders and Issuing Bank that:
SECTION ORGANIZATION; POWERS.
Each member of the Holdings Group is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization, has
all requisite power and authority to carry on its business as now conducted
and, except where the failure to do so, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect, is qualified
to do business in, and is in good standing in, every jurisdiction where such
qualification is required.
SECTION AUTHORIZATION; ENFORCEABILITY.
The Transactions to be entered into by each Loan Party are within such
Loan Party's corporate powers and have been duly authorized by all necessary
corporate and, if required, stockholder action. This Agreement has been duly
executed and delivered by each Loan Party that is a party hereto and
constitutes, and each other Loan Document to which any Loan Party is to be a
<PAGE> 83
party, when executed and delivered by such Loan Party, will constitute, a
legal, valid and binding obligation of such Loan Party, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered
in a proceeding in equity or at law.
SECTION GOVERNMENTAL APPROVALS; NO CONFLICTS.
The Transactions (a) do not require any consent or approval of,
registration or filing with, or any other action by, any Governmental
Authority, except such as have been obtained or made and are in full force and
effect and except filings necessary to perfect Liens created under the Loan
Documents, (b) will not violate any applicable law or regulation or the
charter, by-laws or other organizational documents of any member of the
Holdings Group or any order of any Governmental Authority, (c) will not violate
or result in a default under any indenture, agreement or other instrument
governing Material Indebtedness of, or any other material agreement binding
upon, any member of the Holdings Group or its assets, or give rise to a right
thereunder to require any payment to be made by any member of the Holdings
Group, and (d) will not result in the creation or imposition of any Lien on any
asset of any member of the Holdings Group, except Liens created under the Loan
Documents.
SECTION FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE.
COMBINED FINANCIAL STATEMENTS. Holdings and the Borrower have
heretofore furnished to the Lenders combined financial statements
(including a Combined Statement of Net Assets as of September 30, 1997
and December 31, 1996 and 1995 and related Combined Statements of
Operations and Changes in Net Assets and Combined Statements of Cash
Flows and notes thereto) for the "Assets" and "Business" described in
the Asset Purchase Agreement (as such terms are defined therein), audited
by KPMG Peat Marwick LLP. Such financial statements are free of material
misstatement and present fairly, in all material respects, the combined net
assets of such Business as of September 30, 1997 and December 31, 1996 and
1995, and the results of operations and cash flows of such Business for the
nine-month period ended September 30, 1997 and years ended December 31, 1996
and 1995 in conformity with GAAP.
<PAGE> 84
INFORMATION MEMORANDUM. The factual statements made in the
Information Memorandum are true and correct as of the time of
preparation of the Information Memorandum and as of the date hereof in
all material respects. The financial projections included in the
Information Memorandum and the financial projections delivered to any
of the Agents prior to date hereof were, as of the time of preparation
thereof and as of the date hereof, based on the best information
available to Holdings and the Borrower after due inquiry at the date
thereof and on good faith estimates and assumptions believed by
Holdings and the Borrower to be reasonable, subject to the
uncertainties inherent in projections.
PRO FORMA BALANCE SHEETS. Holdings and the Borrower have
heretofore furnished to the Lenders the pro forma consolidated balance
sheets of Holdings and of the Borrower as of September 30, 1997,
prepared giving effect to the Transactions as if the Transactions had
occurred on such date. Such pro forma consolidated balance sheets (i)
were prepared in good faith based on the same assumptions used to
prepare the pro forma financial statements included in the Information
Memorandum (which assumptions were, at the time of preparation of the
Information Memorandum, and are, as of the date hereof, believed by
Holdings and the Borrower to be reasonable), (ii) were based on the
best information available to Holdings and the Borrower after due
inquiry at the date thereof, (iii) accurately reflect all adjustments
necessary to give effect to the Transactions and (iv) presents fairly,
in all material respects, the pro forma financial position of Holdings
and its consolidated subsidiaries and the Borrower and its consolidated
subsidiaries as of the Effective Date, as if the Transactions had
occurred on such date.
INDEBTEDNESS. Neither Holdings nor the Borrower nor any Borrower
Subsidiary has any outstanding Indebtedness other than (i) Indebtedness
created and outstanding under the Loan Documents, (ii) Senior
Subordinated Notes issued by the Borrower and guaranteed (on a
subordinated basis) by Borrower Subsidiaries and outstanding on the
terms set forth in the Senior Subordinated Note Indenture, (iii)
Discount Debentures issued by Holdings and outstanding on the terms set
forth in the Discount Debenture Indenture and not in any respect
Guaranteed by the Borrower or any Borrower Subsidiary, (iv) the Holdings
Preferred Stock described in the Effective Date Capitalization Table issued by
Holdings and outstanding on the terms set forth in Holdings' Equity
<PAGE> 85
Documents, (v) $9,750 in Indebtedness outstanding on the Effective Date,
and (vi) Indebtedness incurred after the Effective Date and permitted to be
incurred, and to remain outstanding, under Section 6.1.
PREFERRED STOCK. Neither the Borrower nor any Borrower Subsidiary
has any outstanding preferred stock or Disqualified Stock. Holdings
has no outstanding preferred stock that constitutes Disqualified Stock.
LIENS. None of the property or assets of Holdings or the Borrower
or any Borrower Subsidiary is subject to any Lien except Liens
permitted to be incurred, and to remain outstanding, under Section 6.3.
NO CONTINGENT LIABILITIES, UNUSUAL COMMITMENTS OR UNREALIZED
LOSSES. Except as disclosed in the financial statements referred to
above or the notes thereto or in the Information Memorandum and except
for the Disclosed Matters, after giving effect to the Transactions, no
member of the Holdings Group has, as of the Effective Date, any
material contingent liabilities, unusual long-term commitments or
unrealized losses.
FINANCIAL STATEMENTS. Each financial statement delivered by any
member of Holdings Group at any time after the Effective Date pursuant
to Section 5.1 is free of material misstatement and presents fairly, in
all material respects, the assets of the Person or consolidated group
that is the subject thereof as of the date thereof and the results of
operations and cash flows of such Person or group for the period
therein described ended such date, in conformity with GAAP but subject
(except in the case of audited year-end financial statements) to
year-end adjustments.
NO MATERIAL ADVERSE EVENT. Since September 30, 1997, there has
been no material adverse change in the business, assets, operations,
material agreements, prospects or condition, financial or otherwise, of
(i) the "Assets" and "Business" described in the Asset Purchase
Agreements (as such terms are defined therein) or (ii) the Borrower and
Borrower Subsidiaries, taken as a whole, or (iii) Holdings and the
Subsidiaries, taken as a whole, and no event has occurred that has had,
or could reasonably be expected to have, a Material Adverse Effect.
<PAGE> 86
SECTION PROPERTIES.
TITLE. Except as disclosed in Schedule 4.5(a), each member of
the Holdings Group has good title to all its personal property material to
its business, except for minor defects in title that do not interfere
with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes.
INTELLECTUAL PROPERTY. Each member of the Holdings Group owns,
or is licensed to use, all trademarks, trade names, copyrights, patents
and other intellectual property material to its business, and the use
thereof by the Holdings Group does not infringe upon the rights of any
other Person, except for any such infringements that, individually or
in the aggregate, could not reasonably be expected to result in a
Material Adverse Effect. Schedule 4.5(b) sets forth all interests in
any such property that are owned by or registered in the name of any
Loan Party or any agent or nominee acting for any Loan Party and the
registration data as to all such property so registered.
REAL PROPERTY. Schedule 4.5(c) sets forth the address of each
real property that is owned or leased by the Holdings Group as of the
Effective Date after giving effect to the Transactions.
THE BORROWER AND HOLDINGS. The Borrower is a Wholly-Owned
Subsidiary of Holdings. Holdings owns no assets other than the common
stock of the Borrower and conducts no business or activities other than
the ownership of such common stock and activities incidental thereto.
BORROWER SUBSIDIARIES. The Unrecovered Investment of any and all
members of the Holdings Group in Partially-Owned Subsidiaries does not
exceed $20,000,000. Except for such Partially-Owned Subsidiaries, each
Borrower Subsidiary is Wholly-Owned by the Borrower.
AMENDMENT OF SCHEDULES. The Borrower may at any time unilaterally
amend Schedule 4.5(b) or Schedule 4.5(c) to reflect any Permitted
Acquisition or any Transfer of assets permitted under this Agreement,
by giving written notice thereof to the Administrative Agent and the
Lenders. To be effective, such notice must state conspicuously
<PAGE> 87
that it constitutes an amendment to certain factual matters relating to the
property of the Loan Parties set forth in Section 4.5 of this Agreement.
SECTION LITIGATION AND ENVIRONMENTAL MATTERS.
NO LEGAL PROCEEDINGS. There are no actions, suits or proceedings
by or before any arbitrator or Governmental Authority pending against
or, to the knowledge of any Loan Party, threatened against or affecting
any member of the Holdings Group (i) as to which there is a reasonable
possibility of an adverse determination and that, if adversely determined,
could reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve
any of the Loan Documents or the Transactions.
ENVIRONMENTAL MATTERS. Except for the Disclosed Matters and
except with respect to any other matters that, individually or in the
aggregate, could not reasonably be expected to result in a Material
Adverse Effect, no member of the Holdings Group (i) has failed to
comply with any Environmental Law or to obtain, maintain or comply with
any permit, license or other approval required under any Environmental
Law, (ii) has become subject to any Environmental Liability, (iii) has
received notice of any claim with respect to any Environmental
Liability or (iv) knows of any basis for any Environmental Liability.
DISCLOSED MATTERS. Since the date of this Agreement, there has
been no change in the status of the Disclosed Matters that,
individually or in the aggregate, has resulted in, or could reasonably
be expected to result in, a Material Adverse Effect.
SECTION COMPLIANCE WITH LAWS AND AGREEMENTS.
Each member of the Holdings Group is in compliance with all laws,
regulations and orders of any Governmental Authority applicable to it or its
property and all indentures, agreements and other instruments binding upon it
or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. No Default has occurred and is continuing.
SECTION INVESTMENT AND HOLDING COMPANY STATUS.
<PAGE> 88
No member of the Holdings Group is (a) an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940 or
(b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.
SECTION TAXES.
Each member of the Holdings Group has timely filed or caused to be filed
all Tax returns and reports required to have been filed and has paid or
caused to be paid all Taxes required to have been paid by it, except Taxes that
are being contested in good faith by appropriate proceedings and for which
member, as applicable, has set aside on its books adequate reserves.
SECTION ERISA.
No ERISA Event has occurred or is reasonably expected to occur that, when
taken together with all other such ERISA Events for which liability is
reasonably expected to occur, could reasonably be expected to result in a
Material Adverse Effect. The "amount of unfunded benefit liabilities," as
defined in Section 4001(18) of ERISA, as of the last day of the most recent
plan year does not exceed $500,000 for any one Plan and does not exceed
$1,000,000 for all Plans.
SECTION DISCLOSURE.
The Borrower and Holdings have disclosed to the Lenders all agreements,
instruments and corporate or other restrictions to which any member of the
Holdings Group is subject, and all other matters known to any of them, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. Neither the Information Memorandum nor any of the
other reports, financial statements, certificates or other information
furnished by or on behalf of any Loan Party to the Administrative Agent or any
Lender in connection with the negotiation of this Agreement or any other Loan
Document or delivered hereunder or thereunder (as modified or supplemented by
other information so furnished) contains any material misstatement of fact or
omits to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except that, with respect to projected financial information, the Borrower and
Holdings represent only that such information was prepared in good faith based
upon assumptions believed to be reasonable at the time.
<PAGE> 89
SECTION SUBSIDIARIES.
Holdings does not have any subsidiaries other than the Borrower and the
Borrower Subsidiaries. Schedule 4.12 sets forth the name of, and the
ownership interest of Holdings in, each Subsidiary of Holdings and identifies
each Subsidiary that is a Loan Party, in each case as of the Effective Date.
SECTION SOLVENCY.
Immediately upon the consummation of the Transactions on the Effective
Date, immediately following the making of each Loan made on the Effective Date
and after giving effect to the application of the proceeds of such Loans, and
immediately upon the making of each Loan and the issuance, amendment or renewal
of each Letter of Credit at any time after the Effective Date, and, in the case
of each Guarantor, after giving effect to the liability incurred by it under
the Guaranty, Indemnity and Subordination Agreement (subject to the limitation
of liability set forth in Section 2.5 thereof) and the rights granted to such
Guarantor thereunder, (a) the fair value of the assets of each Loan Party, at a
fair valuation, will exceed its debts and liabilities, subordinated, contingent
or otherwise; (b) the present fair saleable value of the property of each Loan
Party will be greater than the amount that will be required to pay the probable
liability of its debts and other liabilities, subordinated, contingent or
otherwise, as such debts and other liabilities become absolute and matured; (c)
each Loan Party will be able to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured; and (d) each Loan Party will not have unreasonably small capital with
which to conduct the business in which it is engaged as such business is now
conducted and is proposed to be conducted following the Effective Date.
SECTION THE COLLATERAL.
PLEDGE AND SECURITY AGREEMENTS. The Pledge and Security
Agreements are effective to create in favor of the Administrative
Agent, for the ratable benefit of the holders of Obligations, a legal,
valid and enforceable security interest in any and all present and
future interests held or at any time acquired by any Loan Party in any
of the property therein described as collateral.
PLEDGED COLLATERAL. All Securities in which any
<PAGE> 90
Loan Party owns any interest (other than Permitted Cash Investments) are
Certificated Securities. All such Certificated Securities, all Subsidiary
Notes and all Instruments in which any Loan Party owns any interest have been
delivered to the Administrative Agent, in pledge as security for the
Obligations. The Administrative Agent's security interest therein constitutes
a fully perfected first priority and sole Lien on, and security interest in,
all right, title and interest of each Loan Party in all such Certificated
Securities, Subsidiary Notes and Instruments, in each case free from any
adverse claim and prior and superior in right to any other Person. Schedule
4.14(b) sets forth all Certificated Securities, Subsidiary Notes and
Instruments that have been delivered to, and are held in pledge by, the
Administrative Agent.
FINANCING STATEMENTS. Duly completed and executed financing
statements covering all of the Collateral will have been duly filed in
proper form sufficient for filing within 10 days from the Effective
Date, and thereafter will remain effectively on file, in each filing
office in each jurisdiction in which the filing of a financing
statement is required or permitted in order to perfect the
Administrative Agent's security interest in any and all of the
Collateral, and such financing statements are sufficient to perfect the
Administrative Agent's security interest to the extent such security
interest can be perfected by filing a financing statement in each such
jurisdiction. Schedule 4.14(c) sets forth all filing offices in each
jurisdiction which a financing statement is required to be filed, in
order to perfect the Administrative Agent's security interest in any
and all of the Collateral, and all filing offices in which financing
statements have been duly filed in proper form sufficient for filing,
and remain effectively on file, in each such jurisdiction. The Security
Documents constitute a valid, enforceable and fully perfected Lien on,
and security interest in, any and all of the property of the Loan
Parties except the Excluded Assets and any Miscellaneous Unpledged
Assets, and such Lien and security interest is prior and superior in
right to any Lien held by any other Person, except any Lien that both
(i) is expressly permitted by Section 6.3 and (ii) either (A) is permitted
under Section 6.3(iii) or Section 6.3(iv) or (B) is imposed by law and is
entitled, as a matter of law, to priority over a security interest that was
duly perfected before such Lien attached.
TRADEMARKS AND COPYRIGHTS. The Trademark Assignment (and each
supplement thereto reflecting the addition of any
<PAGE> 91
Loan Party or the addition of property acquired by a Loan Party after the
Effective Date) is in form sufficient for filing, will have been duly filed in
the United States Patent and Trademark Office within 10 days from the Effective
Date and, after giving effect to the financing statements referred to in
Section 4.14(c), constitutes a fully perfected Lien on, and security interest
in, all right, title and interest of the Loan Parties in all property described
therein in which any Loan Party has any interest as to which a security
interest may be perfected or any transfer may be recorded by filing, recording
or registration in the United States Patent and Trademark Office, in each case
prior and superior in right to any other Person. The Copyright Security
Agreement (and each supplement thereto reflecting the addition of any Loan
Party or the addition of any property acquired by a Loan Party after the
Effective Date) is in form sufficient for filing, will have been duly filed in
the United States Copyright Office within 10 days from the Effective Date and,
after giving effect to the financing statements referred to in Section 4.14(c),
constitutes a fully perfected Lien on, and security interest in, all right,
title and interest of the Loan Parties in all property described therein in
which any Loan Party has any interest as to which a security interest may be
perfected or any transfer may be recorded by filing, recording or registration
in the United States Copyright Office, in each case prior and superior in right
to any other Person. Schedule 4.14(d) sets forth a listing of all such
property.
AMENDMENT OF SCHEDULES. The Borrower may at any time unilaterally
amend Schedule 4.14(b), Schedule 4.14(c) or Schedule 4.14(d) to reflect
any transaction permitted under this Agreement, by giving written notice
thereof to the Administrative Agent and the Lenders. To be effective, such
notice must state conspicuously that it constitutes an amendment to certain
factual matters relating to the Collateral set forth in Section 4.14 of this
Agreement.
SECTION FEDERAL RESERVE REGULATIONS.
NOT IN MARGIN CREDIT BUSINESS. No member of the Holdings Group is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of buying or carrying Margin Stock.
PROCEEDS NOT USED. No part of the proceeds of any Loan or any
Letter of Credit will be used, whether directly or indirectly,
<PAGE> 92
and whether immediately, incidentally or ultimately, (i) to buy or carry
Margin Stock or to extend credit to others for the purpose of buying or
carrying Margin Stock or to refund indebtedness originally incurred for
such purpose or (ii) for any purpose that entails a violation of, or
that is inconsistent with, the provisions of the Regulations of the
Board, including Regulation G, U or X.
ASSETS. Less than 25% of the assets of Holdings Group on a
consolidated basis consist of Margin Stock.
ARTICLE
AFFIRMATIVE COVENANTS
Until the Revolving Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall
have been paid in full and all Letters of Credit shall have expired or
terminated and all LC Disbursements shall have been reimbursed, each of the
Borrower and Holdings covenants and agrees with the Lenders that:
SECTION FINANCIAL STATEMENTS AND OTHER INFORMATION.
The Borrower and Holdings will furnish to each Agent and each Lender:
YEAR-END STATEMENTS. Commencing with the fiscal year ending
December 31, 1998, within 90 days after the end of each fiscal year of
Holdings and the Borrower, each of their consolidated and consolidating
balance sheets and related statements of operations, stockholders'
equity and cash flows as of the end of and for such year, setting forth
in each case in comparative form the figures for the previous fiscal
year, all audited (in the case of such consolidated statements) and
reported on by independent public accountants of recognized national
standing (without a "going concern" or like qualification or exception
and without any qualification or exception as to the scope of such
audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and
results of operations of
<PAGE> 93
Holdings and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied;
QUARTERLY STATEMENTS. Commencing with the fiscal quarter ending
March 31, 1998, within 45 days after the end of each fiscal quarter of
Holdings and the Borrower, each of their consolidated and consolidating
balance sheets and related statements of operations, stockholders' equity
and cash flows as of the end of and for such fiscal quarter and the then
elapsed portion of the fiscal year, setting forth in each case in comparative
form the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all certified by
one of its Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of Holdings and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments and the absence of
footnotes;
MONTHLY STATEMENTS. Within 45 days after the end of each month,
commencing January 1998 and continuing through June 1998 and within 30 days
after the end of each month thereafter, consolidated balance sheets for
Holdings and for the Borrower and related statements of operations and
stockholders' equity as of the end of and for such fiscal month and the then
elapsed portion of the fiscal year, all certified by one of its Financial
Officers as presenting in all material respects the financial condition and
results of operations of Holdings and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes, and setting
forth in comparative form the figures for the same items per the Borrower's
operating budget for such fiscal year;
CERTIFICATE AS TO DEFAULTS. Concurrently with any delivery of
financial statements under Section 5.1(a) or Section 5.1(b), a certificate of
a Financial Officer of Holdings (in the form of a Compliance Certificate or in
such other form as may reasonably be requested from time to time by the
Administrative Agent or Required Lenders) (i) certifying as to whether a
Default has occurred and, if a Default has occurred, specifying the details
thereof and any action taken or proposed to be taken with respect thereto, (ii)
setting forth reasonably detailed calculations demonstrating compliance with
Section 6.12, Section 6.13 and
<PAGE> 94
Section 6.14 and the other information requested in the Compliance
Certificate, and (iii) stating whether any change in GAAP or in the application
thereof has occurred since the date of the audited financial statements
referred to in Section 4.4(a) and, if any such change has occurred, specifying
the effect of such change on the financial statements accompanying such
certificate;
ACCOUNTANT'S STATEMENT. Concurrently with any delivery of
financial statements under Section 5.1(a), a certificate of the
accounting firm that reported on such financial statements stating
whether they obtained knowledge during the course of their examination
of such financial statements of any Default (which certificate may be limited
to the extent required by accounting rules or guidelines);
ANNUAL OPERATING PLAN. Within 30 days following the commencement
of each fiscal year of Holdings and the Borrower, a detailed consolidated and
consolidating operating budget for such fiscal year (including projected
consolidated balance sheets and related statements of projected operations and
cash flow as of the end of and for such fiscal year) and financial projections
for the five-year period commencing with such fiscal year and, promptly when
available, any significant revisions of such budget or projections;
SEC REPORTS. Promptly after the same become publicly available,
copies of all periodic and other reports, proxy statements and other
materials filed by any member of the Holdings Group with the Securities
and Exchange Commission, or any Governmental Authority succeeding to
any or all of the functions of said Commission, or with any national
securities exchange, as the case may be;
ACCOUNTANT'S REPORTS. Promptly upon receipt thereof, copies of
all reports submitted to Holdings or the Borrower by independent
certified public accountants in connection with each annual, interim or
special audit of the books of the Borrower or any of its Subsidiaries
made by such accountants, including any management letter commenting on
the Borrower's internal controls submitted by such accountants to
management in connection with their annual audit; and
OTHER INFORMATION. Promptly following any request therefor, such
other information regarding the operations, business affairs
<PAGE> 95
and financial condition of any member of the Holdings Group, or compliance
with the terms of any Loan Document, as any Agent or Lender may
reasonably request.
SECTION NOTICES OF MATERIAL EVENTS.
The Borrower and Holdings will furnish to each Agent and each Lender
prompt written notice of the following:
DEFAULT. The occurrence of any Default;
LEGAL PROCEEDINGS. The filing or commencement of any action, suit
or proceeding by or before any arbitrator or Governmental Authority
against or affecting any member of the Holdings Group or any Affiliate
thereof that, if adversely determined, could reasonably be expected to
result in a Material Adverse Effect;
ERISA EVENTS. The occurrence of any ERISA Event that, alone or
together with any other ERISA Events that have occurred, could
reasonably be expected to result in a Material Adverse Effect, or the
provision by the administrator of any Plan of a notice of intent to
terminate such Plan pursuant to Section 4041(a)(2) of ERISA; and
MATERIAL ADVERSE EVENTS. Any other event that results in, or
could reasonably be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section 5.2 shall be accompanied by a
statement of a Financial Officer or other executive officer of Holdings and the
Borrower setting forth the details of the event or development requiring such
notice and any action taken or proposed to be taken with respect thereto.
SECTION REGARDING THE COLLATERAL.
CHANGES IN FACTUAL INFORMATION. The Borrower and Holdings will
furnish to the Administrative Agent prompt written notice of any change
(i) in any Loan Party's corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of any Loan Party's chief
<PAGE> 96
executive office, its principal place of business, any office in which it
maintains books or records relating to Collateral owned by it or any
office or facility at which Collateral owned by it is located
(including the establishment of any such new office or facility), (iii)
in any Loan Party's identity or corporate structure, (iv) resulting in
any tangible Collateral being located in any jurisdiction in which a
financing statement must be, but has not been, filed in order to
perfect the Administrative Agent's liens, (v) in respect of any
patents, trademarks copyrights or applications therefor owned by or
licensed to any Loan Party, or (vi) in any Loan Party's Federal
Taxpayer Identification Number. The Borrower and Holdings will not
effect or permit any change referred to in the preceding sentence
unless all filings have been made under the Uniform Commercial Code or
otherwise that are required in order for the Administrative Agent to
continue at all times following such change to have a valid, legal and
perfected security interest in all the Collateral and will promptly
notify the Administrative Agent if any material portion of the
Collateral is damaged or destroyed.
ANNUAL PERFECTION CERTIFICATE. Each year, at the time of delivery
of annual financial statements with respect to the preceding fiscal year
pursuant to Section 5.1(a), Holdings shall deliver to the Administrative Agent
a Perfection Certificate duly executed by a Financial Officer of the Borrower
and Holdings setting forth the information required pursuant to the Perfection
Certificate or confirming that there has been no change in such information
since the date of the Perfection Certificate delivered on the Effective Date or
the date of the most recent certificate delivered pursuant to this Section
5.3(b).
SECTION EXISTENCE; CONDUCT OF BUSINESS.
Except as permitted under Section 5.13, the Borrower and Holdings will,
and will cause each of the Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges, franchises, patents,
copyrights, trademarks and trade names material to the conduct of its business.
SECTION PAYMENT OF OBLIGATIONS.
The Borrower and Holdings will, and will cause each of the Subsidiaries
to, pay its Indebtedness and other obligations in a material amount,
<PAGE> 97
before the same shall become delinquent or in default, and pay or discharge,
before the same shall become delinquent, all taxes, assessments and
governmental charges levied or imposed upon it or its income, profits or
property and all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a Lien upon its property, except (in each case)
where (a) the validity or amount thereof is being contested in good faith by
appropriate proceedings, (b) it has set aside on its books adequate reserves
with respect thereto in accordance with GAAP, (c) such contest effectively
suspends collection of the contested obligation and no Lien arises or is
created to secure such obligation (except a Lien created by law to secure an ad
valorem tax or the claim of a mechanic or materialman claim if the enforcement
of such Lien is suspended or stayed) and (d) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.
SECTION MAINTENANCE OF PROPERTIES.
The Borrower and Holdings will, and will cause each of the Subsidiaries
to, keep and maintain all property material to the conduct of its business in
good working order and condition, ordinary wear and tear excepted.
SECTION INSURANCE.
MAINTENANCE OF INSURANCE. The Borrower and Holdings will, and
will cause each of the Subsidiaries to, maintain insurance with
financially sound and reputable insurers in amounts and with coverages
consistent with prudent industry practice.
LIABILITY COVERAGE. All commercial general liability policies
maintained by any Loan Party shall be endorsed to name the Administrative
Agent as an additional insured.
SECTION CASUALTY AND CONDEMNATION.
The Borrower and Holdings will furnish to the Administrative Agent and
the Lenders prompt written notice of any casualty or other insured
damage to any material portion of any Collateral or the commencement of any
action or proceeding for the taking of any material portion of the Collateral
or any part thereof or interest therein under power of eminent domain or by
condemnation or similar proceeding.
<PAGE> 98
SECTION BOOKS AND RECORDS; INSPECTION AND AUDIT RIGHTS.
The Borrower and Holdings will, and will cause each of the Subsidiaries to,
(i) keep proper books of record and account in which full, true and
correct entries are made of all dealings and transactions in relation
to its business and activities, and (ii) permit any representatives
designated by the Administrative Agent or any Lender, upon reasonable
prior notice, to visit and inspect its properties, to examine and make
extracts from its books and records, and to discuss its affairs,
finances and condition with its officers and independent accountants,
all at such reasonable times and as often as reasonably requested.
Except when a Default has occurred and is continuing, reimbursement
under Section 9.3 for costs incurred by the Administrative Agent in
connection therewith shall not be demanded by the Administrative Agent
in respect of more than one such visit, inspection and discussion in
any one fiscal year and may not be demanded by any other Lender.
SECTION COMPLIANCE WITH LAWS.
The Borrower and Holdings will, and will cause each of the Subsidiaries
to, comply with all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
SECTION USE OF PROCEEDS AND LETTERS OF CREDIT.
No more than $5,000,000 in proceeds of Revolving Loans on the Effective
Date will be used for the payment of amounts payable under the Asset
Purchase Agreement or fees, costs and expenses relating to the Transactions.
The proceeds of all other credit extended to the Borrower hereunder will be
used only for lawful corporate purposes of the Borrower that are permitted
under this Agreement. No part of the proceeds of any Loan will be used,
whether directly or indirectly, for any purpose that entails a violation of any
of the Regulations of the Board, including Regulations G, U and X.
SECTION ADDITIONAL BORROWER SUBSIDIARIES.
If any Person becomes a Borrower Subsidiary after the Effective
<PAGE> 99
Date, the Borrower and Holdings will, within ten days after such Borrower
Subsidiary is formed or acquired, (a) notify the Administrative Agent and the
Lenders thereof, (b) cause such Borrower Subsidiary to execute and deliver, and
endorse and deliver to the Administrative Agent in pledge, a Subsidiary
Note in an amount equal to all Investments in such Borrower Subsidiary made or
maintained, or contemplated to be made or maintained, by any member of the
Holdings Group, except Investments by the Borrower in the common equity capital
of such Borrower Subsidiary, (c) cause all Equity Interests in such Borrower
Subsidiary owned by any Loan Party to be represented by Security Certificates
duly issued by such Borrower Subsidiary and transferred and delivered to the
Administrative Agent in pledge pursuant to the applicable Pledge and Security
Agreement, and (d) cause such Borrower Subsidiary to become a party to the
Guaranty, Indemnity and Subordination Agreement and each applicable Security
Document and take such actions to create and perfect Liens on such Borrower
Subsidiary's assets to secure its liability under its Subsidiary Note and under
the Guaranty, Indemnity and Subordination Agreement as the Administrative Agent
or the Required Lenders may reasonably request; PROVIDED, that any Borrower
Subsidiary that both (i) is a Partially-Owned Subsidiary acquired in a
Permitted Acquisition and (ii) has not Guaranteed any other Indebtedness of any
member of the Holdings Group and is not required to Guarantee any such
Indebtedness under any indenture or agreement governing such Indebtedness shall
be permitted (for as long as the conditions in clauses (i) and (ii) hereof are
satisfied) (A) to limit its liability under the Guarantee, Indemnity and
Subordination Agreement to an amount equal to the amount from time to time
outstanding on its Subsidiary Note and (B) to limit the security interests
granted by it under the Security Documents so that they secure an amount equal
to the amount from time to time outstanding on its Subsidiary Note.
SECTION FURTHER ASSURANCES.
UPON REQUEST. Each of the Borrower and Holdings will, and will
cause each Subsidiary to, from time to time upon the request of the
Administrative Agent or the Required Lenders through the Administrative
Agent, at the expense of the Loan Parties, execute, deliver and
acknowledge all instruments, assignments, security agreements,
financing statements or other documents and take all other actions as
the Administrative Agent or such Required Lenders may in good faith
deem necessary or appropriate to create, perfect, ensure the priority
of, protect or (if an Event of Default is continuing at the time)
lawfully enforce a Lien in favor of the Administrative Agent for the
ratable benefit of the holders of
<PAGE> 100
the Obligations upon any property (whether now owned or hereafter
acquired, whether tangible or intangible, whether real, personal or mixed, and
wherever located) in which Holdings or the Borrower or any Subsidiary has or
may have any interest, except (i) Excluded Assets, (ii) Miscellaneous Unpledged
Assets, and (iii) assets of any Borrower Subsidiary that (A) is a
Partially-Owned Subsidiary acquired in a Permitted Acquisition, (B) has not
Guaranteed any other Indebtedness of any member of the Holdings Group and is
not required to Guarantee any such Indebtedness under any indenture or
agreement governing such Indebtedness, and (C) has no Indebtedness outstanding
to, and has not received the proceeds of any Investment from, any member of the
Holdings Group.
CASH IN BANK. Except as to Miscellaneous Unpledged Assets, each
of the Borrower and Holdings will, and will cause each Loan Party to,
(i) maintain any and all of its bank deposits and bank deposit accounts
at a bank selected by it that is located in a state under the laws of
which a security interest in bank deposits and deposit accounts may be
created under the Uniform Commercial Code and perfected by the giving
of a Perfection Notice to the depositary bank and the receipt of any
required consent thereto from the depositary bank, without any
requirement that the holder of such security interest maintain dominion
or control over such bank deposits and deposit accounts, (ii) give
notice of the existence of the Administrative Agent's security interest
in each such deposit account and any and all present and future
deposits therein, by delivery of a Perfection Notice to the depositary
bank and obtaining any and all required consents from the depositary
bank or as otherwise required under such laws to perfect the
Administrative Agent's security interest therein, at or within 30 days
after the opening of such deposit account, and (iii) grant and permit
no other Lien on any such bank deposits or deposit accounts.
PERMITTED CASH INVESTMENTS. Except as to Miscellanous Unpledged
Assets, each of the Borrower and Holdings will, and will cause each
Loan Party to, maintain any and all Permitted Cash Investments in such
manner as may be required to ensure that the Administrative Agent at
all times holds a duly perfected first and sole security interest
therein as security for the Obligations.
UNPLEDGED ASSETS. If at any time the Administrative
<PAGE> 101
Agent does not hold a duly created, enforceable and perfected Lien as
security for the Obligations upon any property or assets of any Loan Party
other than Excluded Assets and Miscellaneous Unpledged Assets, the Borrower and
Holdings will notify the Agents and the Lenders thereof and will take such
action as may be necessary to cause all assets of each Loan Party (except
Excluded Assets and Miscellaneous Unpledged Assets) to be subjected to a duly
created, enforceable and perfected Lien in favor of the Administrative Agent as
security for the Obligations and will take, and cause each Loan Party to take,
such actions as shall be necessary or reasonably requested by the
Administrative Agent or Required Lenders to grant and perfect such Liens,
including actions described in Section 5.13(a), all at the expense of the Loan
Parties.
SECTION FISCAL YEAR.
The Borrower and Holdings will, and will cause each Subsidiary to,
maintain a fiscal year that ends on December 31.
ARTICLE
NEGATIVE COVENANTS
Until the Revolving Commitments have expired or terminated and the
principal of and interest on each Loan and all fees payable hereunder have been
paid in full and all Letters of Credit have expired or terminated and all LC
Disbursements shall have been reimbursed, each of the Borrower and Holdings
covenants and agrees with the Lenders that:
SECTION INDEBTEDNESS.
The Borrower and Holdings will not, and will not permit any Subsidiary to,
create, incur, assume or permit to exist any Indebtedness, except:
Indebtedness created under the Loan Documents;
Indebtedness of the Borrower under the Senior Subordinated
Notes and the guarantees thereof (on a
<PAGE> 102
subordinated basis) by Borrower Subsidiaries, on the terms set forth
in the Senior Subordinated Note Indenture and in an aggregate principal
amount not exceeding $180,000,000;
Indebtedness of Holdings under the Discount Debentures, on
the terms set forth in the Discount Debenture Indenture;
Indebtedness of any Borrower Subsidiary to the Borrower
evidenced by a Subsidiary Note held by the Administrative Agent
in pledge pursuant to the Pledge and Security Agreements, and
Indebtedness of the Borrower to any Borrower Subsidiary if (i)
all amounts at any time due from such Borrower Subsidiary to the
Borrower have been repaid in cash and (ii) such Indebtedness of
the Borrower is subordinated in right of payment to the
Obligations as set forth in the Guaranty, Indemnity and
Subordination Agreement;
Deferred Acquisition Consideration incurred at the
consummation of a Permitted Acquisition by the Borrower or by the
Borrower Subsidiary that is the purchaser in such Permitted Acquisition
and, if incurred by any such Borrower Subsidiary, Guaranties thereof by
the Borrower;
Indebtedness under Hedging Agreements entered into in
accordance with Section 6.7; and
other Indebtedness of the Borrower in an aggregate
principal amount not exceeding $10,000,000 at any time
outstanding,
PROVIDED, that the aggregate amount of "Purchase Money Indebtedness"
(as defined in the Senior Subordinated Note Indenture) that also
constitutes Deferred Acquisition Consideration shall not exceed
$14,000,000 at any one time outstanding.
SECTION CERTAIN INTERESTS AND LIABILITIES.
DISQUALIFIED STOCK. The Borrower and Holdings will not, and will
not permit any Subsidiary to, issue or have outstanding
<PAGE> 103
any Disqualified Stock.
ALL OBLIGATIONS ARE SENIOR INDEBTEDNESS. The Borrower hereby
agrees that any and all Obligations (i) are and shall be (and are
hereby designated as) "Senior Indebtedness" within the meaning of and
for the purposes of the Senior Subordinated Note Indenture and (ii) are
and shall be (and are hereby made) senior in right of payment, on the
terms set forth in the Senior Subordinated Note Indenture, to the
Senior Subordinated Notes and all "Obligations" (as defined in the
Senior Subordinated Note Indenture) in respect of the Senior
Subordinated Notes and all "Subsidiary Guarantees" (as defined in the
Senior Subordinated Note Indenture) at any time issued under or
pursuant to the Senior Subordinated Note Indenture.
LIMITATION AS TO OTHER SENIOR INDEBTEDNESS. The Borrower will
not, and will not permit any Subsidiary to, incur any Indebtedness or
liabilities (other than the Obligations) that are designated as "Senior
Indebtedness" within the meaning of or for the purposes of the Senior
Subordinated Note Indenture in an amount in excess of $10,000,000 in
the aggregate at any time outstanding.
PREFERRED STOCK. The Borrower and Holdings will not, and will not
permit any Subsidiary to, issue or have outstanding any preferred stock
except preferred stock (i) which was issued by Holdings, (ii) in
respect of which no Subsidiary has any liability, and (iii) which does
not constitute Disqualified Stock. Holdings will not offer or agree to
redeem, purchase or exchange any preferred stock issued by Holdings,
including preferred stock outstanding under the Holdings Certificate of
Designations, and will not permit any Subsidiary to do so. The
redemption of any such preferred stock and the purchase of, or exchange
for, any such preferred stock (including any redemption, purchase or
exchange that Holdings would otherwise, but for the provisions of this
Agreement, be permitted or required to offer or make pursuant to the
provisions of the Holdings Certificate of Designations) are hereby
expressly prohibited.
SECTION LIENS.
The Borrower and Holdings will not, and will not permit any Subsidiary to,
create, incur, assume or permit to exist any Lien on any property or
asset now owned or hereafter acquired by it, or assign or sell any income or
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revenues (including accounts receivable) or rights in respect of any thereof,
except:
Liens created under the Loan Documents;
Permitted Encumbrances;
any Lien on any property or asset of any Loan Party
existing on the date hereof and set forth in Schedule 6.3, but
only so long as (i) such Lien is not enforceable against any
other property or asset and (ii) such Lien secures only those
obligations that it secures on the date hereof; and
so long as the aggregate amount of any and all Indebtedness
and other liabilities secured by any and all security interests
and Liens described in the following clauses (A), (B) and (C)
does not exceed $10,000,000 at any one time outstanding:
(A) any Lien on any property or asset owned by the
Borrower or a Borrower Subsidiary that was existing on
such property or asset prior to the acquisition thereof
by the Borrower or such Borrower Subsidiary or that was
owned by any Person that becomes a Borrower Subsidiary
after the date hereof prior to the time such Person
became a Borrower Subsidiary, in each case if (i) such
Lien was not created in contemplation of or in connection
with such acquisition or such Person becoming a Borrower
Subsidiary, as the case may be, (ii) such Lien is not
enforceable against any other property or assets of the
Borrower or any Borrower Subsidiary and (iii) such Lien
secures only those obligations that it secures on the
date of such acquisition or the date such Person becomes a
Borrower Subsidiary, as the case may be;
(B) Any Capital Lease or purchase money Liens on
tangible fixed assets acquired, constructed or improved
by the Borrower or any Borrower Subsidiary (1) securing
purchase money Indebtedness not exceeding 100% of the
cost of acquiring, constructing or
<PAGE> 105
improving such tangible fixed assets and (2) attaching solely to,
and enforceable solely against, such assets; and
(C) Any Purchase Money Security Interest that (1)
attaches only to, and is enforceable only against, assets
or Equity Interests acquired in a Permitted Acquisition
and the proceeds thereof and replacements and
substitutions therefor and (2) secures only the payment
of Deferred Acquisition Consideration incurred in such
Permitted Acquisition.
SECTION FUNDAMENTAL CHANGES.
MERGER; CONSOLIDATION; LIQUIDATION; DISSOLUTION. The Borrower and
Holdings will not, and will not permit any Subsidiary to, merge into or
consolidate with any other Person, or permit any other Person to merge into or
consolidate with it, or liquidate or dissolve, except that, if at the time
thereof and after giving effect thereto no Default shall have occurred and be
continuing, (i) any Borrower Subsidiary may merge into the Borrower in a
transaction in which the Borrower is the surviving corporation, and (ii) any
Borrower Subsidiary may merge with any other Borrower Subsidiary in a
transaction in which the surviving entity is a Borrower Subsidiary and a Loan
Party, (iii) a newly-formed Wholly-Owned Subsidiary that has no assets except
the purchase consideration and purchase rights for a Permitted Acquisition may
merge with any Person that is being acquired in a Permitted Acquisition, if the
surviving entity is a Borrower Subsidiary and a Loan Party, and (iv) any
Borrower Subsidiary may liquidate or dissolve if the Borrower determines in
good faith that such liquidation or dissolution is in the best interests of the
Borrower and is not materially disadvantageous to the Lenders.
LINES OF BUSINESS. The Borrower will not, and will not permit any
of the Borrower Subsidiaries to, engage to any material extent in any business
other than businesses of the type acquired by the Borrower and such Borrower
Subsidiaries in the Acquisition and businesses reasonably related thereto.
ACTIVITIES OF HOLDINGS. Holdings will not own any assets other
than all outstanding common stock of the Borrower or conduct any business or
activity other than activities reasonably incidental
<PAGE> 106
to the ownership of such common stock.
SECTION INVESTMENTS; ACQUISITIONS.
The Borrower and Holdings will not, and will not permit any Subsidiary to,
purchase, hold or acquire (including pursuant to any merger with any Person
that was not a Wholly-Owned Subsidiary prior to such merger) any Equity
Interest in, Indebtedness of, or other securities (including any option,
warrant or other right to acquire any of the foregoing) issued by, or make or
permit to exist any loans or advances to, or Guarantee any obligations of, or
make or permit to exist any investment or any other interest in, any other
Person, or purchase or otherwise acquire (in one transaction or a series of
transactions) any assets of any other Person constituting a business unit,
except:
the Acquisition;
Permitted Acquisitions;
Permitted Cash Investments;
Investments by Holdings in all outstanding common stock of
the Borrower, if all outstanding common stock of the Borrower is
held by the Administrative Agent in pledge pursuant to the
Holdings Pledge and Security Agreement; and Investments by the
Borrower in common stock of, or a Subsidiary Note issued by, any
Borrower Subsidiary, if (i) such Borrower Subsidiary is a
Wholly-Owned Subsidiary, (ii) such Borrower Subsidiary has
become party to the Guaranty, Indemnity and Subordination
Agreement and the Security Documents and (iii) such Investments
are represented by Security Certificates or Subsidiary Notes
that have been duly issued and are held by the Administrative
Agent in pledge pursuant to the Borrower Pledge and Security
Agreement;
Investments in Partially-Owned Subsidiaries, if (A) after
giving effect thereto such Partially-Owned Subsidiary would
become a Wholly-Owned Borrower Subsidiary or (B) such Investment
is a loan to such Partially-Owned Subsidiary (and such loan is
evidenced by a Subsidiary Note duly executed by it, endorsed and
delivered to the Administrative Agent in pledge as
<PAGE> 107
security for the Obligations and secured pursuant to the Subsidiary
Pledge and Security Agreement) and, after giving effect to such loan,
no Default has occurred and is continuing and the aggregate Unrecovered
Investment in any and all Partially-Owned Subsidiaries does not exceed
$20,000,000;
Investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and
disputes with, customers and suppliers, in each case in the
ordinary course of business;
Hedging Agreements permitted under Section 6.7; and
other Investments in an aggregate amount not to exceed
$5,000,000 at any time outstanding.
SECTION ASSET SALES.
The Borrower and Holdings will not, and will not permit any Subsidiary to,
sell, transfer, exchange lease or otherwise dispose of (collectively,
"Transfer") any property or asset, or issue or permit to remain outstanding any
Equity Interest in any Subsidiary other than common stock of the Borrower owned
by Holdings and common stock of any Borrower Subsidiary owned by the Borrower
or another Borrower Subsidiary, except:
sales of inventory, used or surplus equipment and Permitted
Cash Investments in the ordinary course of business;
Transfers to the Borrower or a Borrower Subsidiary that is
a Wholly-Owned Subsidiary and that has become a party to the
Guaranty, Indemnity and Subordination Agreement and the Security
Documents;
Transfers, in the ordinary course of business, of the
assets of one or more community newspapers or other
revenue-producing assets or the Equity Interests in a Borrower
Subsidiary that owns any such assets, if:
<PAGE> 108
(A) such Transfer does not constitute a Transfer of
less than the entire ownership interest in such assets or
of fewer than all outstanding Equity Interests in such
Borrower Subsidiary,
(B) such Transfer is made for fair value and either
for a cash consideration or for Acquisition
Consideration,
(C) the Attributable Revenues of all assets and
Borrower Subsidiaries Transferred in all Transfers made
in reliance on this clause (iii) during any period of 365
consecutive days, determined in each case for the four
quarter period most recently ended prior to the Transfer,
does not exceed 33% of Pro Forma Revenues for the most
recent four-quarter period for which Pro Forma Revenues
can then be determined, and
(D) if the sales price for the assets or Subsidiary
sold in any such Transfer (or series of related
Transfers) exceeds $10,000,000, then within five Business
Days prior to making such Transfer, or entering into any
agreement therefor that is not contingent upon such
Transfer being permitted under this Agreement, the
Borrower delivers to the Administrative Agent and Lenders
a certificate signed by a Financial Officer of the
Borrower demonstrating that, on a pro forma basis, after
giving effect to such Transfer and any repayment of Loans
committed to be made by the Borrower from the proceeds
thereof, (1) the Borrower will be in compliance with the
covenants set forth in Section 6.13 and Section 6.14 as
of the last day of the fiscal quarter then most recently
ended and (2) the Borrower can reasonably be expected to
remain in compliance with such covenants through the
Maturity Date; and
other Transfers of assets having a fair value of (A) less
than $1,000,000, in the case of any and all such Transfers made
in any period of 365 consecutive days and (B) less than
$5,000,000, in the case of any and all such Transfers made at
<PAGE> 109
any time after the Effective Date.
SECTION HEDGING AGREEMENTS.
The Borrower and Holdings will not, and will not permit any of the
Subsidiaries to, enter into any Hedging Agreement, other than Hedging
Agreements entered into in the ordinary course of business to hedge or mitigate
risks to which the Borrower or any Borrower Subsidiary is exposed in the
conduct of its business or the management of its liabilities.
SECTION PAYMENT RESTRICTIONS.
RESTRICTED PAYMENTS. The Borrower and Holdings will not, and will
not permit any Subsidiary to, declare or make any Restricted Payment or
directly or indirectly agree to pay or make, or be or become liable in respect
of any obligation (contingent or otherwise) to make, any Restricted Payment,
except that:
Holdings may declare and pay dividends with respect to its
capital stock payable solely in additional shares of like
capital stock;
a Wholly-Owned Borrower Subsidiary may declare and pay
dividends to the Borrower or to a Wholly-Owned Borrower
Subsidiary; and, if no Default has occurred and is continuing or
would result, a Partially-Owned Subsidiary may declare and pay
dividends ratably to the holders of its common stock;
the Borrower may pay regularly scheduled interest payments
as and when due in respect of the Senior Subordinated Notes, if
such payment is permitted at such time to be made under the
subordination provisions of the Senior Subordinated Note
Indenture;
Holdings may pay management fees in an amount not exceeding
$1,500,000 in any year and in accordance with the Management
Agreement, and the Borrower may fund such payment, at the time
it is made, as a dividend or loan to Holdings; and
<PAGE> 110
if no Default has occurred and is continuing or would
result, Holdings may repurchase Equity Interests in Holdings
from any management employee of the Borrower or a Borrower
Subsidiary upon termination of such employee's employment, if
the aggregate purchase consideration for any and all such
repurchases made in any fiscal year does not exceed the sum of
$1,000,000 plus the aggregate Net Cash Proceeds received by
Holdings in such fiscal year from the sale of Holdings' common
stock to any and all such management employees plus the
aggregate amount permitted to be paid out under this Section
6.8(a)(v) in any prior fiscal year (commencing with the fiscal
year that includes the Effective Date) but not paid out in such
fiscal year or in a subsequent fiscal year, and the Borrower may
fund the payment of such purchase consideration, at the time it
is paid, as a dividend or loan to Holdings.
PAYMENTS ON ACCOUNT OF INDEBTEDNESS. The Borrower and Holdings
will not, and will not permit any Subsidiary to, make or agree to pay
or make, directly or indirectly, any payment or other distribution
(whether in cash securities or other property) of or in respect
of principal of or interest on any Indebtedness, or any payment or
other distribution (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or
termination of any Indebtedness, except:
payment of regularly scheduled interest and principal
payments as and when due in respect of any Indebtedness other
than the Senior Subordinated Notes and the Discount Debentures;
and
payment of regularly scheduled interest payments as and
when due in respect of the Senior Subordinated Notes, if such
payment is permitted at such time to be made under the
subordination provisions of the Senior Subordinated Note
Indenture.
SECTION TRANSACTIONS WITH AFFILIATES.
The Borrower and Holdings will not, and will not permit any
<PAGE> 111
Subsidiary to, sell, lease or otherwise transfer any property or assets to, or
purchase, lease or otherwise acquire any property or assets from, or otherwise
engage in any other transactions with, any of their respective Affiliates,
except (a) transactions in the ordinary course of business that do not involve
Holdings and are at prices and on terms and conditions not less favorable to
the Borrower or such Subsidiary than could be obtained on an arm's-length basis
from unrelated third parties, (b) transactions between or among the Borrower
and Borrower Subsidiaries that are Wholly-Owned Subsidiaries and are party to
the Guaranty, Indemnity and Subordination Agreement and the Security Documents,
(c) payments by the Borrower and the Borrower Subsidiaries in respect of Taxes
attributable to the Borrower and the Borrower Subsidiaries, if such payments
(i) are made directly to the taxing authority to which such Taxes are due, (ii)
are made when such Taxes (or estimated tax payments in respect thereof) are
due, and (iii) do not exceed the difference between (A) the amount of such
Taxes that the Borrower and the Borrower Subsidiaries would be required pay to
pay under a separate return, less (B) any and all deductions, credits and
refunds in respect of such Taxes that are attributable to the accrual or
payment of interest (or accretion or amortization of original issue discount)
on the Discount Debentures or any other charges or losses of Holdings or that
otherwise are claimed, taken or received by Holdings, and (d) services provided
under the Management Agreement and compensation therefor in amounts not
exceeding $1,500,000 per year.
SECTION RESTRICTIVE AGREEMENTS.
The Borrower and Holdings will not and will not permit any Subsidiary to,
directly or indirectly, enter into, incur or permit to exist any agreement
or other arrangement that prohibits, restricts or imposes any condition upon
(a) the ability of any member of Holdings Group to create, incur or
permit to exist any Lien upon any of its property or assets or (b) the ability
of any Subsidiary to pay dividends or other distributions with respect to any
shares of its capital stock or to make or repay loans or advances to the
Borrower or any Borrower Subsidiary or to Guarantee Indebtedness of the
Borrower or any Borrower Subsidiary or to transfer assets to or engage in any
other transaction with the Borrower or any Borrower Subsidiary, except (i)
restrictions and conditions imposed by law or by any Loan Document, (ii)
restrictions and conditions imposed under the Senior Subordinated Note
Indenture or the Discount Debenture Indenture, (iii) customary restrictions and
conditions contained in agreements relating to the sale of a Borrower
Subsidiary pending such sale, if such restrictions and conditions apply only to
the Subsidiary that is to be sold and such
<PAGE> 112
sale is permitted hereunder, (iv) restrictions or conditions upon the
creation, incurrence or existence of a Lien that are imposed by any agreement
relating to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness and (v) customary provisions in leases restricting the assignment
or subleasing thereof.
SECTION AMENDMENT OF CERTAIN DOCUMENTS.
The Borrower and Holdings will not, and will not permit any Subsidiary to,
amend, modify or waive any of its rights under any of the Equity Documents, the
Management Agreement, the Asset Purchase Agreements, the Debt Issuance
Documents, the Senior Subordinated Note Indenture, or the Discount Debenture
Indenture, except changes that do not relate to or affect any of the
Transactions and are implemented after 30 days prior written notice to the
Administrative Agent and Lenders, unless within such 30-day period the Borrower
is advised by Required Lenders that, in the reasonable opinion of Required
Lenders, such change would be adverse to the interests of the Lenders.
SECTION CAPITAL EXPENDITURES.
The Borrower and Holdings will not make any Capital Expenditures except
(a) Permitted Acquisitions and (b) other Capital Expenditures made by
the Borrower or a Borrower Subsidiary in an amount which, in the aggregate for
all such other Capital Expenditures made by the Borrower and Borrower
Subsidiaries, do not in any period of four fiscal quarters ending on the last
day of any fiscal quarter, commencing March 31, 1998, exceed 4% of Pro Forma
Revenues for such four-quarter period.
SECTION MAXIMUM SENIOR LEVERAGE RATIO.
The Borrower and Holdings will not permit the Senior Leverage Ratio to
exceed 3.25:1 as of the last day of any fiscal quarter in any fiscal year,
commencing March 31, 1998.
SECTION MINIMUM CASH INTEREST COVERAGE RATIO.
The Borrower and Holdings will not permit the Cash Interest Coverage Ratio,
determined as of the last day of any fiscal quarter in any fiscal year set
forth below, commencing June 30, 1998, to be less than the ratio set forth
opposite such year below:
<PAGE> 113
<TABLE>
<CAPTION>
FISCAL QUARTER IN FISCAL YEAR ENDING 12/31 OF MINIMUM RATIO
--------------------------------------------- -------------
<S> <C>
1998 1.4
1999 1.5
2000 1.8
2001 and thereafter 2.0
</TABLE>
SECTION ADDITIONAL SUBSIDIARIES.
The Borrower and Holdings will not, and will not permit any Subsidiary to,
create any additional Subsidiary, unless such Subsidiary is a Borrower
Subsidiary.
ARTICLE
EVENTS OF DEFAULT
SECTION EVENTS OF DEFAULT.
If any of the following events ("Events of Default") shall occur:
FAILURE TO PAY PRINCIPAL OF LOAN OR REIMBURSEMENT OBLIGATION. The
Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as
the same shall become due and payable, whether at the due date thereof
or at a date fixed for prepayment thereof or otherwise;
<PAGE> 114
FAILURE TO PAY INTEREST, FEES AND OTHER OBLIGATIONS. The Borrower
shall fail to pay any interest on any Loan or any fee or any other Obligation
(other than an amount referred to in Section 7.1(a)) payable under this
Agreement or any other Loan Document, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of three
Business Days;
REPRESENTATIONS AND WARRANTIES. Any representation or warranty
made or deemed made by or on behalf of any member of the Holdings Group in or
in connection with any Loan Document or any amendment or modification thereof
or waiver thereunder, or in any report, certificate, financial statement or
other document furnished pursuant to or in connection with any Loan Document or
any amendment or modification thereof or waiver thereunder, shall prove to have
been incorrect in any material respect when made or deemed made;
CERTAIN COVENANTS. The Borrower or Holdings shall fail to observe
or perform any covenant or agreement contained in Section 5.2, 5.4 (with
respect to the existence of the Borrower and Holdings) or 5.11 or in Article
VI, except that if such failure arises from a non-consensual Lien created
without the knowledge of, action by or consent of any Loan Party in violation
of Section 6.3, then such failure shall not constitute an Event of Default
unless such failure shall continue unremedied for 10 days after (i) notice
thereof is given to the Borrower by any Agent or Lender or (ii) any Loan Party
acknowledges such failure in writing;
CERTAIN OTHER COVENANTS. The Borrower or Holdings shall fail to
observe or perform any covenant or agreement contained in Section 5.1, 5.3,
5.7, 5.12, 5.13 or 5.14, and such failure shall continue unremedied for a
period of 10 days after (i) notice thereof is given to the Borrower by any
Agent or Lender or (ii) any Loan Party acknowledges such failure in writing;
OTHER COVENANTS. Any Loan Party shall fail to observe or perform
any covenant, condition or agreement contained in any Loan Document (other than
those specified in Sections 7.1(a), 7.1(b), 7.1(d) or 7.1(e)), and such failure
shall continue unremedied for a period of 30 days after (i) notice thereof is
given to the Borrower by any Agent or Lender or (ii) any Loan Party
acknowledges such failure in writing;
<PAGE> 115
FAILURE TO PAY OTHER INDEBTEDNESS. Any member of the Holdings
Group shall fail to make any payment (whether of principal or interest
and regardless of amount) in respect of any Material Indebtedness, when
and as the same shall become due and payable (after giving effect to
the expiration of any grace or cure period set forth therein);
DEFAULT AS TO OTHER INDEBTEDNESS. Any event or condition occurs
that results in any Material Indebtedness becoming due prior to its
scheduled maturity or that enables or permits (with or without the
giving of notice, the lapse of time or both) the holder or holders of
any Material Indebtedness or any trustee or agent on its or their
behalf to cause any Material Indebtedness to become due, or to require
the prepayment, repurchase, redemption or defeasance thereof, prior to
its scheduled maturity;
INVOLUNTARY PROCEEDINGS. An involuntary proceeding shall be
commenced or an involuntary petition shall be filed seeking (i)
liquidation, reorganization or other relief in respect of any member of the
Holdings Group or its debts, or of a substantial part of its assets, under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any member of the
Holdings Group or for a substantial part of its assets, and, in any such case,
such proceeding or petition shall continue undismissed for 60 days or an order
or decree approving or ordering any of the foregoing shall be entered or such
member of the Holdings Group shall consent to such proceeding or petition or
the entry of any such order or decree;
VOLUNTARY PROCEEDINGS. Any member of the Holdings Group shall (i)
voluntarily commence any proceeding or file any petition seeking
liquidation, reorganization or other relief under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition
described in Section 7.1(i), (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for any member of the Holdings Group or
for a substantial part of its assets, (iv) file an answer admitting the
material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for
<PAGE> 116
the benefit of creditors or (vi) take any action for the purpose of effecting
any of the foregoing;
INABILITY TO PAY DEBTS. Any member of the Holdings Group shall
become unable, admit in writing its inability or fail generally to pay
its debts as they become due;
JUDGMENTS. One or more judgments for the payment of money in an
aggregate amount in excess of $1,000,000 shall be rendered against any
member of the Holdings Group or any combination thereof and the same
shall remain undischarged for a period of 30 consecutive days during
which execution shall not be effectively stayed, or any action shall be
legally taken by a judgment creditor to attach or levy upon any assets
of any member of the Holdings Group to enforce any such judgment;
ERISA. An ERISA Event shall have occurred that, in the opinion of
the Required Lenders, when taken together with all other ERISA Events
that have occurred and have not been satisfied, could reasonably be
expected to result in liability of one or more members of the Holdings
Group in an aggregate amount exceeding $1,000,000;
REPUDIATION OR CONTEST OF OBLIGATIONS. Any Loan Party shall
repudiate, disavow or purport to revoke any of its obligations under
any Loan Document or shall commence or overtly threaten or join or
acquiesce in any litigation seeking to invalidate or annul, or seeking
any other relief from or as to, any of the provisions of any Loan
Document on any ground; or any such litigation shall be commenced by
any Person other than a Loan Party and shall not be dismissed within 60
days thereof;
IMPAIRMENT OF COLLATERAL. Any Lien purported to be created under
any Security Document shall cease to be, or shall be asserted by any
Loan Party not to be, a valid and perfected Lien on any Collateral,
with the priority required by the applicable Security Document, except
(i) as a result of the sale or other disposition of the applicable
Collateral in a transaction permitted under the Loan Documents, (ii) as
a result of the Administrative Agent's release and redelivery of any
stock certificates, promissory notes or other instruments delivered to
it in pledge under any of the Pledge and Security Agreements, or (iii)
as to Miscellaneous Unpledged Assets;
<PAGE> 117
then, and in every such event (other than an event with respect to the
Borrower or Holdings described in Section 7.1(i) or Section 7.1(j)),
and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Required Lenders
shall, by notice to the Borrower, take either or both of the following
actions, at the same or different times: (i) terminate the Revolving
Commitments, and thereupon the Revolving Commitments shall terminate
immediately, and (ii) declare the Loans then outstanding to be due and
payable in whole (or in part, in which case any principal not so
declared to be due and payable may thereafter be declared to be due and
payable), and thereupon the principal of the Loans so declared to be
due and payable, together with accrued interest thereon and all fees
and other obligations of the Borrower accrued hereunder, shall become
due and payable immediately, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the
Borrower; and in case of any event with respect to the Borrower or
Holdings described in Section 7.1(i) or Section 7.1(j), the Revolving
Commitments shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all
fees and other obligations of the Borrower accrued hereunder, shall
automatically become due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by
the Borrower.
ARTICLE
THE ADMINISTRATIVE AGENT
AND OTHER AGENTS
SECTION APPOINTMENT OF AGENTS.
Each of the Lenders and the Issuing Bank hereby (a) irrevocably appoints
Citicorp USA as the Administrative Agent, BT Alex. Brown Incorporated as
Syndication Agent, Wells Fargo Bank, N.A. as Documentation Agent and Bank of
America NT & SA as Co-Agent (collectively, the "Agents") and (b) authorizes
each Agent to take such actions on its behalf and to exercise such powers as
are delegated to such Agent by the terms of the Loan Documents, together with
such actions and powers as are reasonably incidental thereto.
<PAGE> 118
SECTION SAME RIGHTS AND POWERS.
Each Agent hereunder shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as
though it were not an Agent, and such Agent and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
any Transaction Party or any Subsidiary or other Affiliate thereof as if it
were not an Agent hereunder.
SECTION NO DUTIES OR OBLIGATIONS; NOT LIABLE.
The Agents shall not have any duties or obligations except those
expressly set forth in the Loan Documents. Without limiting the generality of
the foregoing, (a) no Agent shall be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing, (b) no
Agent shall have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated by the Loan Documents that such Agent is required to exercise in
writing by the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section
9.2), and (c) except as expressly set forth in the Loan Documents, no Agent
shall have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Borrower or Holdings or any of the
Subsidiaries that is communicated to or obtained by such Agent or any of its
Affiliates in any capacity. No Agent shall be liable for any action taken or
not taken by it with the consent or at the request of the Required Lenders (or
such other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 9.2) or in the absence of such Agent's own
gross negligence or willful misconduct. No Agent shall be deemed to have
knowledge of any Default unless and until written notice thereof is given to
such Agent by the Borrower or a Lender, and no Agent shall be responsible for
or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with any Loan Document, (ii) the
contents of any certificate, report or other document delivered thereunder or
in connection therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth in any Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of
any Loan Document or any other agreement, instrument or document, (v) the
creation, enforceability, perfection, priority or sufficiency of any Lien, or
(vi) the satisfaction of any condition set forth in Article III or elsewhere
in any Loan Document, other than to confirm receipt of items expressly
required to be
<PAGE> 119
delivered to such Agent.
SECTION ENTITLED TO RELY.
Each Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. Each Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. Each Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.
SECTION SUB-AGENTS; RELATED PARTIES.
Each Agent may perform any and all its duties and exercise its rights and
powers by or through any one or more sub-agents appointed by such Agent.
Each Agent and any such sub-agent may perform any and all its duties and
exercise its rights and powers through their respective Related Parties. The
exculpatory provisions of this Article VIII shall apply to any such sub-agent
and to the Related Parties of each Agent and any such sub-agent, and shall
apply to their respective activities in connection with the syndication of the
credit facilities provided for herein as well as activities as an Agent.
SECTION RESIGNATION OF ADMINISTRATIVE AGENT.
Subject to the appointment and acceptance of a successor to the
Administrative Agent as provided in this Section 8.6, the Administrative
Agent may resign at any time by notifying the Lenders, the Issuing Bank and the
Borrower. Upon any such resignation, the Required Lenders shall have the
right, in consultation with the Borrower, to appoint a successor. If no
successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Administrative
Agent gives notice of its resignation, then the retiring Administrative Agent
may, on behalf of the Lenders and the Issuing Bank, appoint a successor
Administrative Agent that shall be a bank with an office in New York, New York,
or an Affiliate of any such bank. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights,
<PAGE> 120
powers, privileges and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed upon between the Borrower and such successor. After
the Administrative Agent's resignation hereunder, the provisions of this
Article VIII and Section 9.3 shall continue in effect for the benefit of such
retiring Administrative Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while it was acting as Administrative Agent.
SECTION CONCERNING THE COLLATERAL.
SECURITY DOCUMENTS. Each of the Agents and Lenders authorizes and
directs the Administrative Agent to enter into the Security Documents for the
benefit of the Lenders and to perform all obligations of the Administrative
Agent thereunder, including (without limitation) obligations to release
Collateral. Each holder of Obligations agrees that any action taken by the
Required Lenders (or, where required by the express terms of this Agreement, a
greater or lesser proportion of the Lenders) in accordance with the provisions
of this Agreement or the Security Documents, and the exercise by the Required
Lenders (or, where so required, such greater or lesser proportion) of the
powers set forth herein or therein, together with such other powers as are
reasonably incidental thereto, shall be authorized and binding upon all of the
holders of Obligations.
RELEASE OF LIENS. Each Lender hereby agrees that it will, upon
request of the Borrower or the Administrative Agent, confirm the Administrative
Agent's authority to release, or direct the Administrative Agent to release,
any Lien held by the Administrative Agent:
(i) against all of the Collateral, upon payment in full of
the Obligations and expiration or termination of the obligations
of the Lenders under this Agreement;
(ii) against any part of the Collateral sold or disposed of
by the Borrower or any Borrower Subsidiary, if such sale or
disposition is permitted by and is made in accordance with this
Agreement; and
<PAGE> 121
(iii) against any Collateral which the Administrative Agent
is required to release pursuant to the Security Documents or
applicable law.
NOT ACCOUNTABLE OR LIABLE. Neither the Administrative Agent nor
any other Agent shall be accountable or liable for any release of
Collateral which (i) the Administrative Agent in good faith believes is
required under the Security Documents or any other Loan Document, or
(ii) results from any failure to give, or delay in giving, any
notice of termination of any rights of the Borrower pursuant to the
Security Documents or any other Loan Document.
SECTION NO RELIANCE
Each Lender acknowledges that it has, independently and without reliance
upon any Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the either Agent or any other
Lender and based on such documents and information as it shall from time to
time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any other Loan Document or
related agreement or any document furnished hereunder or thereunder.
ARTICLE
MISCELLANEOUS
SECTION NOTICES.
Except in the case of notices and other communications expressly permitted
to be given by telephone, all notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as
follows:
if to any member of the Holdings Group, to it at Liberty
Group Operating, Inc., 3000 Dundee Road, Suite 203, Northbrook,
Illinois 60062, Attention of Kenneth Serota
<PAGE> 122
(Telecopy No. 847-272-6244) with a copy to Liberty Group Publishing,
Inc., 11111 Santa Monica Blvd., Suite 2000, Los Angeles, CA 90025,
Attention of Gregory J. Annick (Telecopy No. 310-954-0404);
if to the Administrative Agent, to Citicorp USA, Inc., c/o
Citibank Delaware, 2 Penn's Way, Suite 200, New Castle, DE
19720, Attention of Kent Leonard (Telecopy No. 302-894-6120),
with a copy to Citicorp Securities, Inc., 725 South Figueroa
Street, Los Angeles, CA 90017, Attention of Michael Leyland
(Telecopy No. 213-624-3743);
if to the Swingline Lender, to Citicorp USA, Inc., c/o
Citibank Delaware, 2 Penn's Way, Suite 200, New Castle, DE
19720, Attention of Elizabeth Zecha (Telecopy No. 302-894-6120),
with a copy to Citicorp Securities, Inc., 725 South Figueroa
Street, Los Angeles, CA 90017, Attention of Michael Leyland
(Telecopy No. (213) 624-3743);
if to the Issuing Bank, to Citibank, N.A., 399 Park Avenue,
New York, New York 10043, Attention of Kent Leonard (Telecopy
No. 302-894-6120), with a copy to the Administrative Agent;
if to the Syndication Agent, to BT Alex. Brown Incorporated
- Syndication, 300 South Grand Avenue, 41st floor, Los Angeles,
CA 90071, Attention of Keith Bernstein and Ester Ocampo
(Telecopy No. 213-620-8484);
if to the Documentation Agent, to Wells Fargo Bank, N.A.,
333 South Grand Avenue, ninth floor, Los Angeles, CA 90071,
Attention of Delia Fance (Telecopy No. 213-628-9694);
if to the Co-Agent, to Bank of America NT & SA, 675 Anton
Boulevard, Second Floor, Costa Mesa, CA 92626 Attention of
Deborah Miller (Telecopy No. 714-850-6586); and
if to any other Lender, to it at its
<PAGE> 123
address (or telecopy number) set forth in its Administrative
Questionnaire.
Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.
SECTION WAIVERS; AMENDMENTS.
NO WAIVER; RIGHTS AND POWERS CUMULATIVE. No failure or delay by
the Administrative Agent, the Issuing Bank or any Lender in exercising any
right or power hereunder or under any other Loan Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Agents, the Issuing Bank
and the Lenders hereunder and under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of any Loan Document or consent to any departure by any
Loan Party therefrom shall in any event be effective unless the same shall be
permitted by Section 9.2(b), and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. Under no
circumstances shall the making of a Loan or issuance of a Letter of Credit be
construed as a waiver of any Default, regardless of whether the Agents, any
Lender or the Issuing Bank may have had notice or knowledge of such Default at
the time.
WRITING REQUIRED. Neither this Agreement nor any other Loan
Document nor any provision hereof or thereof may be waived, amended or
modified except, in the case of this Agreement, pursuant to an
agreement or agreements in writing entered into by the Borrower and the
Required Lenders or, in the case of any other Loan Document, pursuant
to an agreement or agreements in writing entered into by the
Administrative Agent and the Loan Party or Loan Parties that are
parties thereto, in each case with the consent of the Required Lenders,
except that (i) no such agreement shall (A) increase the Revolving
Commitment of any Lender without the written consent of such Lender,
(B) reduce the principal amount of any Loan or LC Disbursement or
reduce the rate of interest
<PAGE> 124
thereon, or reduce any fees payable hereunder, without the written consent
of each Lender affected thereby, (C) postpone the scheduled date of payment of
the principal amount of any Loan or LC Disbursement, or any interest thereon,
or any fees payable hereunder, or reduce the amount of, waive or excuse any
such payment, or postpone the scheduled date of expiration of the Revolving
Commitment, without the written consent of each Lender affected thereby, (D)
change Section 2.16(b) or Section 2.16(c) in a manner that would alter the pro
rata sharing of payments required thereby, without the written consent of each
Lender, (E) change any of the provisions of this Section 9.2 or the definition
of the term "Required Lenders" or any other provision of any Loan Document
specifying the number or percentage of Lenders required to waive, amend or
modify any rights thereunder or make any determination or grant any consent
thereunder, without the written consent of each Lender, (F) release any
Guarantor from its liability under the Guaranty, Indemnity and Subordination
Agreement (except as expressly provided therein), or limit such liability,
without the written consent of each Lender, or (G) release all or any
substantial part of the Collateral from the Liens of the Security Documents,
without the written consent of each Lender; and (ii) no such agreement shall
amend, modify or otherwise affect the rights or duties of any Agents, the
Issuing Bank or the Swingline Lender without the prior written consent of such
Agent, the Issuing Bank or the Swingline Lender, as the case may be.
SECTION EXPENSES; INDEMNITY; DAMAGE WAIVER.
EXPENSES. The Borrower and Holdings jointly and severally agree
to pay (i) all reasonable and documented out-of-pocket expenses incurred by the
Agents, the Arranger and their respective Affiliates, including the reasonable
and documented fees, charges and disbursements of counsel for the Agents and
the Arranger, in connection with the syndication of the credit facilities
provided for herein, the preparation and administration of the Loan Documents
or any amendments, modifications or waivers of the provisions thereof (whether
or not the transactions contemplated hereby or thereby shall be consummated),
(ii) all reasonable and documented out-of-pocket expenses incurred by the
Issuing Bank in connection with the issuance, amendment, renewal or extension
of any Letter of Credit or any demand for payment thereunder and (iii) all
reasonable and documented out-of-pocket expenses incurred by the Agents, the
Arranger, the Issuing Bank or any Lender, including the
<PAGE> 125
reasonable and documented fees, charges and disbursements of any
counsel for the Agents, the Issuing Bank or any Lender and any advisors,
appraisers, consultants, or other professional engaged by them or by such
counsel, in connection with the enforcement or protection of its rights in
connection with the Loan Documents, including its rights under this Section
9.3, or in connection with the Loans made or Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans or Letters of
Credit or during the pendency of any bankruptcy or insolvency proceeding.
INDEMNITY. The Borrower and Holdings agree jointly and severally
to defend and indemnify the Agents, the Arranger, the Issuing Bank and each
Lender, and each Related Party of any of the foregoing Persons (all,
collectively, "Indemnitees"), against, and to hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses,
including the reasonable and documented fees, charges and disbursements of any
counsel for any Indemnitee, incurred by or asserted against any Indemnitee
arising out of, in connection with, or as a result of (i) the execution or
delivery of any Loan Document or any other agreement or instrument contemplated
hereby, the performance by the parties to the Loan Documents of their
respective obligations thereunder or the consummation of the Transactions or
any other transactions contemplated hereby, (ii) any Loan or Letter of Credit
or the use of the proceeds therefrom (including any refusal by the Issuing Bank
to honor a demand for payment under a Letter of Credit if the documents
presented in connection with such demand do not strictly comply with the terms
of such Letter of Credit), (iii) any actual or alleged presence or release of
Hazardous Materials on or from any property currently or formerly owned or
operated by any Transaction Party or any of the Subsidiaries, or any
Environmental Liability related in any way to any Transaction Party or any of
the Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is
a party thereto, except only that no Indemnitee shall be indemnified hereunder
if and to the extent that any such losses, claims, damages, liabilities or
related expenses incurred or sustained by it are determined by final judgment
of a court of competent jurisdiction to have resulted directly and primarily
from the gross negligence or willful misconduct of such Indemnitee.
<PAGE> 126
PAYMENT BY LENDERS. To the extent that any Loan Party fails to
pay any amount required to be paid by it to the Administrative Agent,
the Issuing Bank or the Swingline Lender under Section 9.3(a) or
Section 9.3(b), each Lender severally (and not jointly) agrees to pay
to the Administrative Agent, the Issuing Bank or the Swingline Lender,
as the case may be, such Lender's pro rata share (determined as of the
time that the applicable unreimbursed expense or indemnity payment is
sought) of such unpaid amount, but (in each case) only if and to the
extent that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred
by or asserted against the Administrative Agent, Issuing Bank or
Swingline Lender in its capacity as such. For purposes hereof, a
Lender's "pro rata share" shall be determined based upon its share of
the sum of the Total Exposures and unused Revolving Commitments at the
time.
WAIVER OF LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL AND
PUNITIVE DAMAGES. The Borrower and Holdings will not assert, will
cause each Subsidiary never to assert, and for themselves and each
present and future Subsidiary and their respective Related Persons
hereby forever waives, releases and agrees not to sue upon, any claim
against any Indemnitee, on any theory of liability (whether based upon
contract, or founded upon tort or any legal duty or otherwise), for and
special, indirect, consequential damages and, to the fullest extent a
claim for punitive damages is permitted to be waived by law for
punitive damages arising out of, in connection with, or as a result of,
this Agreement or any agreement or instrument contemplated hereby, the
Transactions, any Loan or Letter of Credit or the use of the proceeds
thereof or any act, omission, claim, breach, wrongful conduct, or other
occurrence or event in any respect relating hereto.
PAYABLE UPON DEMAND. All amounts due under this Section 9.3 shall
be payable promptly after written demand therefor.
SECTION SUCCESSORS AND ASSIGNS.
SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), except that neither the
Borrower nor Holdings may assign or
<PAGE> 127
otherwise transfer any of its rights or obligations hereunder without
the prior written consent of each Lender (and any such attempted
assignment or transfer without such consent shall be null and void).
Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby (including any Affiliate of the
Issuing Bank that issues any Letter of Credit) and, to the extent
expressly contemplated hereby, the Related Parties of each of the
Agents, the Issuing Bank and the Lenders) any legal or equitable right,
remedy or claim under or by reason of this Agreement.
ASSIGNMENT BY LENDERS. Any Lender may assign to one or more
assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Revolving Commitment and
the Loans at the time owing to it), if (i) except in the case of an
assignment to a Lender or an Affiliate of a Lender, each of the
Borrower, the Administrative Agent, the Issuing Bank and the Swingline
Lender must give their prior written consent to such assignment (which
consent shall not be unreasonably withheld), (ii) except in the case of
an assignment to a Lender or an Affiliate of a Lender or an assignment
of the entire remaining amount of the assigning Lender's Revolving
Commitment or Loans, the amount of the Revolving Commitment or Loans of
the assigning Lender subject to each such assignment (determined as of
the date the Assignment and Acceptance with respect to such assignment
is delivered to the Administrative Agent) shall not be less than
$5,000,000 unless each of the Borrower and the Administrative Agent
otherwise consent, (iii) each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender's rights
and obligations under this Agreement, (iv) the parties to each
assignment shall execute and deliver to the Administrative Agent an
Assignment and Acceptance, together with a processing and recordation
fee of $3,500, and (v) the assignee, if it shall not be a Lender, shall
deliver to the Administrative Agent an Administrative Questionnaire.
Any consent of the Borrower otherwise required under this Section 9.4
shall not be required if an Event of Default has occurred and is
continuing. Subject to acceptance and recording thereof pursuant to
Section 9.4(d), from and after the effective date specified in each
Assignment and Acceptance the assignee thereunder shall be a party
hereto and, to the extent of the interest assigned by such Assignment
and Acceptance, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the
<PAGE> 128
extent of the interest assigned by such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of the assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections
2.14, 2.15, 2.16 and 9.3). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this Section 9.4(b)
shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with Section 9.4(e).
REGISTER. The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices in The City of New
York a copy of each Assignment and Acceptance delivered to it and a register
for the recordation of the names and addresses of the Lenders, and the
Revolving Commitment of, and principal amount of the Loans and LC Disbursements
owing to, each Lender pursuant to the terms hereof from time to time (the
"Register"). The entries in the Register shall be conclusive, and the Loan
Parties, the Administrative Agent, the Issuing Bank and the Lenders may treat
each Person whose name is recorded in the Register pursuant to the terms hereof
as a Lender hereunder for all purposes of this Agreement, notwithstanding
notice to the contrary. The Register shall be available for inspection by the
Borrower, the Issuing Bank and any Lender, at any reasonable time and from time
to time upon reasonable prior notice.
ACCEPTANCE AND RECORDING OF ASSIGNMENT. Upon its receipt of a
duly completed Assignment and Acceptance executed by an assigning Lender and
an assignee, the assignee's completed Administrative Questionnaire (unless the
assignee shall already be a Lender hereunder), the processing and recordation
fee referred to in Section 9.4(b) and any written consent to such assignment
required by Section 9.4(b), the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Agreement
unless it has been recorded in the Register as provided in this Section 9.4(d).
PARTICIPATIONS. Any Lender may, without the consent of the
Borrower, the Agents, the Issuing Bank or the Swingline Lender, sell
participations to one or more banks or other entities (a
<PAGE> 129
"Participant") in all or a portion of such Lender's rights and obligations
under this Agreement (including all or a portion of its Revolving Commitment and
the Loans owing to it), but in such event (i) such Lender's obligations under
this Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Loan Parties, the Agents, the Issuing Bank and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement. Any agreement or
instrument pursuant to which a Lender sells such a participation shall provide
that such Lender shall retain the sole right to enforce the Loan Documents and
to approve any amendment, modification or waiver of any provision of the Loan
Documents, except that such agreement or instrument may provide that such
Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described clause (i) in Section 9.2(b) that
affects such Participant. Subject to Section 9.4(f), the Borrower agrees that
each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and
2.16 to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to Section 9.4(b). To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 9.8 as though it
were a Lender, if such Participant agrees to be subject to Section 2.16(c) as
though it were a Lender.
PARTICIPANT NOT ENTITLED TO A GREATER PAYMENT. A Participant
shall not be entitled to receive any greater payment under Section 2.14
or Section 2.15 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with
the Borrower's prior written consent. A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 2.15 unless (i) the Borrower is notified of the
participation sold to such Participant and such Participant agrees, for
the benefit of the Borrower, to comply with Section 2.15(e) as though
it were a Lender and (ii) such Participant is eligible for exemption
from the withholding tax referred to therein, following compliance with
Section 2.15(e).
PLEDGE OR ASSIGNMENT AS SECURITY. Any Lender may at any time
pledge or assign a security interest in all or any portion of its
rights under this Agreement to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal
<PAGE> 130
Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest. No such pledge or assignment of a
security interest shall release a Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as
a party hereto.
SECTION SURVIVAL.
All covenants, agreements, representations and warranties made by the
Loan Parties in the Loan Documents and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement or any
other Loan Document shall be considered to have been relied upon by the other
parties hereto and shall survive the execution and delivery of the Loan
Documents and the making of any Loans and issuance of any Letters of Credit,
regardless of any investigation made by any such other party or on its behalf
and notwithstanding that the Agents, the Issuing Bank or any Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any credit is extended hereunder, and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Revolving
Commitments have not expired or terminated. The provisions of Sections 2.14,
2.15, 2.16 and 9.3 and Article VIII shall survive and remain in full force and
effect regardless of the consummation of the transactions contemplated hereby,
the repayment of the Loans, the expiration or termination of the Letters of
Credit and the Revolving Commitments or the termination of this Agreement or
any provision hereof.
SECTION COUNTERPARTS; INTEGRATION; EFFECTIVENESS.
This Agreement may be executed in counterparts (and by different parties
hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract. This Agreement, the other Loan Document and any separate letter
agreements with respect to fees payable to the Agents constitute the entire
contract among the parties relating to the subject matter hereof and supersede
any and all previous agreements and understandings, oral or written, relating
to the subject matter hereof, except any and all agreements relating to the
fees and compensation payable to Citicorp USA or CSI in connection with the
Transactions. Except as provided in Section 3.1, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent
<PAGE> 131
shall have received counterparts hereof that, when taken together, bear
the signatures of each of the other parties hereto, including each Lender
identified on the signature pages hereof, and thereafter shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION SEVERABILITY.
Any provision of this Agreement held to be invalid, illegal or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.
SECTION RIGHT OF SETOFF.
If an Event of Default shall have occurred and be continuing, each Lender
and each of its Affiliates is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other obligations at any time owing by such Lender or
Affiliate to or for the credit or the account of the Borrower against any of
and all the obligations of the Borrower now or hereafter existing under this
Agreement held by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement and although such obligations may be
unmatured. The rights of each Lender under this Section 9.8 are in addition to
other rights and remedies (including other rights of setoff) that such Lender
may have.
SECTION GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS.
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
CONSENT TO JURISDICTION. Each of the Borrower and Holdings hereby
irrevocably and unconditionally submits, for itself and its property and for
each other Loan Party and its property, to the
<PAGE> 132
nonexclusive jurisdiction of the Supreme Court of the State of New York
sitting in New York County and of the United States District Court of the
Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to any Loan Document, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State
or, to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Nothing in this Agreement or any other
Loan Document shall affect any right that the Agents, the Issuing Bank or any
Lender may otherwise have to bring any action or proceeding relating to this
Agreement or any other Loan Document against any Loan Party or their properties
in the courts of any jurisdiction.
WAIVER OF OBJECTIONS TO VENUE. Each of the Borrower and Holdings
hereby irrevocably and unconditionally waives, for itself and each other Loan
Party, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any other
Loan Document in any court referred to in Section 9.9(b) other than a court
referred to in the last sentence thereof that is not referred to elsewhere
therein. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
SERVICE OF PROCESS. Each of the Borrower and Holdings hereby
irrevocably and unconditionally consents, for itself and each other Loan Party,
to service of process in the manner provided for notices in Section 9.1.
Nothing in this Agreement or any other Loan Document will affect the right of
any party to this Agreement to serve process in any other manner permitted by
law.
SECTION WAIVER OF JURY TRIAL.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT
<PAGE> 133
MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10.
SECTION HEADINGS.
Article and Section headings and the Table of Contents used herein are
for convenience of reference only, are not part of this Agreement and shall
not affect the construction of, or be taken into consideration in interpreting,
this Agreement.
SECTION CONFIDENTIALITY.
Each of the Agents, the Issuing Bank and the Lenders agrees to maintain
the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its and its Affiliates' directors,
officers, employees and agents, including accountants, legal counsel and other
advisors (it being understood that the Persons to whom such disclosure is made
will be informed of the confidential nature of such Information and instructed
to keep such Information confidential), (b) to the extent requested by any
regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement, (e) in connection with the exercise of any remedies
hereunder or any suit, action or proceeding relating to this Agreement or any
other Loan Document or the enforcement of rights hereunder or thereunder, (f)
subject to an agreement containing provisions substantially the same as those
of this Section 9.12, to any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement, (g) with the consent of the Borrower or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach
of this Section 9.12 or (ii) becomes available to the Agents, the Issuing
<PAGE> 134
Bank or any Lender on a nonconfidential basis from a source other than the
Holdings. For the purposes of this Section 9.12, the term "Information"
means all information received from the Holdings Group relating to the or its
business, other than any such information that is available to the Agents, the
Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by
the Holdings Group, but, in the case of information received from the Holdings
Group after the date hereof, only if such information is clearly identified at
the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section 9.12 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
SECTION INTEREST RATE LIMITATION.
Notwithstanding anything herein to the contrary, if at any time the
interest rate applicable to any Loan, together with all fees, charges and
other amounts that are treated as interest on such Loan under applicable law
(collectively the "Charges"), shall exceed the maximum lawful rate (the
"Maximum Rate") that may be contracted for, charged, taken, received or
reserved by the Lender holding such Loan in accordance with applicable law, the
rate of interest payable in respect of such Loan hereunder, together with all
Charges payable in respect thereof, shall be limited to the Maximum Rate and,
to the extent lawful, the interest and Charges that would have been payable in
respect of such Loan but were not payable as a result of the operation of this
Section 9.13 shall be cumulated and the interest and-Charges payable to such
Lender in respect of other Loans or periods shall be increased (but not above
the Maximum Rate therefor) until such cumulated amount, together with interest
thereon at the Federal Funds Rate to the date of repayment, shall have been
received by such Lender.
[Remainder of Page Intentionally Left Blank]
<PAGE> 135
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
LIBERTY GROUP OPERATING, INC.
By:________________________________
Name:
Title:
LIBERTY GROUP PUBLISHING, INC.
By:________________________________
Name:
Title:
CITICORP USA, INC.
By:________________________________
Name:
Title:
CITIBANK, N.A.
By:________________________________
Name:
Title:
BT ALEX. BROWN INCORPORATED
By:________________________________
Name:
Title:
BANKERS TRUST COMPANY
By:________________________________
Name:
Title:
<PAGE> 136
WELLS FARGO BANK, N.A.
By:________________________________
Name:
Title:
BANK OF AMERICA NT & SA
By:________________________________
Name:
Title:
CHASE SECURITIES INC.
By:________________________________
Name:
Title:
FIRST BANK
By:________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.6
GUARANTOR PLEDGE AND SECURITY AGREEMENT
dated as of
January 27, 1998
LIBERTY GROUP PUBLISHING, INC.
and
the Subsidiary Grantors,
as Grantors
and
CITICORP USA, INC.
as Administrative Agent,
as Secured Party
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I. DEFINITIONS.......................................................
Section 1.1..Certain Terms............................................
Section 1.2..Terms Defined in Credit Agreement........................
Section 1.3..Terms Defined in the.....................................
Section 1.4..Terms Generally..........................................
ARTICLE II. THE SECURITY INTERESTS...........................................
Section 2.1...Grant of Security Interests.............................
Section 2.2...Delivery of Instruments and Securities..................
Section 2.3...Investment Property.....................................
Section 2.4...Registration of Pledge..................................
Section 2.5...Financing Statements....................................
Section 2.6...Secured Party Filing....................................
Section 2.7...Further Assurances......................................
Section 2.8...Power of Attorney.......................................
Section 2.9...Survival of Security Interests..........................
Section 2.10...Reinstatement of Security Interests....................
Section 2.11...Each Grantor Remains Liable............................
Section 2.12...Application of Guaranty Provisions.....................
Section 2.13...Liability Joint and Several............................
ARTICLE III. REPRESENTATIONS, WARRANTIES AND COVENANTS.......................
Section 3.1..The Collateral..........................................
Section 3.2...Maintenance of Perfection...............................
Section 3.3..Defense of Collateral....................................
Section 3.4...Transfer or Encumbrance.................................
Section 3.5...Payments, Dividends and Distributions...................
Section 3.6...Voting Rights...........................................
Section 3.7...Maintenance of Collateral...............................
Section 3.8...Concerning Equipment and Inventory......................
Section 3.9...Concerning Accounts, Instruments and other Claims.......
Section 3.10...Substituted Performance................................
ARTICLE IV. DEFAULT; REMEDIES................................................
Section 4.1...Default.................................................
Section 4.2...Remedies upon Default...................................
Section 4.3...Waivers by Grantors.....................................
Section 4.4...Standard of Care........................................
Section 4.5..Application of Proceeds..................................
Section 4.6..Indemnity and Expenses...................................
Section 4.7...Surplus, Deficiency.....................................
Section 4.8...Information Related to the Collateral...................
Section 4.9...Sale Exempt from Registration...........................
Section 4.10...Registration Rights....................................
Section 4.11...Rights and Remedies Cumulative.........................
Section 4.12...No Direct Enforcement by Beneficiaries.................
ARTICLE V. CONCERNING THE SECURED PARTY......................................
Section 5.1...Agent for Holders.......................................
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 5.2...Administrative Agent shall be the Secured Party
Section 5.3...No Assurances or Liability..............................
Section 5.4..Holders Bound............................................
ARTICLE VI. MISCELLANEOUS PROVISIONS.........................................
Section 6.1...Continuing Security Interests; Release..................
Section 6.2...Senior Indebtedness.....................................
Section 6.3...Amendments; Etc.........................................
Section 6.4...Failure or Indulgence Not...............................
Section 6.5...Notices.................................................
Section 6.6..Severability.............................................
Section 6.7..Headings.................................................
Section 6.8..Governing Law; Terms.....................................
Section 6.9..Consent to Jurisdiction and Service of Process...........
Section 6.10... Waiver of Jury Trial..................................
Section 6.11...Additional Grantors....................................
Section 6.12..Counterparts............................................
</TABLE>
<PAGE> 4
GUARANTOR PLEDGE AND SECURITY AGREEMENT
This GUARANTOR PLEDGE AND SECURITY AGREEMENT (this "Agreement") is dated
as of January 27, 1998 and entered into by and among LIBERTY GROUP PUBLISHING,
INC., a Delaware corporation ("Holdings"), each of the Persons identified as
Initial Subsidiary Grantors on the signature pages hereof (each, an "Initial
Subsidiary Grantor") and each other Person that at any time agrees in writing
to be bound as a Subsidiary Grantor hereunder (the Initial Subsidiary Grantors
and each such other Person, the "Subsidiary Grantors" and, together with
Holdings, the "Grantors"), and CITICORP USA, INC., a Delaware corporation, in
its capacity as Administrative Agent under the Credit Agreement referred to
below ("Secured Party"), FOR THE BENEFIT OF the Persons that now are or at any
time hereafter become party as a Lender to the Credit Agreement described
herein (the "Lenders"), CITICORP USA, INC., in its individual capacity, as
Administrative Agent and as Swingline Lender, CITIBANK, N.A., as Issuing Bank,
BT ALEX. BROWN INCORPORATED, as Syndication Agent, WELLS FARGO BANK, N.A., as
Documentation Agent, BANK OF AMERICA NT & SA, as Co-Agent, and all other
present and future Holders of any of the Secured Obligations described herein
(all, collectively, including the Lenders, the Administrative Agent, the
Swingline Lender, the Issuing Bank, the Syndication Agent, the Documentation
Agent and the Co-Agent, the "Beneficiaries").
RECITALS
Liberty Group Operating, Inc., a Delaware corporation (the "Borrower"), is
a Subsidiary of Holdings. Each Initial Subsidiary Grantor is a Subsidiary of
the Borrower, and each Person that hereafter agrees to become bound hereby as a
Subsidiary Grantor is, on the date it becomes bound hereby, a Subsidiary of the
Borrower.
The Borrower has requested that credit be extended to the Borrower on
terms and conditions set forth in the Credit Agreement.
To induce the Lenders, the Administrative Agent, the Swingline Lender, the
Issuing Bank, the Syndication Agent, the Documentation Agent and the Co-Agent
to enter into the Credit Agreement, and in consideration thereof and of any and
all credit at any time extended thereunder, (a) Holdings and the Initial
Subsidiary Grantors have offered to issue the guaranties and indemnities and
enter into the agreements set forth in Guaranty, Indemnity and Subordination
Agreement dated as of January 27, 1997 (the "Guaranty, Indemnity and
Subordination Agreement") and to grant to the Administrative Agent, for the
benefit of the Beneficiaries, the
1
<PAGE> 5
collateral security described herein as security for the payment of the Secured
Obligations on the terms herein set forth, and (b) Holdings and the Borrower
have agreed in the Credit Agreement to cause each Person that hereafter becomes
a Subsidiary of the Borrower to become bound by the provisions of the Guaranty,
Indemnity and Subordination Agreement as a Subsidiary Guarantor thereunder and
to become bound by the provisions hereof as a Subsidiary Grantor hereunder.
ACCORDINGLY, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Grantor hereby agrees with Secured Party for the benefit of
the Beneficiaries as follows:
ARTICLE
DEFINITIONS
SECTION CERTAIN TERMS
. As used in this Agreement, the following terms have the meanings
specified below:
"BANKRUPTCY CODE" means Title 11 of the United States Code, as from time
to time amended.
"CLAIM" has the meaning set forth in the Bankruptcy Code.
"COLLATERAL" has the meaning set forth in Section 2.1.
"CREDIT AGREEMENT" means the Credit Agreement dated as of January 27,
1998, by and among Liberty Group Operating, Inc., a Delaware corporation,
Liberty Group Publishing, Inc., a Delaware corporation, the Lenders party
thereto, the Administrative Agent, the Swingline Lender, the Issuing Bank, the
Syndication Agent, the Documentation Agent and the Co-Agent, as such agreement
from time to time may be modified, amended, restated, extended, refinanced or
replaced in any manner or in any respect (including so as to reduce or increase
the amount or cost of credit extended thereunder or to shorten or extend the
time of payment thereunder or in any other manner change the amount or terms of
credit extended to the Borrower or the identity, rights or obligations of any
party thereto).
"DISCHARGE OF THE CREDIT AGREEMENT" means that all obligations of the
Lenders to extend credit under the Credit Agreement and all letters of credit
at any time issued under the
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Credit Agreement have expired or been terminated and have been absolutely,
unconditionally and irrevocably discharged and all Obligations at any time
created, incurred or outstanding (except Obligations for indemnification which
are then contingent and in respect of which no claim or demand has then been
made) have been fully and finally paid in cash.
"EQUITY INTERESTS" means, with respect to any Person, any capital stock of
such Person or membership interests, partnership interests (whether general or
limited) or other equity interests in such Person, regardless of type, class,
preference or designation, and all warrants, options, purchase rights,
conversion or exchange rights, voting rights, calls or claims of any character
with respect thereto, in each case whether outstanding on the date of this
Agreement or issued or granted at any time thereafter.
"EXCLUDED ASSETS" means (a) rights, licenses and franchises granted by any
Governmental Authority in which it is unlawful to create a Lien, (b) any
leasehold interest in real estate, except the tenant's interest in Fixtures
thereon, and (c) any owned real estate, except Fixtures thereon.
"HOLDER" means, in respect of any Secured Obligation, the Person entitled
to enforce payment thereof and specifically includes each Lender, the
Administrative Agent, the Swingline Lender, the Issuing Bank, the Syndication
Agent, the Documentation Agent, the Co-Agent and the Arranger.
"LOAN PARTIES" means the Borrower and the Guarantors.
"OBLIGATIONS" means all direct or indirect debts, liabilities and
obligations of the Borrower or any other Loan Party of any and every type and
description at any time arising under or in connection with the Credit
Agreement or any other Loan Document, to the Administrative Agent, the
Swingline Lender, the Arranger, the Syndication Agent, the Documentation Agent,
the Co-Agent, the Issuing Bank, Citibank, any Lender, any Person entitled to
indemnification pursuant to the Credit Agreement or any other Loan Document or
to any other Person, in each case whether now outstanding or hereafter created
or incurred, whether or not the right of such Person to payment in respect of
any such debts, liabilities or obligations is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured and whether or not such claim is
discharged, stayed or otherwise affected by any bankruptcy case or insolvency,
reorganization, receivership, dissolution or liquidation proceeding, and shall
include (a) all liabilities of the Borrower for principal of and interest on
any and all loans at any time outstanding under the Credit Agreement, (b) all
liabilities of the Borrower in respect of letters of credit at any time issued
pursuant to the Credit Agreement, (c) all liabilities of the Borrower under the
Loan Documents for any fees, costs, taxes, expenses, indemnification and other
amounts payable thereunder, (d) all liabilities of any Borrower Subsidiary
under any Subsidiary Note, (e) all liabilities of any Guarantor under the
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Guaranty, Indemnity and Subordination Agreement, and (f) all other liabilities
of the Borrower or any other Loan Party under or in respect of any of the Loan
Documents or any of the transactions contemplated thereby and specifically
includes any and all present and future "Obligations" as such term is defined
in the Credit Agreement.
"PERFECTED" means, as to the security interests granted to Secured Party
in Section 2.1, that (a) a creditor on a simple contract cannot acquire a
judicial lien that is superior to such security interests and (b) if a case
were pending under the Bankruptcy Code in which any Grantor is the debtor, such
security interests would be a Lien that is perfected in such bankruptcy case.
"POST-PETITION INTEREST AND EXPENSE CLAIMS" means any and all claims of
any Holder of Secured Obligations (a) for interest on any Obligations
determined for any period of time occurring after the commencement of any case
under the Bankruptcy Code or any other insolvency, reorganization,
receivership, dissolution or liquidation proceeding at the contract rate
(including any applicable post-default increase therein) set forth in the
Credit Agreement or any other Loan Document or (b) for cost and expense
reimbursements or indemnification on the terms set forth in the Credit
Agreement or any other Loan Document relating to costs and expenses incurred
and indemnification rights accrued at any time after the commencement of any
such case or proceeding, in each case to the extent such claim accrues or
becomes payable in accordance with the provisions of the Credit Agreement or
other Loan Documents (or would have accrued or become payable if enforceable or
allowable in such case or proceeding), whether or not such claim is
enforceable, allowable or allowed in such case or proceeding and even if such
claim is disallowed therein.
"SECURED OBLIGATIONS" is defined in Section 2.1.
SECTION TERMS DEFINED IN CREDIT AGREEMENT
. Unless the context otherwise requires, the following terms used in this
Agreement are used as defined in the Credit Agreement:
ABR Loans
Arranger
Asset Purchase Agreements
Borrower
Borrower Subsidiary
Business Day
Co-Agent
Default
Disqualified Stock
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Documentation Agent
Event of Default
Governmental Authority
Guarantee
Guarantors
Issuing Bank
Lien
Loan Documents
Loans
Material Adverse Effect
Miscellaneous Unpledged Assets
Permitted Cash Investments
Person
Required Lenders
Subsidiary
Subsidiary Note
Swingline Lender
Syndication Agent
Transaction Agreements
Transactions
SECTION TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE
. When capitalized, the following terms used in this Agreement or the
Security Documents have the meanings given to them in the Uniform Commercial
Code, as in effect in the State of New York on the date of this Agreement:
Accounts
Certificated Security
Commodity Account
Commodity Contract
Commodity Intermediary
Control
Documents
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Equipment
Financial Asset
Fixtures
General Intangibles
Goods
Instruments
Inventory
Investment Property
Securities Account
Securities Intermediary
Security
Security Certificate
Security Entitlement
Uncertificated Security
SECTION TERMS GENERALLY
. The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words "include," "includes" and "including" shall be deemed to be followed
by the phrase "without limitation." The word "will" shall be construed to have
the same meaning and effect as the word "shall." Unless the context requires
otherwise (a) any definition of or reference to any agreement, instrument or
other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth herein), (b) any reference herein to any Person
shall be construed to include such Person's successors, transferees and
assigns, (c) the words "herein," "hereof" and "hereunder," and words of similar
import, shall be construed to refer
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to this Agreement in its entirety and not to any particular provision hereof,
(d) all references herein to Articles, Sections, Exhibits and Schedules shall
be construed to refer to Articles and Sections of, and Exhibits and Schedules
to, this Agreement, and (e) the words "asset" and "property" shall be construed
to have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, whether real, personal or mixed and of every
type and description.
ARTICLE
THE SECURITY INTERESTS
SECTION GRANT OF SECURITY INTERESTS
. As security for the payment of the Obligations and all Post-Petition
Interest and Expense Claims (collectively, the "Secured Obligations"), each
Grantor hereby assigns to Secured Party for the benefit of the Beneficiaries,
and grants Secured Party for the benefit of the Beneficiaries security
interests in, all of such Grantor's right, title and interest in and to the
following types or items of property, in each case whether now or hereafter
existing or owned by such Grantor or in which such Grantor now owns or
hereafter acquires an interest and wherever the same may be located
(collectively, the "Collateral"):
all Inventory, including specifically all raw materials,
work-in-process, finished goods, supplies, materials, spare parts, Goods
held for sale or on lease or for lease or furnished or to be furnished
under contracts of service, merchandise inventory, rental inventory, and
returned or repossessed Goods and all rights to enforce return or
repossession by reclamation, stoppage in transit or otherwise,
all Equipment, including specifically all manufacturing, printing,
distribution, delivery, retailing, vending, data processing,
communications, office and other equipment in all of its forms, all
vehicles, all tools, dies, and molds, all Fixtures, all other Goods used
or bought for use primarily in a business and all other Goods except
Inventory,
all Accounts,
all Chattel Paper,
all Documents,
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all Instruments and all other Claims that are in any respect
evidenced or represented by any writing, including specifically all
writings evidencing or representing a Claim against Holdings or any
Borrower Subsidiary or any other Person,
all Securities, whether constituting Certificated Securities or
Uncertificated Securities, all Financial Assets, all Security
Entitlements, all Securities Accounts, all Commodity Contracts, all
Commodity Accounts, and all other Investment Property, including
specifically the Security Certificates described in Schedule 3.1(b) and
all other Equity Interests and all Permitted Cash Investments,
all money, cash and cash equivalents, including specifically all
deposit accounts and all certificates of deposit,
all General Intangibles, including specifically (a) the property
described on Schedule 3.1(c), (b) all registered and unregistered
trademarks and servicemarks and all trademark and service mark license
agreements to which any Grantor is a party (whether as licensor or
licensee) and all Claims (including infringement claims) relating
thereto, (c) all patents and patent applications and all patent license
agreements to which any Grantor is a party (whether as licensor or
licensee) and all Claims (including infringement claims) relating
thereto, (d) all registered and unregistered copyrights and all copyright
license agreements to which any Grantor is a party (whether as licensor
or licensee) and Claims (including infringement claims) relating thereto,
(e) all other intellectual property in which any Grantor has an interest,
including proprietary research and development, know-how, trade secrets,
trade names, trade styles, license agreements and user rights and Claims
(including infringement claims) relating thereto, (f) all customer lists
and agreements, (g) all supplier lists and agreements, (h) all employee
and consultant lists, rights, and agreements, (i) all computing, data and
information processing and communications programs, discs, designs, and
information and the data and other entries thereon, (j) all books,
records, catalogs, back issues, library rights and all manifestations and
embodyments thereof, (k) all rights and Claims arising under or in
respect of the Asset Purchase Agreements or the other Transaction
Agreements, including all indemnification rights and indemnification
payments thereunder, (l) all rights and Claims arising under or in
respect of the Credit Agreement or any Loan Document, including rights
and Claims against Secured Party or any other Beneficiary, (m) all rights
and Claims arising in respect of the Transactions, (n) all Net Cash
Proceeds, (o) all tax refunds, (p) all policies of insurance and
condemnation awards of every type and description and the proceeds
thereof, (q) all loans receivable, letters of credit, bonds and
undertakings, deferred purchase price or deferred purchase consideration,
consulting or non-competition payments and other Indebtedness,
liabilities and obligations receivable not constituting an Account and
not evidenced or represented by any Instrument, Chattel Paper or
Security, (r) all rights of recoupment, recourse, reimbursement,
subrogation,
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indemnity or contribution (including those arising under the Guaranty,
Indemnity and Subordination Agreement, those arising in respect of any
Guarantee of the Senior Subordinated Notes or any other Guarantee or any
payment thereon, and those arising on account of any other agreement,
transaction or event), (s) all other causes of action and Claims of every
type and description, whether fixed or contingent, liquidated or not
liquidated, accrued or not accrued, and all judgments, orders and
recoveries thereon, (t) all other agreements and contract rights of every
type and description and Claims thereon or relating in any manner
thereto, (u) all other rights, privileges, benefits, entitlements,
franchises, licenses and expectancies of every type and description, (v)
all other intangible property of every type and description, and (w) all
goodwill associated with any of the foregoing,
all property that is at any time delivered to, or that is is at any
time in the Control of, Secured Party,
TOGETHER, IN EACH CASE, WITH (a) all accessions thereto and products and
replacements thereof, (b) all guaranties, Liens and other forms of collateral
security therefor, and (c) all dividends, distributions, and payments received
thereon or in exchange or substitution therefor or upon Transfer thereof, and
(d) all other proceeds thereof,
EXCEPT AND EXCLUDING, HOWEVER, each item of property that is an Excluded
Asset, for as long as it remains an Excluded Asset.
SECTION DELIVERY OF INSTRUMENTS AND SECURITIES
. On the date hereof or, if hereafter acquired, immediately upon
acquisition thereof, without any notice from or demand by Secured Party, (a)
each Grantor shall deliver to Secured Party the Security Certificates described
in Schedule 3.1(b) as owned by it and all other Instruments (except checks
received and collected in the ordinary course of business) and Security
Certificates at any time owned by it and constituting Collateral, in each case
in suitable form for transfer by delivery or accompanied by duly executed
instruments of transfer, assignments in blank or with appropriate endorsements,
in form and substance satisfactory to Secured Party, and (b) each Grantor shall
cause the issuer of each Uncertificated Security owned by it and constituting
Collateral to register Secured Party as the registered owner thereof, either
upon original issuance or by registration of transfer and shall executed and
deliver all writings necessary to cause such issuer to do so.
SECTION INVESTMENT PROPERTY
. Each Grantor will cause Secured Party's security interests in
Investment
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Property owned by such Grantor to be and remain continuously Perfected by
Control and, in addition, will cause such security interests to be Perfected by
filing. No Grantor will grant or permit any other security interest or Lien
upon any Investment Property constituting Collateral. If so requested at any
time by Secured Party or the Required Lenders as to any Security Entitlement or
Securities Account or any Commodity Contract or Commodity Account that is owned
by any Grantor, constitutes Collateral and does not constitute Miscellaneous
Unpledged Assets, such Grantor will promptly cause each Person who is a
Securities Intermediary as to any such Security Entitlement or Securities
Account and each Person who is a Commodity Intermediary as to any such Commodity
Contract or Commodity Account to deliver a written agreement enforceable by
Secured Party for the benefit of the Beneficiaries waiving and releasing, and
agreeing not to create, grant, accept or hold, any priority, pari passu or
junior security interest or Lien therein. No Grantor will cause or permit any
Equity Interest in any Subsidiary to be outstanding as an Uncertificated
Security or to constitute a Security Entitlement or be held in a Securities
Account.
SECTION REGISTRATION OF PLEDGE
. Secured Party may at any time when any Event of Default is continuing
and without any notice to any Loan Party or any other Person, transfer to and
register in Secured Party's name, as pledgee, any and all Instruments and
Investment Property constituting Collateral. Such transfer and registration
shall not foreclose or otherwise affect any rights or interests of any Loan
Party and shall not increase, restrict or reduce any of Secured Party's rights
and remedies. If after any such transfer and registration any Grantor remains
entitled under Section 3.6 to exercise voting rights with respect to Equity
Interests included in such Investment Property, Secured Party shall, at the
written request of such Grantor, deliver to such Grantor a revocable proxy or
other instrument sufficient to permit such Grantor to exercise such voting
rights to the extent permitted under Section 3.6.
SECTION FINANCING STATEMENTS
. Each Grantor will duly execute, deliver and (subject to execution by
Secured Party, where required by law) file duly completed financing statements
naming such Grantor as debtor, naming Secured Party as secured party, and
covering the property described in Section 2.1, in the proper filing office in
each jurisdiction in which a financing statement is required from time to time
to be filed in order to ensure that the security interests granted to Secured
Party in Section 2.1 are at all times continuously Perfected, to the extent
that, under applicable law, such security interests can be Perfected by the
filing of a financing statement.
SECTION SECURED PARTY FILING
. Secured Party is hereby authorized to file one or more financing
statements and continuations thereof and amendments thereto, relative to all or
any part of the Collateral, without
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the signature of any Grantor where permitted by law.
SECTION FURTHER ASSURANCES
. Each Grantor will promptly (and in any event within three Business Days
after request by Secured Party or the Required Lenders) execute and deliver,
and use its reasonable and diligent best efforts to obtain from other Persons,
all instruments and documents (including security agreements, security
assignments, Lien releases, Lien waivers, transfer documents and transfer
notices, financing statements and other lien notices), in form and substance
satisfactory to Secured Party or the Required Lenders, and take all other
actions which are necessary or, in the good faith judgment of Secured Party or
the Required Lenders, desirable or appropriate in order to create, maintain,
perfect, ensure the agreed priority of, protect or enforce Secured Party's
security interests in the Collateral, to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral, to
protect the Collateral against the rights, claims or interests of third
persons, or to effect or to assure further the purposes and provisions of this
Agreement, and each Grantor agrees to pay all costs related thereto and all
reasonable expenses incurred by Secured Party in connection therewith.
SECTION POWER OF ATTORNEY
. Each Grantor hereby irrevocably constitutes and appoints Secured Party
and any officer, agent or nominee of Secured Party, with full power of
substitution, as its true and lawful attorney-in-fact with full power and
authority, in the name of such Grantor or in its own name, if and whenever any
Grantor is in default under this Agreement as set forth in Section 4.1 to take
any and all actions and to execute and deliver any and all agreements,
documents, notices, instruments and writings that Secured Party or the Required
Lenders may determine to be necessary or desirable to create, perfect or ensure
the agreed priority of the security interests granted in Section 2.1 or to
enforce such security interests in any lawful and commercial reasonable manner
or otherwise to protect Secured Party's interest in the Collateral in any
lawful and commercially reasonable manner, including the power and right on
behalf of any Grantor, without notice to or assent by any Grantor:
to ask for, demand, sue for, collect, settle and give acquittance
for any and all moneys due or to become due with respect to any or all
of the Collateral and otherwise to demand and enforce payment and
collection of any and all Claims constituting Collateral,
to sign and file in any office in any jurisdiction financing
statements, lien notices, collateral assignments and any other
instruments or writings that may be required or, in the opinion of
Secured Party or the Required Lenders, appropriate to create or Perfect a
security interest in or Lien upon any of the Collateral as security for
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the Secured Obligations,
to accept, hold, collect, endorse, transfer and deliver any and all
checks, notes, drafts, acceptances, documents and other negotiable and
nonnegotiable Instruments, Securities, Documents and Chattel Paper
constituting Collateral that may be delivered to Secured Party in
accordance with the provisions of this Agreement, whether made payable to
a Grantor or otherwise,
to commence, file, prosecute, defend, settle, compromise or adjust
any claim, suit, action or proceeding with respect to any or all of the
Collateral or otherwise to enforce the rights of Secured Party with
respect to any of the Collateral,
to obtain, contest, enforce, adjust and settle Claims for insurance
proceeds or condemnation awards constituting proceeds of Collateral or
required to be paid to Secured Party pursuant to this Agreement or the
Credit Agreement,
to do, at its option and at the expense and for the account of any
Grantor, at any time and from time to time, all lawful and commercially
reasonable acts and things that Secured Party or the Required Lenders may
deem necessary or desirable to protect or preserve the Collateral or to
realize upon the Collateral,
to contest, settle, pay or discharge taxes or Liens (other than
Liens permitted under this Agreement or the Credit Agreement) levied or
placed upon or threatened against any of the Collateral, and for such
purposes (A) the legality or validity thereof and amounts necessary to
settle or discharge the same may be determined by Secured Party or the
Required Lenders in its or their commercially reasonable discretion and
(B) each Grantor agrees immediately upon demand to reimburse Secured
Party for any payments made by Secured Party on account of any such taxes
or Liens, as part of the Obligations secured hereby,
to sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with the Accounts
and other documents relating to the Collateral, and
generally to sell, Transfer, pledge, make any agreement with respect
to or otherwise deal with any of the Collateral as fully and completely
as though Secured Party were the absolute owner thereof for all purposes,
and to do, at Secured Party's option and at Grantors' expense, at any
time or from time to time, all acts and things that Secured Party or the
Required Lenders reasonably deem necessary to protect, preserve or
realize upon the Collateral and Secured Party's security interests
therein in
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order to effect the intent of this Agreement, all as fully and
effectively as any Grantor might do.
The power granted in this Section 2.8 is a power coupled with an interest, is
irrevocable and shall be discharged upon Discharge of the Credit Agreement.
SECTION SURVIVAL OF SECURITY INTERESTS
. The security interests granted hereby shall, unless released in writing
by Secured Party, (a) remain enforceable as security for all Secured
Obligations now outstanding or created or incurred at any future time (whether
or not created or incurred pursuant to any agreement presently in effect or
hereafter made and notwithstanding any subsequent repayment of any of the
Secured Obligations or any other act, occurrence or event), until Discharge of
the Credit Agreement, (b) survive the Discharge of the Credit Agreement to the
same extent that any contingent Obligation survives, and (c) survive any sale
or other Transfer of any Collateral and remain enforceable against each
transferee and subsequent owner thereof, even if such sale or other Transfer is
permitted at the time under the Credit Agreement, except in the case of
inventory sold in the ordinary course of business and any other Collateral that
is expressly and specifically released from the security interests created
hereby pursuant to a written release signed by Secured Party.
SECTION REINSTATEMENT OF SECURITY INTERESTS
. If at any time any payment on any Secured Obligation is set aside,
avoided or rescinded or must otherwise be restored or returned, this Agreement
and the security interests granted to Secured Party herein and all other
obligations of each Grantor hereunder shall remain in full force and effect
and, if previously released or terminated, shall be automatically and fully
reinstated, without any necessity for any act, consent or agreement of any
Grantor, as fully as if such payment had never been made and as fully as if any
such release or termination had never become effective.
SECTION EACH GRANTOR REMAINS LIABLE
. Anything contained herein to the contrary notwithstanding, (a) each
Grantor shall remain liable under all contracts and agreements included in the
Collateral, to the extent set forth therein, to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by Secured Party of any of its rights hereunder
shall not release any Grantor from any of its duties or obligations under any
contract or agreement included in the Collateral, (c) Secured Party shall not
have any obligation or liability under any contract or agreement included in
the Collateral by reason of this Agreement or the grant to Secured Party of any
security interest in such contract or agreement, and (d) Secured
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Party shall not be obligated to perform any of the obligations or duties of any
Grantor under any contract or agreement included in the Collateral or to take
any action to collect or enforce any claim for payment assigned hereunder.
SECTION APPLICATION OF GUARANTY PROVISIONS
. Each and all of the provisions set forth in the Guaranty, Indemnity and
Subordination Agreement that govern or in any respect relate to any Guarantor's
guarantee of payment of the Guaranteed Obligations (as defined therein) or the
liability of any Guarantor thereunder or any recourse, reimbursement,
contribution, indemnity or subrogation rights related thereto and the
subordination of claims arising therefrom (including specifically each and all
of the provisions in Section 2.5, Article III, Article IV and Sections 5.1,
5.2, 5.3, 5.4, 5.5, 5.6 and 5.7 thereof) shall apply with like force and effect
to the security interest granted by such Guarantor as Grantor under this
Agreement and to the liability of such Guarantor as Grantor under this
Agreement, mutatis mutandis, to the end and with the effect that (a) such
security interest and liability hereunder shall be as equally absolute,
unconditional, continuing, unlimited (except to the extent provided in Section
2.5 of the Guaranty, Indemnity and Subordination Agreement), enduring, assured
and protected as such Guaranteed Obligations and the liability of such
Guarantor under the Guaranty, Indemnity and Subordination Agreement are
absolute, unconditional, continuing, unlimited, enduring, assured and protected
and (b) all recourse, reimbursement, contribution, indemnity or subrogation
rights are forever waived, released and discharged with respect to such
security interest or any enforcement of such security interest or the liability
of any Grantor hereunder on the same terms as those set forth in Article IV of
the Guaranty, Indemnity and Subordination Agreement, with the exceptions
therein set forth.
SECTION LIABILITY JOINT AND SEVERAL
. The security interest granted by each Grantor herein and all liability
of each Grantor hereunder shall be the joint and several obligation of each
Grantor and may be freely enforced against each Grantor, for the full amount of
the Secured Obligations and all other liabilities of such Grantor hereunder,
without regard to whether enforcement is sought or available against any other
Grantor.
ARTICLE
REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Grantor represents and warrants to Secured Party and agrees with
Secured Party that:
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SECTION THE COLLATERAL.
OWNERSHIP. Except as otherwise expressly permitted under the Credit
Agreement, (i) each Grantor owns its interest in the Collateral free and clear
of any and all Liens and (ii) no effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any filing or recording office, except those in favor of Secured
Party.
INTERESTS IN AND CLAIMS AGAINST SUBSIDIARIES. Schedule 3.1(b) sets forth
accurately and exhaustively all Equity Interests owned by any Grantor in any
Subsidiary of any Grantor and all other Equity Interests owned by any Grantor.
All such Equity Interests are represented by Security Certificates that have
been duly authorized and validly issued, are fully paid and non-assessable and
were not issued in breach or derogation of preemptive rights of any Person.
INTELLECTUAL PROPERTY. Schedule 3.1(c) sets forth accurately and
exhaustively (a) all registered and unregistered trademarks and servicemarks
owned by any Grantor, all trademark and service mark license agreements to
which any Grantor is a party (whether as licensor or licensee), and all pending
or overtly threatened infringement claims by or against any Grantor and other
litigation relating to any such trademarks, servicemarks or trademark or
servicemark license agreements, (b) all patents and patent applications owned
by any Grantor, all patent license agreements to which any Grantor is a party
(whether as licensor or licensee), and all pending or overtly threatened
infringement claims by or against any Grantor and other litigation relating to
any such patents, patent applications or patent license agreements, (c) all
registered and unregistered copyrights owned by any Grantor, all copyright
license agreements to which any Grantor is a party (whether as licensor or
licensee) and all pending or overtly threatened infringement claims by or
against any Grantor or other litigation relating to any such copyrights or
copyright license agreements, (d) all other General Intangibles in which any
Grantor has an interest, including proprietary research and development,
know-how, trade secrets, trade names, license agreements and user rights and
other intellectual property of every type and description, all pending or
overtly threatened infringement claims by or against any Grantor and other
litigation relating thereto. and all other intangible property, except General
Intangibles that constitute Miscellaneous Unpledged Assets.
OTHER INVESTMENT PROPERTY. Schedule 3.1(d) sets forth accurately and
exhaustively all other Investment Property of any Grantor, except Investment
Property constituting Miscellaneous Unpledged Assets or Permitted Cash
Investments.
LOCATION OF EQUIPMENT AND INVENTORY. All Equipment and Inventory are
located and intended to be kept at one of the collateral locations specified on
Schedule 3.1(e).
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NO CONSUMER GOODS OR FARM PRODUCTS. No Grantor owns any assets that are,
as to it, consumer goods or farm products.
LOCATION OF GRANTORS. Each Grantor's chief place of business, chief
executive office and office or offices where such Grantor keeps its records
regarding its Accounts and all originals of its Chattel Paper are located, and
during the preceding four months were located, at the Grantor locations
specified on Schedule 3.1(g).
NAMES. The correct legal name of each Grantor is set forth in the
preamble to this Agreement. No Grantor conducts business or hold itself out
under, and in the past five years has not conducted business or held itself out
under, any other name (including any trade-name or fictitious business name)
except any name listed on Schedule 3.1(h).
TAXPAYER ID NUMBER. The proper taxpayer identification number for each
Loan Party is accurately set forth on Schedule 3.1(i).
PERFECTION. Except in the case of property (if any) constituting
Miscellaneous Unpledged Assets, the security interests granted to Secured Party
in Section 2.1 are lawful, valid and enforceable security interests that at all
times have been, and remain, duly and continuously Perfected.
AMENDMENT OF SCHEDULE 3.1. Any Grantor may at any time unilaterally amend
Schedule 3.1 in any respect required by the occurrence of any event that does
not constitute or give rise to a Default, by giving written notice thereof to
Secured Party. To be effective, such notice must state conspicuously that it
constitutes an amendment to certain factual matters relating to the Collateral
set forth in Section 3.1 of this Agreement.
SECTION MAINTENANCE OF PERFECTION.
No Grantor will (a) cause, permit or suffer any voluntary or
involuntary change in its name, identity or corporate structure, or in the
location of its chief executive office, or (b) keep any records relating to its
Accounts or any tangible Collateral (other than mobile goods) at any location
other than a location set forth in Schedule 3.1, unless (in each case) (i)
Schedule 3.1 has first been appropriately supplemented with respect thereto,
and (ii) an appropriate financing statement has been filed in the proper office
and in the proper form, and all other requisite actions have been taken, to
Perfect and continue the Perfection (without loss of priority) of Secured
Party's security interests in the Collateral.
SECTION DEFENSE OF COLLATERAL.
Each Grantor will defend the Collateral against all claims and demands
of all
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Persons at any time claiming any interest therein.
SECTION TRANSFER OR ENCUMBRANCE.
No Grantor will encumber or Transfer any item of Collateral or any
interest therein, or permit or suffer any item of Collateral to be encumbered
or Transferred, unless (a) such action is permitted at the time under the
Credit Agreement and (ii) each Loan Party makes all payments on account of the
Secured Obligations required to be made therefrom and takes all other actions
required to be taken in connection therewith under the Credit Agreement or any
other Loan Document.
SECTION PAYMENTS, DIVIDENDS AND DISTRIBUTIONS.
Each Grantor shall be entitled to receive all payments on Accounts,
Instruments and Claims owned by it and all dividends and distributions on
Equity Interests and other Investment Property owned by it, so long as (a) no
Event of Default has occurred and is continuing or would result, (b) such
Grantor ensures that Secured Party's security interests in any and all such
payments, dividends and distributions (except those constituting Miscellaneous
Unpledged Assets) remain continuously Perfected and (c) each Loan Party makes
all payments on account of the Secured Obligations required to be made
therefrom and takes all other actions required to be taken in connection
therewith under the Credit Agreement or any other Loan Document.
SECTION VOTING RIGHTS.
So long as no Event of Default has occurred or would result, each
Grantor shall have and may exercise all voting rights with respect to any and
all Equity Interests constituting Collateral, except that:
NO BREACH. No Grantor shall act or vote in favor of any action that would
constitute or cause a breach of any obligations of any Loan Party under the
Credit Agreement or under any other Loan Document;
NO CAPITAL STRUCTURE CHANGES. No Grantor shall act or vote in favor of
(i) the authorization or issuance of any Disqualified Stock, options, warrants,
voting rights, or preference shares or additional shares, or (ii) any
reclassification, readjustment, reorganization, merger, consolidation, sale or
disposition of assets, or dissolution, without giving Secured Party at least 15
days' prior written notice thereof;
MATERIAL ADVERSE CHANGES. No Grantor shall act or vote in favor of any
action that has or is reasonably likely to have a material adverse effect on
the value of any of the
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Collateral or that has, or would reasonably be expected to result in, a
Material Adverse Effect; and
TERMINATION OF VOTING RIGHTS. At any time when any Grantor is in
default under this Agreement as set forth in Section 4.1, Secured Party may
terminate any or all of each Grantor's voting rights with respect to any or all
Equity Interests constituting Collateral, either by giving written notice of
such termination to the Borrower or by transferring such Equity Interests into
Secured Party's name, and Secured Party shall thereupon have the sole right and
power to exercise such voting rights.
SECTION MAINTENANCE OF COLLATERAL.
Each Grantor shall:
not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any other Loan Document
or any applicable statute, regulation or ordinance or any policy of
insurance covering any such Collateral;
notify Secured Party of any change in such Grantor's name, identity
or corporate structure within 30 days after such change;
give Secured Party 30 days' prior written notice of any change in
such Grantor's chief place of business, chief executive office, places of
business, collateral locations or federal taxpayer ID number or the
office where such Grantor keeps its Chattel Paper and its records
regarding any Accounts;
if the Lenders give value to enable such Grantor to acquire rights
in or the use of any Collateral, use such value for such purposes; and
pay promptly when due all material property and other taxes,
assessments and governmental charges or levies imposed upon any
Collateral and all Claims that are or might become secured by any Lien
upon any Collateral, except to the extent the same is being contested as
permitted under the Credit Agreement; PROVIDED, that, notwithstanding any
other provision in the Loan Documents, each Grantor shall in any event
pay such taxes, assessments, charges, levies and Claims not later than
five days prior to the date of any proposed sale under any judgment, writ
or warrant of attachment or other legal process entered or filed against
any Grantor or any Collateral as a result of the failure to make such
payment.
SECTION CONCERNING EQUIPMENT AND INVENTORY.
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Each Grantor will:
cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new (ordinary wear and tear
and worn-out and surplus equipment excepted) and in accordance with such
Grantor's past practices and make or cause to be made all repairs,
replacements and other improvements in connection therewith that are
necessary or desirable to such end;
notify Secured Party of any loss or damage to any Equipment in an
amount exceeding $2,000,000;
keep correct and accurate records of the Inventory, itemizing and
describing the kind, type and quantity of Inventory, such Grantor's cost
therefor and (where applicable) the current list prices for the
Inventory, in the ordinary course of such Grantor's business;
if any Inventory is in possession or control of any agent, carrier,
warehouseman, bailee, consignee or processor, upon the occurrence of an
Event of Default instruct such Person to hold all such Inventory for the
account of Secured Party and subject to the instructions of Secured
Party; and
if so requested at any time by Secured Party or the Required
Lenders, promptly endorse and deliver to Secured Party each and all
negotiable Documents constituting Collateral.
SECTION CONCERNING ACCOUNTS, INSTRUMENTS AND OTHER CLAIMS.
Each Grantor will:
maintain accurate and complete records concerning the Accounts,
Instruments and all other Claims and the identity, name and address of
each account debtor or obligor thereon, hold and preserve such records in
safekeeping, permit representatives of Secured Party at any time during
normal business hours to inspect, copy and make abstracts from such
records, and render to Secured Party, at such Grantor's cost and expense,
such clerical and other assistance as may be reasonably requested with
regard thereto,
if so requested at any time by Secured Party or the Required
Lenders, such Grantor will certify and deliver to Secured Party complete
and correct copies of each contract or agreement constituting Collateral,
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continue to collect, at such Grantor's expense, all amounts due or
to become due to such Grantor under Accounts, Instruments and other
Claims and, in connection therewith take such action as such Grantor (or,
whenever any Grantor is in default under this Agreement as set forth in
Section 4.1, as Secured Party or the Required Lenders) may reasonably
deem necessary or advisable to enforce collection of amounts due or to
become due to thereunder; PROVIDED, that Secured Party shall have the
right at any time when any Grantor is in default under this Agreement as
set forth in Section 4.1 (A) to notify the account debtors or obligors
under any or all Accounts, Instruments or other Claims of the assignment
of such Accounts, Instruments or Claims to Secured Party and to direct
such account debtors or obligors to make payment of all amounts due or to
become due to any Grantor thereunder directly to Secured Party, (B) to
notify each Person maintaining a lockbox or similar arrangement to which
account debtors or obligors under any Accounts, Instruments or other
Claims have been directed to make payment to remit all amounts
representing collections on checks and other payment items from time to
time sent to or deposited in such lockbox or other arrangement directly
to Secured Party and (C) at the expense of Grantors, to demand payment of
any Accounts, Instruments and Claims and enforce collection thereof by
legal proceedings in any lawful manner and to extend, renew adjust,
settle or compromise the amount or payment thereof, in the same manner
and to the same extent as any Grantor might have done, and
if Secured Party at any time exercises any of the rights described
in the proviso in Section 3.9(iii), (A) segregate from all other funds
and hold in trust for Secured Party and immediately deliver to Secured
Party (in the identical form received) all amounts and proceeds
(including checks and other instruments) received by any Grantor in
respect of any and all Accounts, Instruments and other Claims, and (B)
not adjust, settle or compromise the amount or payment of any Account or
Claim, or release wholly or partly any account debtor or obligor thereon,
or allow any credit or discount thereon.
SECTION SUBSTITUTED PERFORMANCE.
Secured Party may at any time (but shall not be obligated to) (a)
perform any of the obligations of any Grantor under this Agreement if such
Grantor fails to perform such obligation within three Business Days (or, in the
case of insurance, within one Business Day) after written demand by Secured
Party and (b) make any payments and do any other acts which Secured Party or
the Required Lenders may deem necessary or desirable to protect Secured Party's
security interests in the Collateral, including the right to pay, purchase,
contest or compromise any Lien that attaches or is asserted against any
Collateral, to procure insurance, and to appear in and defend any action or
proceeding relating to any Collateral, and each Grantor agrees promptly to
reimburse Secured Party for all payments made by Secured Party in doing so,
together with interest thereon at the rate then applicable to ABR Loans, all
reasonable attorneys'
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fees and disbursements incurred by Secured Party in connection therewith,
whether or not suit is brought, and all other costs and expenses related
thereto.
ARTICLE
DEFAULT; REMEDIES
SECTION DEFAULT.
Grantors shall be in default under this Agreement (a) whenever any
Event of Default has occurred and is continuing (and each of the Grantors shall
thereupon be in default hereunder without regard to whether or to what degree
any Grantor individually may have caused, participated in, or had any knowledge
of the occurrence of such Event of Default) and (b) at all times after the
Loans have become due and payable, whether at maturity, upon acceleration
pursuant to Section 7.1 of the Credit Agreement or otherwise.
SECTION REMEDIES UPON DEFAULT.
At any time when any Grantor is in default under this Agreement as
set forth in Section 4.1, Secured Party may exercise and enforce, in any order,
(a) each and all of the rights and remedies available to a secured party upon
default under the Uniform Commercial Code or other applicable law, (b) each and
all of the rights and remedies available to it under the Credit Agreement or
any other Loan Document and (c) each and all of the following rights and
remedies:
COLLECTION RIGHTS. Without notice to any Grantor or any other Loan
Party, Secured Party may notify any or all account debtors and obligors on any
Accounts, Instruments or other Claims constituting Collateral of Secured
Party's security interests therein and may direct, demand and enforce payment
thereof directly to Secured Party.
TAKING POSSESSION. Secured Party may (i) enter upon any and all
premises owned or leased by any Grantor where Collateral is located (or
believed by Secured Party to be located), with or without judicial process and
without any obligation to pay rent, (ii) prior to the disposition of the
Collateral, store, process, repair or recondition the Collateral or otherwise
prepare the Collateral for disposition in any manner to the extent Secured
Party deems appropriate, (iii) take possession of any Grantor's premises or
place custodians in exclusive control thereof, remain on such premises and use
the same and any Grantor's equipment for the purpose of completing any work in
process or otherwise preparing the Collateral for sale or selling or otherwise
Transferring the Collateral, (iv) take possession of all items of Collateral
that are not then in its possession, either upon such premises or by removal
from such premises, and
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(v) require any Grantor or the Person in possession thereof to deliver such
Collateral to Secured Party at one or more locations designated by Secured
Party and reasonably convenient to it and each Grantor owning an interest
therein.
FORECLOSURE. Secured Party may sell, lease, license or otherwise
dispose of or Transfer any or all of the Collateral or any part thereof in one
or more parcels at public sale or in private sale or transaction, on any
exchange or market or at Secured Party's offices or on any Grantor's premises
or at any other location, for cash, on credit or for future delivery, and may
enter into all contracts necessary or appropriate in connection therewith,
without any notice whatsoever unless required by law. Where permitted by law,
one or more of the Beneficiaries may be the purchasers at any such sale and in
such event, if such bid is made by all of the Lenders or by all of the Holders
of Secured Obligations or otherwise whenever a credit bid is expressly
permitted under the Credit Agreement or approved in writing by the
Administrative Agent and the Required Lenders, the Beneficiaries bidding at
such sale may bid part or all of the Obligations owing to them without
necessity of any cash payment on account of the purchase price, even though any
other purchaser at such sale is required to bid a purchase price payable in
cash. Each Grantor agrees that at least 10 calendar days' written notice to
such Grantor of the time and place of any public sale of Collateral owned by it
(or, to the extent such Grantor is entitled by law to notice thereof, the
public sale of any other Collateral), or the time after which any private sale
of Collateral owned by it (or, to the extent such Grantor is entitled by law to
notice thereof, the private sale of any other Collateral) is to be made, shall
be commercially reasonable. For purposes of such notice, to the fullest extent
permitted by law (i) each Grantor waives notice of any sale of Collateral owned
by any other Grantor and (ii) each Grantor agrees that notice given to the
Borrower shall constitute notice given to such Grantor. The giving of notice
of any such sale or other disposition shall not obligate Secured Party to
proceed with the sale or disposition, and any such sale or disposition may be
postponed or adjourned from time to time, without further notice.
USE OF INTELLECTUAL PROPERTY. Secured Party may, on a royalty-free
basis, use and license use of any trademark, trade name, trade style,
copyright, patent or technical knowledge or process owned, held or used
by any Grantor in respect of any Collateral as to which any right or remedy of
Secured Party is exercised or enforced.
In addition, each Holder of any Secured Obligation may exercise and enforce
such rights and remedies for the collection of such Secured Obligation as may
be available to it by law or agreement.
SECTION WAIVERS BY GRANTORS.
. Each Grantor hereby irrevocably waives (a) all rights of redemption from
any foreclosure sale, (b) the benefit of all valuation, appraisal, exemption
and moratorium laws,
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(c) to the fullest extent permitted by law, all rights to notice or a hearing
prior to the exercise by Secured Party of its right to take possession of any
Collateral, whether by self-help or by legal process and any right to object to
the Secured Party taking possession of any Collateral by self-help, (d) if
Secured Party seeks to obtain possession of any Collateral by replevin, claim
and delivery, attachment, levy or other legal process, (i) any notice or demand
for possession prior to the commencement of legal proceedings, (ii) the posting
of any bond or security in any such proceedings, and (iii) any requirement
that Secured Party retain possession and not dispose of any Collateral until
after a trial or final judgment in such proceedings.
SECTION STANDARD OF CARE.
. The powers conferred on Secured Party hereunder are solely to protect
its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, Secured Party shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or to protect, preserve, vote or exercise any rights
pertaining to any Collateral. Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of Collateral in its possession
if such Collateral is accorded treatment substantially equal to that which
Secured Party accords its own property or if it selects, with reasonable care,
a custodian to hold such Collateral on its behalf.
SECTION APPLICATION OF PROCEEDS.
. Except as expressly provided elsewhere in this Agreement, all proceeds
received by Secured Party in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral may, in the discretion of
Secured Party, be held by Secured Party as Collateral for, or then, or at any
other time thereafter, applied in full or in part by Secured Party against, the
Secured Obligations in the following order of priority:
FIRST: To the payment of all reasonable costs and expenses of such
sale, collection or other realization, including reasonable compensation
to Secured Party and its agents and counsel, and all other reasonable
expenses, liabilities and advances made or incurred by Secured Party in
connection therewith, and all amounts for which Secured Party is entitled
to indemnification hereunder and all reasonable advances made by Secured
Party hereunder for the account of any Grantor, and to the payment of all
reasonable costs and expenses paid or incurred by Secured Party in
connection with the exercise of any right or remedy hereunder, all in
accordance with Section 4.6;
SECOND: To the payment of all other Secured Obligations (for the
ratable benefit of the holders thereof) then due and payable; and
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THIRD: To the payment to or upon the order of the Grantor entitled
thereto, or to whomsoever may be lawfully entitled to receive the same or
as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
SECTION INDEMNITY AND EXPENSES.
INDEMNITY. Each Grantor will defend, indemnify and hold harmless
Secured Party and each Beneficiary from and against any and all claims, losses
and liabilities in any way relating to, growing out of or resulting from this
Agreement and the transactions contemplated hereby (including enforcement of
any interest, right or remedy created hereby), except to the extent such
claims, losses or liabilities are directly attributable to Secured Party's or
such Beneficiary's gross negligence or willful misconduct as finally determined
by a court of competent jurisdiction.
EXPENSES. Each Grantor will pay to Secured Party upon demand the
amount of any and all reasonable costs and expenses, including the reasonable
fees and expenses of its counsel and of any advisors, consultants, experts and
agents, that Secured Party may incur in connection with (i) the administration
of this Agreement, (ii) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the interests, rights or remedies
of Secured Party hereunder, (iv) the failure by any Grantor to perform or
observe any of the provisions hereof, or (v) the proof, allowance, protection,
administration, treatment, discharge, collection or enforcement of any of the
Secured Obligations or any of the Collateral in any bankruptcy case or
insolvency, reorganization, receivership, dissolution or liquidation proceeding
of or affecting any Loan Party.
SECTION SURPLUS, DEFICIENCY.
. Any surplus proceeds of any sale or other disposition by Secured Party
of any Collateral remaining after Discharge of the Credit Agreement and after
all Secured Obligations are paid in full and in cash shall be paid over to the
Grantor entitled thereto, or to whomever may be lawfully entitled to receive
such surplus or as a court of competent jurisdiction may direct, but prior to
Discharge of the Credit Agreement, such surplus proceeds may be retained by
Secured Party and held as Collateral until Discharge of the Credit Agreement.
The Borrower and each Guarantor shall be and remain liable for any deficiency.
SECTION INFORMATION RELATED TO THE COLLATERAL.
. If Secured Party determines to sell or otherwise Transfer any
Collateral, each Grantor shall, and shall cause any Person controlled by it to,
furnish to Secured Party all
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information Secured Party may request that pertains or could pertain to the
value or condition of the Collateral or that would or might facilitate such
sale or Transfer. Secured Party shall have the right, notwithstanding any
confidentiality obligation or agreement otherwise binding upon it, freely to
disclose such information, and any and all other information (including
confidential information) pertaining in any manner to the Collateral or the
assets, liabilities, results of operations, business or prospects of any Loan
Party, freely to any Person that Secured Party in good faith believes to be a
potential or prospective purchaser in such sale or Transfer, without liability
for any disclosure, dissemination or use that may be made as to such information
by any such Person.
SECTION SALE EXEMPT FROM REGISTRATION.
. Secured Party shall be entitled at any such sale or other Transfer, if
it deems it advisable to do so, to restrict the prospective bidders or
purchasers to Persons who will provide assurances satisfactory to Secured Party
that the Collateral may be offered and sold to them without registration under
the Securities Act of 1933, as amended, and without registration or
qualification under any other applicable state or federal law. Upon the
consummation of any such sale, Secured Party shall have the right to assign,
transfer and deliver to the purchaser or purchasers thereof the Collateral so
sold. Secured Party may solicit offers to buy the Collateral, or any part of
it, from a limited number of investors deemed by Secured Party, in its good
faith judgment or in good faith reliance upon advice of its counsel, to meet
the requirements to purchase securities under Regulation D promulgated under
the Securities Act of 1933 as then in effect (or any other regulation of
similar import). If Secured Party solicits such offers from such investors,
then the acceptance by Secured Party of the highest offer obtained from any of
them shall be deemed to be a commercially reasonable method of disposition of
the Collateral
SECTION REGISTRATION RIGHTS.
. If Secured Party determines that registration of any securities
constituting Collateral under the Securities Act of 1933 or registration or
qualification of such securities under any other applicable state or federal
law is required or desirable in connection with any sale or Transfer of any
Collateral, then as and when requested by Secured Party, each Grantor will use
its best efforts to cause such registration to be effectively made, at no
expense to Secured Party, and to continue any such registration effective for
such time as may be reasonably necessary in the opinion of Secured Party.
SECTION RIGHTS AND REMEDIES CUMULATIVE.
. The rights provided for in this Agreement and the other Loan Documents
are cumulative and are not exclusive of any other rights, powers or privileges
or remedies provided by law or in equity, or under any other instrument,
document or agreement. Secured Party may
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exercise and enforce each right and remedy available to it either before or
concurrently with or after, and independently of, any exercise or enforcement
of any other right or remedy of Secured Party or any Holder of any Secured
Obligation against any Person or property. All such rights and remedies shall
be cumulative, and no one of them shall exclude or preclude any other.
SECTION NO DIRECT ENFORCEMENT BY BENEFICIARIES.
. Secured Party may freely exercise and enforce any and all of its rights
and remedies hereunder, for the benefit of the Beneficiaries. No Beneficiary,
other than Secured Party, shall have any independent right to collect, take
possession of, foreclose against or otherwise enforce the security interests
granted hereby.
ARTICLE
CONCERNING THE SECURED PARTY
SECTION AGENT FOR HOLDERS.
. Secured Party is executing and delivering this Agreement, and accepting
the security interests, rights, remedies, powers and benefits conferred upon
Secured Party hereby, both for its own benefit and as agent for all present
and future Holders of Secured Obligations. The provisions of the Credit
Agreement and all rights, powers, immunities and indemnities granted to Secured
Party under the Credit Agreement or any other Loan Document, or under any
separate agreement made by or otherwise binding upon any Holder of Secured
Obligations, shall apply in respect of such execution, delivery and acceptance
and in respect of any and all actions taken or omitted by Secured Party under,
in connection with or in respect of this Agreement.
SECTION ADMINISTRATIVE AGENT SHALL BE THE SECURED PARTY.
. Secured Party shall at all times be the same Person that is the
Administrative Agent under the Credit Agreement. Written notice of resignation
by the Administrative Agent pursuant to Section 8.6 of the Credit Agreement
shall also constitute notice of resignation as Secured Party under this
Agreement; and appointment of a successor Administrative Agent pursuant to
Section 8.6 of the Credit Agreement shall also constitute appointment of a
successor Secured Party under this Agreement. Upon the acceptance of any
appointment as Administrative Agent under Section 8.6 of the Credit Agreement
by a successor Administrative Agent, the successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Secured Party under this Agreement, and the retiring
Secured Party under this Agreement shall promptly (a) transfer to such
successor Secured Party
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all sums, securities and other items of Collateral held hereunder, together
with all records and other documents necessary or appropriate in connection
with the performance of the duties of the successor Secured Party under this
Agreement, and (b) execute and deliver to such successor Secured Party such
amendments to financing statements, and take such other actions, as may be
necessary or appropriate in connection with the assignment to such successor
Secured Party of the security interests created hereunder, whereupon such
retiring Secured Party shall be discharged from its duties and obligations
under this Agreement. After any retiring Administrative Agent's resignation
hereunder as Secured Party, the provisions of this Agreement shall inure to its
benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.
SECTION NO ASSURANCES OR LIABILITY.
Secured Party makes no statement, promise, representation or warranty
whatsoever, and shall have no liability whatsoever, to any Holder of any
Secured Obligations as to the authorization, execution, delivery, legality,
enforceability or sufficiency of this Agreement or as to the creation,
perfection, priority, or enforceability of any security interests granted
hereunder or as to existence, ownership, quality, condition, value or
sufficiency of any Collateral or as to any other matter whatsoever.
SECTION HOLDERS BOUND.
Except where the consent of others may be required pursuant to the express
provisions of Section 9.2 of the Credit Agreement, any modification, amendment,
waiver, release, termination or discharge of any security interest, right,
remedy, power or benefit conferred upon Secured Party that is effectuated in a
writing signed by Secured Party shall be binding upon all Holders of Secured
Obligations if it is (i) authorized pursuant to any provision of the Credit
Agreement or any other Loan Document, (ii) required by law or (iii) authorized
or ratified either (A) by the Required Holders or (B) by the Holders of at
least a majority in outstanding principal amount of the Secured Obligations
(other than contingent or unliquidated Secured Obligations).
ARTICLE
MISCELLANEOUS PROVISIONS
SECTION CONTINUING SECURITY INTERESTS; RELEASE.
. This Agreement creates continuing security interests in the Collateral
and shall (a) remain in full force and effect until the Discharge of the Credit
Agreement, (b) be binding
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upon each Grantor and its successors and assigns, and (c) inure, together with
the rights and remedies of Secured Party hereunder, to the benefit of and be
enforceable by Secured Party and its successors, transferees and assigns acting
in the capacity of Administrative Agent under the Credit Agreement. Subject to
and upon Discharge of the Credit Agreement, Secured Party shall (within a
reasonable time after it receives from Grantors a written request for release
of the Collateral) execute and deliver to Grantors an instrument in form and
substance satisfactory to Secured Party releasing (on a quitclaim basis,
without recourse, without warranty, and without any liability whatsoever) any
security interest Secured Party may then hold in the Collateral and thereupon
Secured Party shall, at Grantors' expense, execute and deliver to Grantors such
UCC termination statements and other like documents as Grantors may reasonably
request to evidence such release.
SECTION SENIOR INDEBTEDNESS.
. All liability of each Grantor hereunder (A) is and shall be (and is
hereby designated as) "Senior Indebtedness" within the meaning of and for the
purposes of the Indenture dated as of January 27, 1998 by and among the
Borrower, the Subsidiary Guarantors named therein, and State Street Bank and
Trust Company, as trustee, governing the Borrower's 9 3/8% Senior Subordinated
Notes due 2008, and (B) is and shall be (and is hereby made) senior in right of
payment, on the terms set forth in said Indenture, to said Senior Subordinated
Notes and all "Obligations" (as defined in said Indenture) in respect of said
Senior Subordinated Notes and all "Subsidiary Guarantees" (as defined in said
Indenture) at any time issued under or pursuant to said Indenture.
SECTION AMENDMENTS; ETC.
No amendment or waiver of any provision of this Agreement, or consent to
any departure by any Grantor herefrom, shall in any event be effective unless
the same shall be in writing and signed by Secured Party, and then such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which it was given.
SECTION FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
. No failure or delay on the part of Secured Party in the exercise of any
power, right or privilege hereunder shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude any other or further exercise thereof or of any other power,
right or privilege. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.
SECTION NOTICES.
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. Any and all notices and communications to be given to any Grantor or
Secured Party may be given by courier service, personal service, mailing
the same, postage prepaid, or by telex, facsimile transmission or cable to each
such party at the address of the Borrower set forth in the Credit Agreement, on
the signature pages hereof or to any other address as any party hereto may
specify by written notice to the other parties, and such communication shall be
deemed to have been given when delivered in person or by courier service, upon
receipt of telefacsimile or telex, or three Business Days after depositing it
in the United States mail with postage prepaid and properly addressed.
SECTION SEVERABILITY
. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION HEADINGS
. Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
SECTION GOVERNING LAW; TERMS
. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE
EXTENT THAT THE NEW YORK UNIFORM COMMERCIAL CODE PROVIDES THAT THE PERFECTION
OF THE SECURITY INTERESTS HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
Notwithstanding the foregoing, the creation, perfection, priority and
enforcement of a security interest in any deposit account shall be governed by
the laws of the state in which the depositary bank, or branch bank, maintaining
such deposit account is located.
SECTION CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING OUT OF OR
RELATING TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT
29
<PAGE> 33
JURISDICTION IN THE STATE OF NEW YORK. BY EXECUTION AND DELIVERY OF THIS
AGREEMENT EACH GRANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT. Each Grantor hereby agrees that service of all process in
any such proceeding in any such court may be made by registered or certified
mail, return receipt requested, to such Grantor at its address provided in
Section 6.5, such service being hereby acknowledged by such Grantor to be
sufficient for personal jurisdiction in any action against such Grantor in any
such court and to be otherwise effective and binding service in every respect.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of Secured Party to bring proceedings
against such Grantor in the courts of any other jurisdiction.
SECTION WAIVER OF JURY TRIAL
. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS AGREEMENT. The scope of this waiver is intended to be all-encompassing of
any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including without limitation contract
claims, tort claims, breach of duty claims, and all other common law and
statutory claims. Grantors and Secured Party each acknowledge that this waiver
is a material inducement for Grantors and Secured Party to enter into a
business relationship, that Grantors and Secured Party have already relied on
this waiver in entering into this Agreement and that each will continue to rely
on this waiver in their related future dealings. Each party hereto further
warrants and represents that it has reviewed this waiver with its legal counsel
and that it knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
SECTION ADDITIONAL GRANTORS
. The initial Grantors hereunder shall be Holdings and such of the
Subsidiaries of the Borrower as are signatories hereto on the date hereof.
From time to time subsequent to the date hereof, additional Subsidiaries of the
Borrower may become party hereto, as additional Grantors (each an "Additional
Grantor"), by executing a counterpart of this Agreement. Upon
30
<PAGE> 34
delivery of any such counterpart to the Administrative Agent, notice of which
is hereby waived by each Grantor, each such Additional Grantor shall be a
Grantor and shall be as fully a party hereto as if such Additional Grantor were
an original signatory hereof. Each Grantor expressly agrees that its
obligations arising hereunder shall not be affected or diminished by the
addition or release of any other Grantor hereunder, nor by any election of any
Beneficiary not to cause any Subsidiary of Borrower to become an Additional
Grantor hereunder. This Agreement shall be fully effective as to any Grantor
that is or becomes a party hereto regardless of whether any other Person
becomes or fails to become or ceases to be a Grantor hereunder.
SECTION COUNTERPARTS
. This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[Remainder of page intentionally left blank]
31
<PAGE> 35
IN WITNESS WHEREOF, Grantors and Secured Party have executed this
Agreement as of the date first written above.
LIBERTY GROUP ARIZONA HOLDINGS, INC.
LIBERTY GROUP ARKANSAS HOLDINGS, INC.
LIBERTY GROUP CALIFORNIA HOLDINGS, INC.
LIBERTY GROUP ILLINOIS HOLDINGS, INC.
LIBERTY GROUP IOWA HOLDINGS, INC.
LIBERTY GROUP KANSAS HOLDINGS, INC.
LIBERTY GROUP MICHIGAN HOLDINGS, INC.
LIBERTY GROUP MINNESOTA HOLDINGS, INC.
LIBERTY GROUP MISSOURI HOLDINGS, INC.
LIBERTY GROUP NEW YORK HOLDINGS, INC.
LIBERTY GROUP PENNSYLVANIA HOLDINGS, INC.
LIBERTY GROUP MANAGEMENT SERVICES, INC.
By: /s/ Kenneth L. Serota
Name: Kenneth L. Serota
Title: President
Acting for and on behalf of each of the entities named
above (the "Initial Subsidiary Grantors")
LIBERTY GROUP PUBLISHING, INC.
By: /s/ Kenneth L. Serota
Name: Kenneth L. Serota
Title: President
Accepted as of the 27th day
of January, 1998
CITICORP USA, INC.,
AS ADMINISTRATIVE AGENT
By: /s/ Michael Leyland
----------------------------
Name: Michael Leyland
Title: Attorney-In-Fact
32
<PAGE> 1
EXHIBIT 10.7
BORROWER PLEDGE AND SECURITY AGREEMENT
dated as of
January 27, 1998
LIBERTY GROUP OPERATING, INC.,
as Grantor
and
CITICORP USA, INC.,
as Administative Agent,
as Secured Party
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS .........................................................
Section 1.1. Certain Terms ...............................................
Section 1.2. Terms Defined in Credit Agreement ...........................
Section 1.3. Terms Defined in the Uniform Commercial Code ................
Section 1.4. Terms Generally .............................................
ARTICLE II. THE SECURITY INTERESTS .............................................
Section 2.1. Grant of Security Interests ................................
Section 2.2. Delivery of Instruments and Securities .....................
Section 2.3. Investment Property ........................................
Section 2.4. Registration of Pledge .....................................
Section 2.5. Financing Statements .......................................
Section 2.6. Secured Party Filing .......................................
Section 2.7. Further Assurances .........................................
Section 2.8. Power of Attorney ..........................................
Section 2.9. Survival of Security Interests .............................
Section 2.10. Reinstatement of Security Interests .......................
Section 2.11. Grantor Remains Liable ....................................
ARTICLE III. REPRESENTATIONS, WARRANTIES AND COVENANTS .........................
Section 3.1. The Collateral .............................................
Section 3.2. Maintenance of Perfection ..................................
Section 3.3. Defense of Collateral .......................................
Section 3.4. Transfer or Encumbrance ....................................
Section 3.5. Payments, Dividends and Distributions ......................
Section 3.6. Voting Rights ..............................................
Section 3.7. Maintenance of Collateral ..................................
Section 3.8. Concerning Equipment and Inventory .........................
Section 3.9. Concerning Accounts, Instruments and other Claims ..........
Section 3.10. Substituted Performance ...................................
ARTICLE IV. DEFAULT; REMEDIES ..................................................
Section 4.1. Default ....................................................
Section 4.2. Remedies upon Default ......................................
Section 4.3. Waivers by Grantor .........................................
Section 4.4. Standard of Care ...........................................
Section 4.5. Application of Proceeds .....................................
Section 4.6. Indemnity and Expenses ......................................
Section 4.7. Surplus, Deficiency ........................................
Section 4.8. Information Related to the Collateral ......................
Section 4.9. Sale Exempt from Registration ..............................
</TABLE>
29
<PAGE> 3
<TABLE>
<S> <C>
Section 4.10. Registration Rights........................................
Section 4.11. Rights and Remedies Cumulative ............................
Section 4.12. No Direct Enforcement by Beneficiaries ....................
ARTICLE V. CONCERNING THE SECURED PARTY ........................................
Section 5.1. Agent for Holders ..........................................
Section 5.2. Administrative Agent shall be the Secured Party ............
Section 5.3. No Assurances or Liability .................................
Section 5.4. Holders Bound ...............................................
ARTICLE VI. MISCELLANEOUS PROVISIONS ...........................................
Section 6.1. Continuing Security Interests; Release .....................
Section 6.2. Senior Indebtedness ........................................
Section 6.3. Amendments; Etc. ...........................................
Section 6.4. Failure or Indulgence Not Waiver; Remedies Cumulative ......
Section 6.5. Notices ....................................................
Section 6.6. Severability ................................................
Section 6.7. Headings ....................................................
Section 6.8. Governing Law; Terms ........................................
Section 6.9. Consent to Jurisdiction and Service of Process ..............
Section 6.10. Waiver of Jury Trial .....................................
Section 6.11. Counterparts ...............................................
</TABLE>
<PAGE> 4
BORROWER PLEDGE AND SECURITY AGREEMENT
This BORROWER PLEDGE AND SECURITY AGREEMENT (this "Agreement") is dated as
of January 27, 1998 and entered into by and between LIBERTY GROUP OPERATING,
INC., a Delaware corporation ("Grantor"), and CITICORP USA, INC., a Delaware
corporation, in its capacity as Administrative Agent under the Credit Agreement
referred to below ("Secured Party"), FOR THE BENEFIT OF the Persons that now
are or at any time hereafter become party as a Lender to the Credit Agreement
described herein (the "Lenders"), CITICORP USA, INC., in its individual
capacity, as Administrative Agent and as Swingline Lender, CITIBANK, N.A., as
Issuing Bank, BT ALEX. BROWN INCORPORATED, as Syndication Agent, WELLS FARGO
BANK, N.A., as Documentation Agent, BANK OF AMERICA NT & SA, as Co-Agent, and
all other present and future Holders of any of the Secured Obligations
described herein (all, collectively, including the Lenders, the Administrative
Agent, the Swingline Lender, the Issuing Bank, the Syndication Agent, the
Documentation Agent and the Co-Agent, the "Beneficiaries").
RECITALS
The Grantor has requested that credit be extended to the Grantor on terms
and conditions set forth in the Credit Agreement.
To induce the Lenders, the Administrative Agent, the Swingline Lender, the
Issuing Bank, the Syndication Agent, the Documentation Agent and the Co-Agent
to enter into the Credit Agreement, and in consideration thereof and of any and
all credit at any time extended thereunder, the Grantor has agreed to grant to
the Administrative Agent, for the benefit of the Beneficiaries, the collateral
security described herein as security for the payment of the Secured
Obligations on the terms herein set forth.
ACCORDINGLY, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Grantor hereby agrees with Secured Party for the benefit of the
Beneficiaries as follows:
ARTICLE
DEFINITIONS
SECTION CERTAIN TERMS
1
<PAGE> 5
. As used in this Agreement, the following terms have the meanings
specified below:
"BANKRUPTCY CODE" means Title 11 of the United States Code, as from time
to time amended.
"CLAIM" has the meaning set forth in the Bankruptcy Code.
"COLLATERAL" has the meaning set forth in Section 2.1.
"CREDIT AGREEMENT" means the Credit Agreement dated as of January 27,
1998, by and among Liberty Group Operating, Inc., a Delaware corporation,
Liberty Group Publishing, Inc., a Delaware corporation, the Lenders party
thereto, the Administrative Agent, the Swingline Lender, the Issuing Bank, the
Syndication Agent, the Documentation Agent and the Co-Agent, as such agreement
from time to time may be modified, amended, restated, extended, refinanced or
replaced in any manner or in any respect (including so as to reduce or increase
the amount or cost of credit extended thereunder or to shorten or extend the
time of payment thereunder or in any other manner change the amount or terms of
credit extended to the Borrower or the identity, rights or obligations of any
party thereto).
"DISCHARGE OF THE CREDIT AGREEMENT" means that all obligations of the
Lenders to extend credit under the Credit Agreement and all letters of credit
at any time issued under the Credit Agreement have expired or been terminated
and have been absolutely, unconditionally and irrevocably discharged and all
Obligations at any time created, incurred or outstanding (except Obligations
for indemnification which are then contingent and in respect of which no claim
or demand has then been made) have been fully and finally paid in cash.
"EQUITY INTERESTS" means, with respect to any Person, any capital stock of
such Person or membership interests, partnership interests (whether general or
limited) or other equity interests in such Person, regardless of type, class,
preference or designation, and all warrants, options, purchase rights,
conversion or exchange rights, voting rights, calls or claims of any character
with respect thereto, in each case whether outstanding on the date of this
Agreement or issued or granted at any time thereafter.
"EXCLUDED ASSETS" means (a) rights, licenses and franchises granted by any
Governmental Authority in which it is unlawful to create a Lien, (b) any
leasehold interest in real estate, except the tenant's interest in Fixtures
thereon, and (c) any owned real estate, except Fixtures thereon.
"HOLDER" means, in respect of any Secured Obligation, the Person entitled
to enforce payment thereof and specifically includes each Lender, the
Administrative Agent, the Swingline Lender, the Issuing Bank, the Syndication
Agent, the Documentation Agent, the Co-Agent and the Arranger.
"LOAN PARTIES" means the Borrower and the Guarantors.
"OBLIGATIONS" means all direct or indirect debts, liabilities and
obligations of the
<PAGE> 6
Borrower or any other Loan Party of any and every type and description at any
time arising under or in connection with the Credit Agreement or any other Loan
Document, to the Administrative Agent, the Swingline Lender, the Arranger, the
Syndication Agent, the Documentation Agent, the Co-Agent, the Issuing Bank,
Citibank, any Lender, any Person entitled to indemnification pursuant to the
Credit Agreement or any other Loan Document or to any other Person, in each
case whether now outstanding or hereafter created or incurred, whether or not
the right of such Person to payment in respect of any such debts, liabilities
or obligations is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured and whether or not such claim is discharged, stayed or otherwise
affected by any bankruptcy case or insolvency, reorganization, receivership,
dissolution or liquidation proceeding, and shall include (a) all liabilities of
the Borrower for principal of and interest on any and all Loans at any time
outstanding under the Credit Agreement, (b) all liabilities of the Borrower in
respect of letters of credit at any time issued pursuant to the Credit
Agreement, (c) all liabilities of the Borrower under the Loan Documents for any
fees, costs, taxes, expenses, indemnification and other amounts payable
thereunder, (d) all liabilities of any Guarantor under the Guaranty, Indemnity
and Subordination Agreement, and (e) all other liabilities of the Borrower or
any other Loan Party under or in respect of any of the Loan Documents or any of
the transactions contemplated thereby and specifically includes any and all
present and future "Obligations" as such term is defined in the Credit
Agreement.
"PERFECTED" means, as to the security interests granted to Secured Party
in Section 2.1, that (a) a creditor on a simple contract cannot acquire a
judicial lien that is superior to such security interests and (b) if a case
were pending under the Bankruptcy Code in which Grantor is the debtor, such
security interests would be a Lien that is perfected in such bankruptcy case.
"POST-PETITION INTEREST AND EXPENSE CLAIMS" means any and all claims of
any Holder of Secured Obligations (a) for interest on any Obligations
determined for any period of time occuring after the commencement of any case
under the Bankruptcy Code or any other insolvency, reorganization,
receivership, dissolution or liquidation proceeding at the contract rate
(including any applicable post-default increase therein) set forth in the
Credit Agreement or any other Loan Document or (b) for cost and expense
reimbursements or indemnification on the terms set forth in the Credit
Agreement or any other Loan Document relating to costs and expenses incurred
and indemnification rights accrued at any time after the commencement of any
such case or proceeding, in each case to the extent such claim accrues or
becomes payable in accordance with the provisions of the Credit Agreement or
other Loan Documents (or would have accrued or become payable if enforceable or
allowable in such case or proceeding), whether or not such claim is
enforceable, allowable or allowed in such case or proceeding and even if such
claim is disallowed therein.
"SECURED OBLIGATIONS" is defined in Section 2.1.
SECTION TERMS DEFINED IN CREDIT AGREEMENT
. Unless the context otherwise requires, the following terms used in this
Agreement are used as defined in the Credit Agreement:
3
<PAGE> 7
ABR Loans
Arranger
Asset Purchase Agreements
Borrower
Borrower Subsidiary
Business Day
Co-Agent
Default
Disqualified Stock
Documentation Agent
Event of Default
Governmental Authority
Guarantee
Guarantors
Guarantor Pledge and Security Agreement
Issuing Bank
Lien
Loan Documents
Loans
Material Adverse Effect
Miscellaneous Unpledged Assets
Permitted Cash Investments
Person
Required Lenders
Subsidiary
Subsidiary Note
Swingline Lender
Syndication Agent
Transaction Agreements
Transactions
SECTION TERMS DEFINED IN THE UNIFORM COMMERCIAL CODE
. When capitalized, the following terms used in this Agreement or the
Security Documents have the meanings given to them in the Uniform Commercial
Code, as in effect in the State of New York on the date of this Agreement:
Accounts
Certificated Security
Commodity Account
Commodity Contract
<PAGE> 8
Commodity Intermediary
Control
Documents
Equipment
Financial Asset
Fixtures
General Intangibles
Goods
Instruments
Inventory
Investment Property
Securities Account
Securities Intermediary
Security
Security Certificate
Security Entitlement
Uncertificated Security
SECTION TERMS GENERALLY
. The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words "include," "includes" and "including" shall be deemed to be followed
by the phrase "without limitation." The word "will" shall be construed to have
the same meaning and effect as the word "shall." Unless the context requires
otherwise (a) any definition of or reference to any agreement, instrument or
other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended,
5
<PAGE> 9
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors,
transferees and assigns, (c) the words "herein," "hereof" and "hereunder," and
words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, (d) all references herein
to Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this Agreement, and
(e) the words "asset" and "property" shall be construed to have the same
meaning and effect and to refer to any and all tangible and intangible assets
and properties, whether real, personal or mixed and of every type and
description.
ARTICLE
THE SECURITY INTERESTS
SECTION GRANT OF SECURITY INTERESTS
. As security for the payment of the Obligations and all Post-Petition
Interest and Expense Claims (collectively, the "Secured Obligations"), Grantor
hereby assigns to Secured Party for the benefit of the Beneficiaries, and
grants Secured Party for the benefit of the Beneficiaries security interests
in, all of Grantor's right, title and interest in and to the following types or
items of property, in each case whether now or hereafter existing or owned by
Grantor or in which Grantor now owns or hereafter acquires an interest and
wherever the same may be located (collectively, the "Collateral"):
all Inventory, including specifically all raw materials,
work-in-process, finished goods, supplies, materials, spare parts, Goods
held for sale or on lease or for lease or furnished or to be furnished
under contracts of service, merchandise inventory, rental inventory, and
returned or repossessed Goods and all rights to enforce return or
repossession by reclamation, stoppage in transit or otherwise,
all Equipment, including specifically all manufacturing, printing,
distribution, delivery, retailing, vending, data processing,
communications, office and other equipment in all of its forms, all
vehicles, all tools, dies, and molds, all Fixtures, all other Goods used
or bought for use primarily in a business and all other Goods except
Inventory,
all Accounts,
all Chattel Paper,
all Documents,
all Instruments and all other Claims that are in any respect
evidenced or represented by any writing, including specifically the
Subsidiary Notes described in Schedule 3.1(b) and all other Subsidiary
Notes and all other writings evidencing or representing a Claim against
Holdings or any Borrower Subsidiary or any other Person,
<PAGE> 10
all Securities, whether constituting Certificated Securities or
Uncertificated Securities, all Financial Assets, all Security
Entitlements, all Securities Accounts, all Commodity Contracts, all
Commodity Accounts, and all other Investment Property, including
specifically the Security Certificates described in Schedule 3.1(b) and
all other Equity Interests and all Permitted Cash Investments,
all money, cash and cash equivalents, including specifically all
deposit accounts and all certificates of deposit,
all General Intangibles, including specifically (a) the property
described on Schedule 3.1(c), (b) all registered and unregistered
trademarks and servicemarks and all trademark and service mark license
agreements to which Grantor is a party (whether as licensor or licensee)
and all Claims (including infringement claims) relating thereto, (c) all
patents and patent applications and all patent license agreements to
which Grantor is a party (whether as licensor or licensee) and all Claims
(including infringement claims) relating thereto, (d) all registered and
unregistered copyrights and all copyright license agreements to which
Grantor is a party (whether as licensor or licensee) and Claims
(including infringement claims) relating thereto, (e) all other
intellectual property in which Grantor has an interest, including
proprietary research and development, know-how, trade secrets, trade
names, trade styles, license agreements and user rights and Claims
(including infringement claims) relating thereto, (f) all customer lists
and agreements, (g) all supplier lists and agreements, (h) all employee
and consultant lists, rights, and agreements, (i) all computing, data and
information processing and communications programs, discs, designs, and
information and the data and other entries thereon, (j) all books,
records, catalogs, back issues, library rights and all manifestations and
embodyments thereof, (k) all rights and Claims arising under or in
respect of the Asset Purchase Agreements or the other Transaction
Agreements, including all indemnification rights and indemnification
payments thereunder, (l) all rights and Claims arising under or in
respect of the Credit Agreement or any Loan Document, including rights
and Claims against Secured Party or any other Beneficiary, (m) all rights
and Claims arising in respect of the Transactions, (n) all Net Cash
Proceeds, (o) all tax refunds, (p) all policies of insurance and
condemnation awards of every type and description and the proceeds
thereof, (q) all loans receivable, letters of credit, bonds and
undertakings, deferred purchase price or deferred purchase consideration,
consulting or non-competition payments and other Indebtedness,
liabilities and obligations receivable not constituting an Account and
not evidenced or represented by any Instrument, Chattel Paper or
Security, (r) all rights of recoupment, recourse, reimbursement,
subrogation, indemnity or contribution (including those arising under the
Guaranty, Indemnity and Subordination Agreement, those arising in respect
of any Guarantee of the Senior Subordinated Notes or any other Guarantee
or any payment thereon, and those arising on account of any other
agreement, transaction or event), (s) all other causes of action and
Claims of every type and description, whether fixed or contingent,
liquidated or not liquidated, accrued or not accrued, and all judgments,
orders and recoveries thereon, (t) all other agreements and contract
rights of every type and description and Claims thereon or relating in
any manner thereto, (u) all
7
<PAGE> 11
other rights, privileges, benefits, entitlements, franchises, licenses
and expectancies of every type and description, (v) all other intangible
property of every type and description, and (w) all goodwill associated
with any of the foregoing,
all property that is at any time delivered to, or that is is at any
time in the Control of, Secured Party,
TOGETHER, IN EACH CASE, WITH (a) all accessions thereto and products and
replacements thereof, (b) all guaranties, Liens and other forms of collateral
security therefor, and (c) all dividends, distributions, and payments received
thereon or in exchange or substitution therefor or upon Transfer thereof, and
(d) all other proceeds thereof,
EXCEPT AND EXCLUDING, HOWEVER, each item of property that is an Excluded
Asset, for as long as it remains an Excluded Asset.
SECTION DELIVERY OF INSTRUMENTS AND SECURITIES
. On the date hereof or, if hereafter acquired, immediately upon
acquisition thereof by Grantor, without any notice from or demand by Secured
Party, (a) Grantor shall deliver to Secured Party the Subsidiary Notes and
Security Certificates described in Schedule 3.1(b) and all other Instruments
(except checks received and collected in the ordinary course of business) and
Security Certificates at any time constituting Collateral, in each case in
suitable form for transfer by delivery or accompanied by duly executed
instruments of transfer, assignments in blank or with appropriate endorsements,
in form and substance satisfactory to Secured Party, and (b) Grantor shall
cause the issuer of each Uncertificated Security constituting Collateral to
register Secured Party as the registered owner thereof, either upon original
issuance or by registration of transfer and shall executed and deliver all
writings necessary to cause such issuer to do so.
SECTION INVESTMENT PROPERTY
. Grantor will cause Secured Party's security interests in Investment
Property to be and remain continuously Perfected by Control and, in addition,
will cause such security interests to be Perfected by filing. Grantor will not
grant or permit any other security interest or Lien upon any Investment
Property constituting Collateral. If so requested at any time by Secured Party
or the Required Lenders as to any Security Entitlement or Securities Account or
any Commodity Contract or Commodity Account that constitutes Collateral and
does not constitute Miscellaneous Unpledged Assets, Grantor will promptly cause
each Person who is a Securities Intermediary as to any such Security
Entitlement or Securities Account and each Person who is a Commodity
Intermediary as to any such Commodity Contract or Commodity Account to deliver
a written agreement enforceable by Secured Party for the benefit of the
Beneficiaries waiving and releasing, and agreeing not to create, grant, accept
or hold, any priority, pari passu or junior security interest or Lien therein.
Grantor will not cause or permit any Equity Interest in any Subsidiary to be
outstanding as an Uncertificated Security or to constitute a Security
Entitlement or be held in a Securities Account.
SECTION REGISTRATION OF PLEDGE
<PAGE> 12
. Secured Party may at any time when any Event of Default is continuing
and without any notice to any Loan Party or any other Person, transfer to and
register in Secured Party's name, as pledgee, any and all Instruments and
Investment Property constituting Collateral. Such transfer and registration
shall not foreclose or otherwise affect any rights or interests of any Loan
Party and shall not increase, restrict or reduce any of Secured Party's rights
and remedies. If after any such transfer and registration Grantor remains
entitled under Section 3.6 to exercise voting rights with respect to Equity
Interests included in such Investment Property, Secured Party shall, at the
written request of Grantor, deliver to Grantor a revocable proxy or other
instrument sufficient to permit Grantor to exercise such voting rights to the
extent permitted under Section 3.6.
SECTION FINANCING STATEMENTS
. Grantor will duly execute, deliver and (subject to execution by Secured
Party, where required by law) file duly completed financing statements naming
Grantor as debtor, naming Secured Party as secured party, and covering the
property described in Section 2.1, in the proper filing office in each
jurisdiction in which a financing statement is required from time to time to be
filed in order to ensure that the security interests granted to Secured Party
in Section 2.1 are at all times continuously Perfected, to the extent that,
under applicable law, such security interests can be Perfected by the filing of
a financing statement.
SECTION SECURED PARTY FILING
. Secured Party is hereby authorized to file one or more financing
statements and continuations thereof and amendments thereto, relative to all
or any part of the Collateral, without the signature of Grantor where permitted
by law.
SECTION FURTHER ASSURANCES
. Grantor will promptly (and in any event within three Business Days after
request by Secured Party or the Required Lenders) execute and deliver, and use
its reasonable and diligent best efforts to obtain from other Persons, all
instruments and documents (including security agreements, security assignments,
Lien releases, Lien waivers, transfer documents and transfer notices, financing
statements and other lien notices), in form and substance satisfactory to
Secured Party or the Required Lenders, and take all other actions which are
necessary or, in the good faith judgment of Secured Party or the Required
Lenders, desirable or appropriate in order to create, maintain, perfect, ensure
the agreed priority of, protect or enforce Secured Party's security interests
in the Collateral, to enable Secured Party to exercise and enforce its rights
and remedies hereunder with respect to any Collateral, to protect the
Collateral against the rights, claims or interests of third persons, or to
effect or to assure further the purposes and provisions of this Agreement, and
Grantor agrees to pay all costs related thereto and all reasonable expenses
incurred by Secured Party in connection therewith.
SECTION POWER OF ATTORNEY
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<PAGE> 13
. Grantor hereby irrevocably constitutes and appoints Secured Party and
any officer, agent or nominee of Secured Party, with full power of
substitution, as its true and lawful attorney-in-fact with full power and
authority, in the name of Grantor or in its own name, if and whenever Grantor
is in default under this Agreement as set forth in Section 4.1 to take any and
all actions and to execute and deliver any and all agreements, documents,
notices, instruments and writings that Secured Party or the Required Lenders
may determine to be necessary or desirable to create, perfect or ensure the
agreed priority of the security interests granted in Section 2.1 or to enforce
such security interests in any lawful and commercial reasonable manner or
otherwise to protect Secured Party's interest in the Collateral in any lawful
and commercially reasonable manner, including the power and right on behalf of
Grantor, without notice to or assent by Grantor:
to ask for, demand, sue for, collect, settle and give acquittance
for any and all moneys due or to become due with respect to any or all of
the Collateral and otherwise to demand and enforce payment and collection
of any and all Claims constituting Collateral,
to sign and file in any office in any jurisdiction financing
statements, lien notices, collateral assignments and any other
instruments or writings that may be required or, in the opinion of
Secured Party or the Required Lenders, appropriate to create or Perfect a
security interest in or Lien upon any of the Collateral as security for
the Secured Obligations,
to accept, hold, collect, endorse, transfer and deliver any and all
checks, notes, drafts, acceptances, documents and other negotiable and
nonnegotiable Instruments, Securities, Documents and Chattel Paper
constituting Collateral that may be delivered to Secured Party in
accordance with the provisions of this Agreement, whether made payable to
Grantor or otherwise,
to commence, file, prosecute, defend, settle, compromise or adjust
any claim, suit, action or proceeding with respect to any or all of the
Collateral or otherwise to enforce the rights of Secured Party with
respect to any of the Collateral,
to obtain, contest, enforce, adjust and settle Claims for insurance
proceeds or condemnation awards constituting proceeds of Collateral or
required to be paid to Secured Party pursuant to this Agreement or the
Credit Agreement,
to do, at its option and at the expense and for the account of
Grantor, at any time and from time to time, all lawful and commercially
reasonable acts and things that Secured Party or the Required Lenders may
deem necessary or desirable to protect or preserve the Collateral or to
realize upon the Collateral,
to contest, settle, pay or discharge taxes or Liens (other than
Liens permitted under this Agreement or the Credit Agreement) levied or
placed upon or threatened against any of the Collateral, and for such
purposes (A) the legality or validity thereof and amounts necessary to
settle or discharge the same may be determined by Secured Party or the
Required Lenders in its or their commercially reasonable discretion and
<PAGE> 14
(B) Grantor agrees immediately upon demand to reimburse Secured Party for
any payments made by Secured Party on account of any such taxes or Liens,
as part of the Obligations secured hereby,
to sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with the Accounts
and other documents relating to the Collateral, and
generally to sell, Transfer, pledge, make any agreement with respect
to or otherwise deal with any of the Collateral as fully and completely
as though Secured Party were the absolute owner thereof for all purposes,
and to do, at Secured Party's option and at Grantor's expense, at any
time or from time to time, all acts and things that Secured Party or the
Required Lenders reasonably deem necessary to protect, preserve or
realize upon the Collateral and Secured Party's security interests
therein in order to effect the intent of this Agreement, all as fully and
effectively as Grantor might do.
The power granted in this Section 2.8 is a power coupled with an interest, is
irrevocable and shall be discharged upon Discharge of the Credit Agreement.
SECTION SURVIVAL OF SECURITY INTERESTS
. The security interests granted hereby shall, unless released in writing
by Secured Party, (a) remain enforceable as security for all Secured
Obligations now outstanding or created or incurred at any future time (whether
or not created or incurred pursuant to any agreement presently in effect or
hereafter made and notwithstanding any subsequent repayment of any of the
Secured Obligations or any other act, occurrence or event), until Discharge of
the Credit Agreement, (b) survive the Discharge of the Credit Agreement to the
same extent that any contingent Obligation survives, and (c) survive any sale
or other Transfer of any Collateral and remain enforceable against each
transferee and subsequent owner thereof, even if such sale or other Transfer is
permitted at the time under the Credit Agreement, except in the case of
inventory sold in the ordinary course of business and any other Collateral that
is expressly and specifically released from the security interests created
hereby pursuant to a written release signed by Secured Party.
SECTION REINSTATEMENT OF SECURITY INTERESTS
. If at any time any payment on any Secured Obligation is set aside,
avoided or rescinded or must otherwise be restored or returned, this Agreement
and the security interests granted to Secured Party herein and all other
obligations of Grantor hereunder shall remain in full force and effect and, if
previously released or terminated, shall be automatically and fully reinstated,
without any necessity for any act, consent or agreement of Grantor, as fully as
if such payment had never been made and as fully as if any such release or
termination had never become effective.
SECTION GRANTOR REMAINS LIABLE.
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<PAGE> 15
Anything contained herein to the contrary notwithstanding, (a) Grantor shall
remain liable under all contracts and agreements included in the Collateral, to
the extent set forth therein, to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b)
the exercise by Secured Party of any of its rights hereunder shall not release
Grantor from any of its duties or obligations under any contract or agreement
included in the Collateral, (c) Secured Party shall not have any obligation or
liability under any contract or agreement included in the Collateral by reason
of this Agreement or the grant to Secured Party of any security interest in
such contract or agreement, and (d) Secured Party shall not be obligated to
perform any of the obligations or duties of Grantor under any contract or
agreement included in the Collateral or to take any action to collect or
enforce any claim for payment assigned hereunder.
ARTICLE
REPRESENTATIONS, WARRANTIES AND COVENANTS
Grantor represents and warrants to Secured Party and agrees with Secured
Party that:
SECTION THE COLLATERAL.
OWNERSHIP
. Except as otherwise expressly permitted under the Credit Agreement, (i)
Grantor owns the Collateral free and clear of any and all Liens and (ii) no
effective financing statement or other instrument similar in effect covering
all or any part of the Collateral is on file in any filing or recording office,
except those in favor of Secured Party.
INTERESTS IN AND CLAIMS AGAINST SUBSIDIARIES
. Schedule 3.1(b) sets forth accurately and exhaustively all Equity
Interests owned by Grantor in any Subsidiary of Grantor, all other Equity
Interests owned by Grantor, and all Subsidiary Notes issued to Grantor by any
Subsidiary of Grantor. All such Equity Interests are represented by Security
Certificates that have been duly authorized and validly issued, are fully paid
and non-assessable and were not issued in breach or derogation of preemptive
rights of any Person. Each Subsidiary of Grantor is lawfully indebted under its
Subsidiary Note described in Schedule 3.1(b) in the amount of the Initial Loan
set forth in such Subsidiary Note. Such indebtedness (i) constitutes a legally
valid and binding obligation of each such Borrower Subsidiary, enforceable
against it in accordance with its terms, (ii) is evidenced by and due and
payable on the terms set forth in such Subsidiary Note, and (iii) is secured by
the security interests granted by such Subsidiary to the Administrative Agent,
for the benefit of the Beneficiaries, as set forth in the Guarantor Pledge and
Security Agreement. Each Subsidiary Note and the indebtedness from time to
time evidenced thereby and any and all collateral security therefor are
enforceable solely by the Administrative Agent for the benefit of the
Beneficiaries , as security for the payment of the Secured Obligations.
<PAGE> 16
INTELLECTUAL PROPERTY
. Schedule 3.1(c) sets forth accurately and exhaustively (a) all
registered and unregistered trademarks and servicemarks owned by Grantor, all
trademark and service mark license agreements to which Grantor is a party
(whether as licensor or licensee), and all pending or overtly threatened
infringement claims by or against Grantor and other litigation relating to any
such trademarks, servicemarks or trademark or servicemark license agreements,
(b) all patents and patent applications owned by Grantor, all patent license
agreements to which Grantor is a party (whether as licensor or licensee), and
all pending or overtly threatened infringement claims by or against Grantor and
other litigation relating to any such patents, patent applications or patent
license agreements, (c) all registered and unregistered copyrights owned by
Grantor, all copyright license agreements to which Grantor is a party (whether
as licensor or licensee) and all pending or overtly threatened infringement
claims by or against Grantor or other litigation relating to any such
copyrights or copyright license agreements, (d) all other General Intangibles
in which Grantor has an interest, including proprietary research and
development, know-how, trade secrets, trade names, license agreements and user
rights and other intellectual property of every type and description, all
pending or overtly threatened infringement claims by or against Grantor and
other litigation relating thereto. and all other intangible property, except
General Intangibles that constitute Miscellaneous Unpledged Assets.
OTHER INVESTMENT PROPERTY
. Schedule 3.1(d) sets forth accurately and exhaustively all other
Investment Property of Grantor, except Investment Property constituting
Miscellaneous Unpledged Assets or Permitted Cash Investments.
LOCATION OF EQUIPMENT AND INVENTORY
. All Equipment and Inventory are located and intended to be kept at one
of the collateral locations specified on Schedule 3.1(e).
NO CONSUMER GOODS OR FARM PRODUCTS
. Grantor does not own any assets that are, as to it, consumer goods or
farm products.
LOCATION OF GRANTOR
. The Grantor's chief place of business, chief executive office and office
or offices where the Grantor keeps its records regarding its Accounts and all
originals of its Chattel Paper are located, and during the preceding four
months were located, at the Grantor locations specified on Schedule 3.1(g).
NAMES
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<PAGE> 17
. The correct legal name of Grantor is set forth in the preamble to this
Agreement. Grantor does not conduct business or hold itself out under, and in
the past five years has not conducted business or held itself out under, any
other name (including any trade-name or fictitious business name) except any
name listed on Schedule 3.1(h).
TAXPAYER ID NUMBER
. The proper taxpayer identification number for each Loan Party is
accurately set forth on Schedule 3.1(i).
PERFECTION
. Except in the case of property (if any) constituting Miscellaneous
Unpledged Assets, the security interests granted to Secured Party in Section
2.1 are lawful, valid and enforceable security interests that at all times have
been, and remain, duly and continuously Perfected.
AMENDMENT OF SCHEDULE 3.1
. Grantor may at any time unilaterally amend Schedule 3.1 in any respect
required by the occurrence of any event that does not constitute or give rise
to a Default, by giving written notice thereof to Secured Party. To be
effective, such notice must state conspicuously that it constitutes an
amendment to certain factual matters relating to the Collateral set forth in
Section 3.1 of this Agreement.
SECTION MAINTENANCE OF PERFECTION
. Grantor will not (a) cause, permit or suffer any voluntary or involuntary
change in its name, identity or corporate structure, or in the location of its
chief executive office, or (b) keep any records relating to its Accounts or any
tangible Collateral (other than mobile goods) at any location other than a
location set forth in Schedule 3.1, unless (in each case) (i) Schedule 3.1 has
first been appropriately supplemented with respect thereto, and (ii) an
appropriate financing statement has been filed in the proper office and in the
proper form, and all other requisite actions have been taken, to Perfect and
continue the Perfection (without loss of priority) of Secured Party's security
interests in the Collateral.
SECTION DEFENSE OF COLLATERAL
. Grantor will defend the Collateral against all claims and demands of all
Persons at any time claiming any interest therein.
SECTION TRANSFER OR ENCUMBRANCE
. Grantor will not encumber or Transfer any item of Collateral or any
interest therein, or permit or suffer any item of Collateral to be encumbered
or Transferred, unless (a) such action is permitted at the time under the
Credit Agreement and (ii) each Loan Party makes all payments on account of the
Secured Obligations required to be made therefrom and takes all other actions
required
<PAGE> 18
to be taken in connection therewith under the Credit Agreement or any other
Loan Document.
SECTION PAYMENTS, DIVIDENDS AND DISTRIBUTIONS.
Grantor shall be entitled to receive all payments on Accounts, Instruments
and Claims and all dividends and distributions on Equity Interests and other
Investment Property constituting Collateral, so long as (a) no Event of Default
has occurred and is continuing or would result, (b) Grantor ensures that
Secured Party's security interests in any and all such payments, dividends and
distributions (except those constituting Miscellaneous Unpledged Assets) remain
continously Perfected and (c) each Loan Party makes all payments on account of
the Secured Obligations required to be made therefrom and takes all other
actions required to be taken in connection therewith under the Credit Agreement
or any other Loan Document.
SECTION VOTING RIGHTS
. So long as no Event of Default has occurred or would result, Grantor
shall have and may exercise all voting rights with respect to any and all
Equity Interests constituting Collateral, except that:
NO BREACH. Grantor shall not act or vote in favor of any action that
would constitute or cause a breach of any obligations of any Loan Party under
the Credit Agreement or under any other Loan Document;
NO CAPITAL STRUCTURE CHANGES. Grantor shall not act or vote in favor of
(i) the authorization or issuance of any Disqualified Stock, options, warrants,
voting rights, or preference shares or additional shares, or (ii) any
reclassification, readjustment, reorganization, merger, consolidation, sale or
disposition of assets, or dissolution, without giving Secured Party at least 15
days' prior written notice thereof;
MATERIAL ADVERSE CHANGES. Grantor shall not act or vote in favor of any
action that has or is reasonably likely to have a material adverse effect on
the value of any of the Collateral or that has, or would reasonably be expected
to result in, a Material Adverse Effect; and
TERMINATION OF VOTING RIGHTS. At any time when Grantor is in default
under this Agreement as set forth in Section 4.1, Secured Party may terminate
any or all of Grantor's voting rights with respect to any or all Equity
Interests constituting Collateral, either by giving written notice of such
termination to Grantor or by transferring such Equity Interests into Secured
Party's name, and Secured Party shall thereupon have the sole right and power
to exercise such voting rights.
SECTION MAINTENANCE OF COLLATERAL
15
<PAGE> 19
. Grantor shall:
not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement or any other Loan Document
or any applicable statute, regulation or ordinance or any policy of
insurance covering any such Collateral;
notify Secured Party of any change in Grantor's name, identity
or corporate structure within 30 days after such change;
give Secured Party 30 days' prior written notice of any change
in Grantor's chief place of business, chief executive office, places of
business, collateral locations or federal taxpayer ID number or the
office where Grantor keeps its Chattel Paper and its records regarding
any Accounts;
if the Lenders give value to enable Grantor to acquire rights
in or the use of any Collateral, use such value for such purposes; and
pay promptly when due all material property and other taxes,
assessments and governmental charges or levies imposed upon any
Collateral and all Claims that are or might become secured by any Lien
upon any Collateral, except to the extent the same is being contested as
permitted under the Credit Agreement; PROVIDED, that, notwithstanding any
other provision in the Loan Documents, Grantor shall in any event pay
such taxes, assessments, charges, levies and Claims not later than five
days prior to the date of any proposed sale under any judgment, writ or
warrant of attachment or other legal process entered or filed against
Grantor or any Collateral as a result of the failure to make such
payment.
SECTION CONCERNING EQUIPMENT AND INVENTORY
. Grantor will:
cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new (ordinary wear and tear
and worn-out and surplus equipment excepted) and in accordance with
Grantor's past practices and make or cause to be made all repairs,
replacements and other improvements in connection therewith that are
necessary or desirable to such end;
notify Secured Party of any loss or damage to any Equipment in
an amount exceeding $2,000,000;
keep correct and accurate records of the Inventory, itemizing
and describing the kind, type and quantity of Inventory, Grantor's cost
therefor and (where applicable) the current list prices for the
Inventory, in the ordinary course of Grantor's business;
if any Inventory is in possession or control of any agent,
carrier,
<PAGE> 20
warehouseman, bailee, consignee or processor, upon the occurrence of an
Event of Default instruct such Person to hold all such Inventory for the
account of Secured Party and subject to the instructions of Secured
Party; and
if so requested at any time by Secured Party or the Required
Lenders, promptly endorse and deliver to Secured Party each and all
negotiable Documents constituting Collateral.
SECTION CONCERNING ACCOUNTS, INSTRUMENTS AND OTHER CLAIMS
. Grantor will:
maintain accurate and complete records concerning the Accounts,
Instruments and all other Claims and the identity, name and address of
each account debtor or obligor thereon, hold and preserve such records in
safekeeping, permit representatives of Secured Party at any time during
normal business hours to inspect, copy and make abstracts from such
records, and render to Secured Party, at Grantor's cost and expense, such
clerical and other assistance as may be reasonably requested with regard
thereto,
if so requested at any time by Secured Party or the Required
Lenders, Grantor will certify and deliver to Secured Party complete and
correct copies of each contract or agreement constituting Collateral,
continue to collect, at Grantor's expense, all amounts due or to
become due to Grantor under Accounts, Instruments and other Claims and,
in connection therewith take such action as Grantor (or, whenever Grantor
is in default under this Agreement as set forth in Section 4.1, as
Secured Party or the Required Lenders) may reasonably deem necessary or
advisable to enforce collection of amounts due or to become due to
thereunder; PROVIDED, that Secured Party shall have the right at any time
when Grantor is in default under this Agreement as set forth in Section
4.1 (A) to notify the account debtors or obligors under any or all
Accounts, Instruments or other Claims of the assignment of such Accounts,
Instruments or Claims to Secured Party and to direct such account debtors
or obligors to make payment of all amounts due or to become due to
Grantor thereunder directly to Secured Party, (B) to notify each Person
maintaining a lockbox or similar arrangement to which account debtors or
obligors under any Accounts, Instruments or other Claims have been
directed to make payment to remit all amounts representing collections on
checks and other payment items from time to time sent to or deposited in
such lockbox or other arrangement directly to Secured Party and (C) at
the expense of Grantor, to demand payment of any Accounts, Instruments
and Claims and enforce collection thereof by legal proceedings in any
lawful manner and to extend, renew adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as
Grantor might have done, and
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<PAGE> 21
if Secured Party at any time exercises any of the rights
described in the proviso in Section 3.9(iii), (A) segregate from all
other funds and hold in trust for Secured Party and immediately deliver
to Secured Party (in the identical form received) all amounts and
proceeds (including checks and other instruments) received by Grantor in
respect of any and all Accounts, Instruments and other Claims, and (B)
not adjust, settle or compromise the amount or payment of any Account or
Claim, or release wholly or partly any account debtor or obligor thereon,
or allow any credit or discount thereon.
SECTION SUBSTITUTED PERFORMANCE
. Secured Party may at any time (but shall not be obligated to) (a)
perform any of the obligations of Grantor under this Agreement if Grantor
fails to perform such obligation within three Business Days (or, in the case of
insurance, within one Business Day) after written demand by Secured Party and
(b) make any payments and do any other acts which Secured Party or the Required
Lenders may deem necessary or desirable to protect Secured Party's security
interests in the Collateral, including the right to pay, purchase, contest or
compromise any Lien that attaches or is asserted against any Collateral, to
procure insurance, and to appear in and defend any action or proceeding
relating to any Collateral, and Grantor agrees promptly to reimburse Secured
Party for all payments made by Secured Party in doing so, together with
interest thereon at the rate then applicable to ABR Loans, all reasonable
attorneys' fees and disbursements incurred by Secured Party in connection
therewith, whether or not suit is brought, and all other costs and expenses
related thereto.
ARTICLE
DEFAULT; REMEDIES
SECTION DEFAULT
. Grantor shall be in default under this Agreement (a) whenever any
Event of Default has occurred and is continuing (without regard to whether or
to what degree Grantor individually may have caused, participated in, or had
any knowledge of the occurrence of such Event of Default) and (b) at all times
after the Loans have become due and payable, whether at maturity, upon
acceleration pursuant to Section 7.1 of the Credit Agreement or otherwise.
SECTION REMEDIES UPON DEFAULT
. At any time when Grantor is in default under this Agreement as set
forth in Section 4.1, Secured Party may exercise and enforce, in any order, (a)
each and all of the rights and remedies available to a secured party upon
default under the Uniform Commercial Code or other applicable law, (b) each and
all of the rights and remedies available to it under the Credit Agreement or
any other Loan Document and (c) each and all of the following rights and
remedies:
<PAGE> 22
COLLECTION RIGHTS. Without notice to Grantor or any other Loan Party,
Secured Party may notify any or all account debtors and obligors on any
Accounts, Instruments or other Claims constituting Collateral of Secured
Party's security interests therein and may direct, demand and enforce payment
thereof directly to Secured Party.
TAKING POSSESSION. Secured Party may (i) enter upon any and all
premises owned or leased by Grantor where Collateral is located (or believed by
Secured Party to be located), with or without judicial process and without any
obligation to pay rent, (ii) prior to the disposition of the Collateral, store,
process, repair or recondition the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent Secured Party deems
appropriate, (iii) take possession of Grantor's premises or place custodians in
exclusive control thereof, remain on such premises and use the same and any of
Grantor's equipment for the purpose of completing any work in process or
otherwise preparing the Collateral for sale or selling or otherwise
Transferring the Collateral, (iv) take possession of all items of Collateral
that are not then in its possession, either upon such premises or by removal
from such premises, and (v) require Grantor or the Person in possession thereof
to deliver such Collateral to Secured Party at one or more locations designated
by Secured Party and reasonably convenient to it and Grantor.
FORECLOSURE. Secured Party may sell, lease, license or otherwise
dispose of or Transfer any or all of the Collateral or any part thereof in one
or more parcels at public sale or in private sale or transaction, on any
exchange or market or at Secured Party's offices or on Grantor's premises or at
any other location, for cash, on credit or for future delivery, and may enter
into all contracts necessary or appropriate in connection therewith, without
any notice whatsoever unless required by law. Where permitted by law, one or
more of the Beneficiaries may be the purchasers at any such sale and in such
event, if such bid is made by all of the Lenders or by all of the Holders of
Secured Obligations or otherwise whenever a credit bid is expressly permitted
under the Credit Agreement or approved in writing by the Administrative Agent
and the Required Lenders, the Beneficiaries bidding at such sale may bid part
or all of the Obligations owing to them without necessity of any cash payment
on account of the purchase price, even though any other purchaser at such sale
is required to bid a purchase price payable in cash. Grantor agrees that at
least 10 calendar days' written notice to Grantor of the time and place of any
public sale or the time after which any private sale is to be made shall be
commercially reasonable. The giving of notice of any such sale or other
disposition shall not obligate Secured Party to proceed with the sale or
disposition, and any such sale or disposition may be postponed or adjourned
from time to time, without further notice.
USE OF INTELLECTUAL PROPERTY. Secured Party may, on a royalty-free
basis, use and license use of any trademark, trade name, trade style,
copyright, patent or technical knowledge or process owned, held or used by
Grantor in respect of any Collateral as to which any right or remedy of Secured
Party is exercised or enforced.
In addition, each Holder of any Secured Obligation may exercise and enforce
such rights and
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<PAGE> 23
remedies for the collection of such Secured Obligation as may be available to
it by law or agreement.
SECTION WAIVERS BY GRANTOR
. Grantor hereby irrevocably waives (a) all rights of redemption from
any foreclosure sale, (b) the benefit of all valuation, appraisal, exemption
and moratorium laws, (c) to the fullest extent permitted by law, all rights to
notice or a hearing prior to the exercise by Secured Party of its right to take
possession of any Collateral, whether by self-help or by legal process and any
right to object to the Secured Party taking possession of any Collateral by
self-help, (d) if Secured Party seeks to obtain possession of any Collateral by
replevin, claim and delivery, attachment, levy or other legal process, (i) any
notice or demand for possession prior to the commencement of legal proceedings,
(ii) the posting of any bond or security in any such proceedings, and (iii)
any requirement that Secured Party retain possession and not dispose of any
Collateral until after a trial or final judgment in such proceedings.
SECTION STANDARD OF CARE
. The powers conferred on Secured Party hereunder are solely to protect
its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, Secured Party shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or to protect, preserve, vote or exercise any rights
pertaining to any Collateral. Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of Collateral in its possession
if such Collateral is accorded treatment substantially equal to that which
Secured Party accords its own property or if it selects, with reasonable care,
a custodian to hold such Collateral on its behalf.
SECTION APPLICATION OF PROCEEDS
. Except as expressly provided elsewhere in this Agreement, all
proceeds received by Secured Party in respect of any sale of, collection from,
or other realization upon all or any part of the Collateral may, in the
discretion of Secured Party, be held by Secured Party as Collateral for, or
then, or at any other time thereafter, applied in full or in part by Secured
Party against, the Secured Obligations in the following order of priority:
FIRST: To the payment of all reasonable costs and expenses of such
sale, collection or other realization, including reasonable compensation
to Secured Party and its agents and counsel, and all other reasonable
expenses, liabilities and advances made or incurred by Secured Party in
connection therewith, and all amounts for which Secured Party is entitled
to indemnification hereunder and all reasonable advances made by Secured
Party hereunder for the account of Grantor, and to the payment of all
reasonable costs and expenses paid or incurred by Secured Party in
connection with the exercise of any right or remedy hereunder, all in
accordance with Section 4.6;
SECOND: To the payment of all other Secured Obligations (for the
ratable benefit of the holders thereof) then due and payable; and
<PAGE> 24
THIRD: To the payment to or upon the order of the Grantor, or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
SECTION INDEMNITY AND EXPENSES.
INDEMNITY. Grantor will defend, indemnify and hold harmless Secured
Party and each Beneficiary from and against any and all claims, losses and
liabilities in any way relating to, growing out of or resulting from this
Agreement and the transactions contemplated hereby (including enforcement of
any interest, right or remedy created hereby), except to the extent such
claims, losses or liabilities are directly attributable to Secured Party's or
such Beneficiary's gross negligence or willful misconduct as finally determined
by a court of competent jurisdiction.
EXPENSES. Grantor will pay to Secured Party upon demand the amount of
any and all reasonable costs and expenses, including the reasonable fees and
expenses of its counsel and of any advisors, consultants, experts and agents,
that Secured Party may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the interests, rights or remedies of Secured
Party hereunder, (iv) the failure by Grantor to perform or observe any of the
provisions hereof, or (v) the proof, allowance, protection, administration,
treatment, discharge, collection or enforcement of any of the Secured
Obligations or any of the Collateral in any bankruptcy case or insolvency,
reorganization, receivership, dissolution or liquidation proceeding of or
affecting any Loan Party.
SECTION SURPLUS, DEFICIENCY
. Any surplus proceeds of any sale or other disposition by Secured
Party of any Collateral remaining after Discharge of the Credit Agreement and
after all Secured Obligations are paid in full and in cash shall be paid over
to Grantor or to whomever may be lawfully entitled to receive such surplus or
as a court of competent jurisdiction may direct, but prior to Discharge of
the Credit Agreement, such surplus proceeds may be retained by Secured Party
and held as Collateral until Discharge of the Credit Agreement. The Borrower
and each Guarantor shall be and remain liable for any deficiency.
SECTION INFORMATION RELATED TO THE COLLATERAL
. If Secured Party determines to sell or otherwise Transfer any
Collateral, Grantor shall, and shall cause any Person controlled by it to,
furnish to Secured Party all information Secured Party may request that
pertains or could pertain to the value or condition of the Collateral or that
would or might facilitate such sale or Transfer. Secured Party shall have the
right, notwithstanding any confidentiality obligation or agreement otherwise
binding upon it, freely to disclose such
21
<PAGE> 25
information, and any and all other information (including confidential
information) pertaining in any manner to the Collateral or the assets,
liabilities, results of operations, business or prospects of any Loan Party,
freely to any Person that Secured Party in good faith believes to be a
potential or prospective purchaser in such sale or Transfer, without liability
for any disclosure, dissemination or use that may be made as to such
information by any such Person.
SECTION SALE EXEMPT FROM REGISTRATION
. Secured Party shall be entitled at any such sale or other Transfer,
if it deems it advisable to do so, to restrict the prospective bidders or
purchasers to Persons who will provide assurances satisfactory to Secured Party
that the Collateral may be offered and sold to them without registration under
the Securities Act of 1933, as amended, and without registration or
qualification under any other applicable state or federal law. Upon the
consummation of any such sale, Secured Party shall have the right to assign,
transfer and deliver to the purchaser or purchasers thereof the Collateral so
sold. Secured Party may solicit offers to buy the Collateral, or any part of
it, from a limited number of investors deemed by Secured Party, in its good
faith judgment or in good faith reliance upon advice of its counsel, to meet
the requirements to purchase securities under Regulation D promulgated under
the Securities Act of 1933 as then in effect (or any other regulation of
similar import). If Secured Party solicits such offers from such investors,
then the acceptance by Secured Party of the highest offer obtained from any of
them shall be deemed to be a commercially reasonable method of disposition of
the Collateral.
SECTION REGISTRATION RIGHTS
. If Secured Party determines that registration of any securities
constituting Collateral under the Securities Act of 1933 or registration or
qualification of such securities under any other applicable state or federal
law is required or desirable in connection with any sale or Transfer of any
Collateral, then as and when requested by Secured Party, Grantor will use its
best efforts to cause such registration to be effectively made, at no expense
to Secured Party, and to continue any such registration effective for such time
as may be reasonably necessary in the opinion of Secured Party.
SECTION RIGHTS AND REMEDIES CUMULATIVE
. The rights provided for in this Agreement and the other Loan
Documents are cumulative and are not exclusive of any other rights, powers or
privileges or remedies provided by law or in equity, or under any other
instrument, document or agreement. Secured Party may exercise and enforce each
right and remedy available to it either before or concurrently with or after,
and independently of, any exercise or enforcement of any other right or remedy
of Secured Party or any Holder of any Secured Obligation against any Person or
property. All such rights and remedies shall be cumulative, and no one of them
shall exclude or preclude any other.
SECTION NO DIRECT ENFORCEMENT BY BENEFICIARIES
. Secured Party may freely exercise and enforce any and all of its
rights and remedies hereunder, for the benefit of the Beneficiaries. No
Beneficiary, other than Secured Party, shall have any independent right to
collect, take possession of, foreclose against or otherwise enforce the
security interests granted hereby.
<PAGE> 26
ARTICLE
CONCERNING THE SECURED PARTY
SECTION AGENT FOR HOLDERS.
Secured Party is executing and delivering this Agreement, and accepting
the security interests, rights, remedies, powers and benefits conferred upon
Secured Party hereby, both for its own benefit and as agent for all present and
future Holders of Secured Obligations. The provisions of the Credit Agreement
and all rights, powers, immunities and indemnities granted to Secured Party
under the Credit Agreement or any other Loan Document, or under any separate
agreement made by or otherwise binding upon any Holder of Secured Obligations,
shall apply in respect of such execution, delivery and acceptance and in
respect of any and all actions taken or omitted by Secured Party under, in
connection with or in respect of this Agreement.
SECTION ADMINISTRATIVE AGENT SHALL BE THE SECURED PARTY
. Secured Party shall at all times be the same Person that is the
Administrative Agent under the Credit Agreement. Written notice of resignation
by the Administrative Agent pursuant to Section 8.6 of the Credit Agreement
shall also constitute notice of resignation as Secured Party under this
Agreement; and appointment of a successor Administrative Agent pursuant to
Section 8.6 of the Credit Agreement shall also constitute appointment of a
successor Secured Party under this Agreement. Upon the acceptance of any
appointment as Administrative Agent under Section 8.6 of the Credit Agreement
by a successor Administrative Agent, the successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Secured Party under this Agreement, and the retiring
Secured Party under this Agreement shall promptly (a) transfer to such
successor Secured Party all sums, securities and other items of Collateral held
hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Secured Party under this Agreement, and (b) execute and deliver to such
successor Secured Party such amendments to financing statements, and take such
other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, whereupon such retiring Secured Party shall be discharged from its
duties and obligations under this Agreement. After any retiring Administrative
Agent's resignation hereunder as Secured Party, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Agreement while it was Secured Party hereunder.
SECTION NO ASSURANCES OR LIABILITY.
Secured Party makes no statement, promise, representation or warranty
whatsoever, and shall have no liability whatsoever, to any Holder of any
Secured Obligations as to the
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<PAGE> 27
authorization, execution, delivery, legality, enforceability or sufficiency of
this Agreement or as to the creation, perfection, priority, or enforceability
of any security interests granted hereunder or as to existence, ownership,
quality, condition, value or sufficiency of any Collateral or as to any other
matter whatsoever.
SECTION HOLDERS BOUND.
Except where the consent of others may be required pursuant to the
express provisions of Section 9.2 of the Credit Agreement, any modification,
amendment, waiver, release, termination or discharge of any security interest,
right, remedy, power or benefit conferred upon Secured Party that is
effectuated in a writing signed by Secured Party shall be binding upon all
Holders of Secured Obligations if it is (i) authorized pursuant to any
provision of the Credit Agreement or any other Loan Document, (ii) required by
law or (iii) authorized or ratified either (A) by the Required Holders or (B)
by the Holders of at least a majority in outstanding principal amount of the
Secured Obligations (other than contingent or unliquidated Secured
Obligations).
ARTICLE
MISCELLANEOUS PROVISIONS
SECTION CONTINUING SECURITY INTERESTS; RELEASE
. This Agreement creates continuing security interests in the Collateral
and shall (a) remain in full force and effect until the Discharge of the Credit
Agreement, (b) be binding upon Grantor and its successors and assigns, and (c)
inure, together with the rights and remedies of Secured Party hereunder, to the
benefit of and be enforceable by Secured Party and its successors, transferees
and assigns acting in the capacity of Administrative Agent under the Credit
Agreement. Subject to and upon Discharge of the Credit Agreement, Secured
Party shall (within a reasonable time after it receives from Grantor a written
request for release of the Collateral) execute and deliver to Grantor an
instrument in form and substance satisfactory to Secured Party releasing (on a
quitclaim basis, without recourse, without warranty, and without any liability
whatsoever) any security interest Secured Party may then hold in the Collateral
and thereupon Secured Party shall, at Grantor's expense, execute and deliver to
Grantor such UCC termination statements and other like documents as Grantor may
reasonably request to evidence such release.
SECTION SENIOR INDEBTEDNESS
. All liability of Grantor hereunder (A) is and shall be (and is hereby
designated as) "Senior Indebtedness" within the meaning of and for the purposes
of the Indenture dated as of January 27, 1998 by and among the Borrower, the
Subsidiary Guarantors named therein, and State Street Bank and Trust Company,
as trustee, governing the Borrower's 9 3/8% Senior Subordinated Notes due 2008,
and (B) is and shall be (and is hereby made) senior in right of payment, on the
terms set forth in said Indenture, to said Senior Subordinated Notes and all
"Obligations" (as defined in said Indenture) in respect of said Senior
Subordinated Notes and all "Subsidiary Guarantees" (as defined in said
Indenture) at any time issued under or pursuant to said Indenture.
<PAGE> 28
SECTION AMENDMENTS; ETC.
. No amendment or waiver of any provision of this Agreement, or consent
to any departure by Grantor herefrom, shall in any event be effective unless
the same shall be in writing and signed by Secured Party, and then such waiver
or consent shall be effective only in the specific instance and for the
specific purpose for which it was given.
SECTION FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE
. No failure or delay on the part of Secured Party in the exercise of any
power, right or privilege hereunder shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor
shall any single or partial exercise of any such power, right or privilege
preclude any other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
SECTION NOTICES
. Any and all notices and communications to be given to Grantor or
Secured Party may be given by courier service, personal service, mailing the
same, postage prepaid, or by telex, facsimile transmission or cable to each
such party at its address set forth in the Credit Agreement, on the signature
pages hereof or to any other address as any party hereto may specify by written
notice to the other parties, and such communication shall be deemed to have
been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex, or three Business Days after depositing it in the
United States mail with postage prepaid and properly addressed.
SECTION SEVERABILITY
. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION HEADINGS
. Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
SECTION GOVERNING LAW; TERMS
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF
25
<PAGE> 29
THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE NEW YORK UNIFORM COMMERCIAL
CODE PROVIDES THAT THE PERFECTION OF THE SECURITY INTERESTS HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK .
Notwithstanding the foregoing, the creation, perfection, priority and
enforcement of a security interest in any deposit account shall be governed by
the laws of the state in which the depositary bank, or branch bank, maintaining
such deposit account is located.
SECTION CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST GRANTOR ARISING OUT OF OR
RELATING TO THIS AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE OF NEW YORK. BY EXECUTION AND DELIVERY
OF THIS AGREEMENT GRANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT. Grantor hereby agrees that service of all
process in any such proceeding in any such court may be made by registered or
certified mail, return receipt requested, to Grantor at its address provided in
Section 6.5, such service being hereby acknowledged by Grantor to be sufficient
for personal jurisdiction in any action against Grantor in any such court and
to be otherwise effective and binding service in every respect. Nothing herein
shall affect the right to serve process in any other manner permitted by law or
shall limit the right of Secured Party to bring proceedings against Grantor in
the courts of any other jurisdiction.
SECTION WAIVER OF JURY TRIAL
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS AGREEMENT. The scope of this waiver is intended to be all-encompassing of
any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including without limitation contract
claims, tort claims, breach of duty claims, and all other common law and
statutory claims. Grantor and Secured Party each acknowledge that this waiver
is a material inducement for Grantor and Secured Party to enter into a business
relationship, that Grantor and Secured Party have already relied on this waiver
in entering into this Agreement and that each will continue to rely on this
waiver in their related future dealings. Each party hereto further warrants and
represents that it has reviewed this waiver with its legal counsel and that it
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT. In the event of litigation, this Agreement may be
<PAGE> 30
filed as a written consent to a trial by the court.
SECTION COUNTERPARTS
This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[Remainder of page intentionally left blank]
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<PAGE> 31
IN WITNESS WHEREOF, Grantor and Secured Party have executed this Agreement
as of the date first written above.
LIBERTY GROUP OPERATING, INC.
By: /s/ Kenneth L. Serota
___________________________
Name: Kenneth L. Serota
Title: President
Accepted as of the 27th day
of January, 1998
CITICORP USA, INC.,
AS ADMINISTRATIVE AGENT
By: /s/ Michael Leyland
________________________________
Name: Michael Leyland
Title: Attorney-In-Fact
<PAGE> 1
================================================================================
EXHIBIT 10.8
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JANUARY 27, 1998
BY AND AMONG
LIBERTY GROUP PUBLISHING, INC.,
AS ISSUER
AND
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
CITICORP SECURITIES, INC.
BT ALEX. BROWN
CHASE SECURITIES INC.,
AS INITIAL PURCHASERS
================================================================================
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of January 27, 1998, among LIBERTY GROUP PUBLISHING, INC., a Delaware
corporation (the "Company"), and DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION, CITICORP SECURITIES, INC., BT ALEX. BROWN and CHASE SECURITIES
INC. (collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated January
15, 1998, among the Company and the Initial Purchasers (the "Purchase
Agreement"), which provides for the sale by the Company to the Initial
Purchasers of $89,000,000 aggregate principal amount at maturity of 11 5/8%
Series A Senior Discount Debentures due 2009 (the "Series A Debentures"). In
order to induce the Initial Purchasers to enter into the Purchase Agreement,
the Company has agreed to provide to the Initial Purchasers and their
respective direct and indirect transferees, among other things, the
registration rights for the Series A Debentures set forth in this Agreement.
The execution of this Agreement is a condition to the closing of the
transactions contemplated by the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the following
meanings (and, unless otherwise indicated, capitalized terms used herein
without definition shall have the respective meanings ascribed to them by the
Purchase Agreement):
Applicable Period: See Section 2(b) hereof.
Company: See the introductory paragraphs to this Agreement.
controlling person: See Section 7 hereof.
DTC: See Section 5(i) hereof.
Effectiveness Period: See Section 3(a) hereof.
Effectiveness Target Date: See Section 4(a)(ii) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2(a) hereof.
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<PAGE> 3
Exchange Offer Registration Statement: See Section 2(a) hereof.
Holder: Any holder of Transfer Restricted Securities.
indemnified party: See Section 7 hereof.
Indemnified Person: See Section 7 hereof.
indemnifying person: See Section 7 hereof.
Indenture: The Indenture, dated as of the date hereof, by and between the
Company and State Street Bank and Trust Company, as trustee (the "Trustee"),
pursuant to which the Series A Debentures and Series B Debentures are being
issued, as amended or supplemented from time to time in accordance with the
terms thereof.
Initial Purchasers: See the introductory paragraphs to this Agreement.
Inspectors: See Section 5(m) hereof.
Issue Date: As defined in the Offering Memorandum.
Liquidated Damages: See Section 4(a) hereof.
NASD: See Section 5(q) hereof.
Offering Memorandum: The final Offering Memorandum dated January 15, 1998
as supplemented by the Supplement To Offering Memorandum dated January 20,
1998, related to the sale of the Series A Debentures.
Participating Broker-Dealer: See Section 2(b) hereof.
Person or person: An individual, trustee, corporation, partnership, joint
stock company, trust, unincorporated association, union, business association,
limited liability company, limited liability partnership, firm or other legal
entity.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the offering of any portion of the
Series B Debentures and/or the Transfer Restricted Securities (as applicable),
covered by such Registration Statement, and all other amendments and
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<PAGE> 4
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
Purchase Agreement: See the introductory paragraphs to this Agreement.
Records: See Section 5(m) hereof.
Registration Default: See Section 4(a) hereof.
Registration Statement: The Exchange Offer Registration Statement or a
registration statement of the Company that otherwise covers any of the Transfer
Restricted Securities pursuant to the provisions of this Agreement, including
the Prospectus, amendments and supplements to such registration statement,
including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 promulgated pursuant to the Securities Act, as
currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
Rule 144A: Rule 144A promulgated pursuant to the Securities Act, as
currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated pursuant to the Securities Act, as such
rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
Series A Debentures: See the introductory paragraphs to this Agreement.
Series B Debentures: See Section 2(a) hereof.
Shelf Notice: See Section 2(c) hereof.
Shelf Registration Statement: See Section 3(a) hereof.
TIA: The Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated thereunder.
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<PAGE> 5
Transfer Restricted Securities: The Series A Debentures upon original
issuance thereof and at all times subsequent thereto, until in the case of any
such Series A Debentures, the earliest to occur of, the date on which (i) a
Registration Statement covering such has been declared effective by the SEC and
such Series A Debentures have been disposed of in accordance with such
effective Registration Statement, (ii) such Series A Debentures are sold in
compliance with Rule 144 or are eligible for sale under Rule 144(k) or (iii)
such Series A Debentures cease to be outstanding (including, without
limitation, upon an exchange of such Series A Debentures for Series B
Debentures in the Exchange Offer).
Trustee: See the definition of Indenture.
Underwritten registration or underwritten offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to
the public.
2. Exchange Offer
(a) The Company agrees to file with the SEC within 60 days after the
Issue Date a registration statement under the Securities Act with respect to an
offer to exchange (the "Exchange Offer") any and all of the Transfer Restricted
Securities for a like aggregate principal amount of debt securities of the
Company (the "Series B Debentures"), which Series B Debentures will be (i)
substantially identical in all material respects to the Series A Debentures,
except that such Series B Debentures will not contain terms with respect to
transfer restrictions, and (ii) entitled to the benefits of the Indenture or a
trust indenture which is identical to the Indenture (other than such changes to
the Indenture or any such identical trust indenture as are necessary to comply
with any requirements of the SEC to effect or maintain the qualification
thereof under the TIA), and which, in either case, has been qualified under the
TIA, and (iii) registered pursuant to an effective Registration Statement in
compliance with the Securities Act. The Exchange Offer will be registered
pursuant to the Securities Act on an appropriate form of Registration Statement
(the "Exchange Offer Registration Statement"), and will comply with all
applicable tender offer rules and regulations promulgated pursuant to the
Exchange Act and shall be duly registered or qualified pursuant to all
applicable state securities or Blue Sky laws, except as would subject the
Company to general taxation or service of process where it is not currently
subject. The Exchange Offer shall not be subject to any condition, other than
that the Exchange Offer does not violate any applicable law, policy or
interpretation of the staff of the SEC. No securities shall be included in the
Exchange Offer Registration Statement other than the Series B Debentures. The
Company agrees (x) to use its reasonable best efforts to cause such Exchange
Offer Registration Statement to be declared effective under the Securities Act
within 135 days after the Issue Date; (y) to keep the Exchange Offer open for
not less than 30 days (or such longer period required by applicable law) after
the date that the notice of the Exchange Offer referred to below is mailed to
Holders; and (z) to use its reasonable best efforts to consummate the Exchange
Offer within 45 days after the Effectiveness Target Date. As promptly as
practicable after the Exchange Offer Registration
-4-
<PAGE> 6
Statement is declared effective, the Company will commence the offer of Series
B Debentures in exchange for properly tendered Series A Debentures. For each
Series A Debenture validly tendered pursuant to the Exchange Offer, the holder
of such Series A Debenture will receive a Series B Debenture having a principal
amount at maturity equal to that of the tendered Series A Debenture.
Each Holder who participates in the Exchange Offer will be required to
represent that any Series B Debentures received by it will be acquired in the
ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
person to participate in the distribution (within the meaning of the Securities
Act) of the Series B Debentures, and that such Holder is not an "affiliate" of
the Company within the meaning of Rule 405 of the Securities Act (or that if it
is such an affiliate, it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable). Each
Holder that is not a Participating Broker-Dealer will be required to represent
that it is not engaged in, and does not intend to engage in, the distribution
of the Series B Debentures. Each Holder that (i) is a Participating
Broker-Dealer and (ii) will receive Series B Debentures for its own account in
exchange for the Transfer Restricted Securities that it acquired as the result
of market-making or other trading activities will be required to acknowledge
that it will deliver a Prospectus as required by law in connection with any
resale of such Series B Debentures. The Company shall allow Participating
Broker-Dealers and other persons, if any, subject to prospectus delivery
requirements to use the Prospectus included in the Exchange Offer Registration
Statement in connection with the resale of the Series B Debentures. Upon
consummation of the Exchange Offer in accordance with this Agreement, the
Company shall have no further obligation to register Transfer Restricted
Securities pursuant to Section 3 of this Agreement.
(b) The Company shall include within the Exchange Offer
Registration Statement a section entitled "Plan of Distribution," reasonably
acceptable to the Initial Purchasers, which shall contain a summary statement
of the positions taken or policies made by the staff of the SEC with respect to
the potential "underwriter" status of any broker-dealer that acquired Series A
Debentures as the result of market-making activities or other trading
activities (and not directly from the Company) and is the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) of Series B Debentures received
by such broker-dealer in the Exchange Offer (a "Participating Broker-Dealer").
Such "Plan of Distribution" section shall also allow the use of the Prospectus
by all persons subject to the prospectus delivery requirements of the
Securities Act, including all Participating Broker-Dealers, and include a
statement describing the means by which Participating Broker-Dealers may
resell the Series B Debentures.
The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective under the Securities Act and to amend
and supplement the Prospectus contained therein, in order to permit such
Prospectus to be lawfully delivered by
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<PAGE> 7
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as is necessary to comply with applicable law and
the policies, rules and regulations of the SEC as announced from time to time
in connection with any resale of the Series B Debentures provided that such
period shall not exceed 180 days from the consummation of the Exchange Offer
(or such longer period if extended pursuant to the last paragraph of Section 5
hereof) (the "Applicable Period").
In connection with the Exchange Offer, the Company shall:
(i) mail as promptly as practicable to each Holder a copy of
the Prospectus forming part of the Exchange Offer Registration
Statement, together with an appropriate letter of transmittal and
related documents;
(ii) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York; and
(iii) permit Holders to withdraw tendered Series A Debentures
at any time prior to the close of business, New York time, on the last
business day on which the Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer,
the Company shall:
(i) accept for exchange all Series A Debentures tendered
and not validly withdrawn pursuant to the Exchange Offer;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Series A Debentures so accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver
promptly to each Holder of Series A Debentures, Series B Debentures
equal in principal amount to the Series A Debentures of such Holder so
accepted for exchange.
(c) If (1) prior to the consummation of the
Exchange Offer, any change in law or in the applicable interpretations of the
staff of the SEC do not permit the Company to effect the Exchange Offer, or (2)
for any other reason the Exchange Offer is not consummated within 180 days of
the Issue Date, then the Company shall as promptly as practicable deliver to
the Holders and the Trustee written notice thereof (the "Shelf Notice"), and
the Company shall file a Registration Statement pursuant to Section 3 hereof.
Following the delivery of a Shelf Notice to the Holders of Transfer Restricted
Securities, the Company shall not have any further obligation to conduct the
Exchange Offer pursuant to this Section 2.
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<PAGE> 8
3. Shelf Registration
If the Company is required to deliver a Shelf Notice as
contemplated by Section 2(c) hereof, then:
(a) Shelf Registration. The Company shall prepare and file
with the SEC, within 45 days after such filing obligation arises, a
Registration Statement for an offering to be made on a continuous basis
pursuant to Rule 415 covering all of the Transfer Restricted Securities (the
"Shelf Registration Statement"). The Shelf Registration Statement shall be on
Form S-1 or another appropriate form permitting registration of the Transfer
Restricted Securities for resale by the Holders in the manner or manners
designated by the Holders of a majority in aggregate principal amount of the
outstanding Transfer Restricted Securities (including, without limitation, an
underwritten offering). The Company shall not permit any securities other than
the Transfer Restricted Securities to be included in the Shelf Registration
Statement. The Company shall use its reasonable best efforts to cause the
Shelf Registration Statement to be declared effective pursuant to the
Securities Act on or prior to 135 days after such obligation arises and to keep
the Shelf Registration Statement continuously effective under the Securities
Act until the earlier of (i) the date which is 24 months following the Issue
Date (or such longer period if extended pursuant to the last paragraph of
Section 5 hereof), (ii) the date that all Transfer Restricted Securities
covered by the Shelf Registration Statement have been sold in the manner set
forth and as contemplated in the Shelf Registration Statement or (iii) the date
that there ceases to be outstanding any Transfer Restricted Securities (the
"Effectiveness Period").
(b) Supplements and Amendments. The Company shall use its
reasonable best efforts to keep the Shelf Registration Statements continuously
effective during the Effectiveness Period by supplementing and amending the
Shelf Registration Statement if required by the rules, regulations or
instructions applicable to the registration form used for such Shelf
Registration Statement, or if reasonably requested in writing timely received
setting forth the reasons for such request by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities covered by
such Registration Statement or by any underwriter of such Transfer Restricted
Securities.
4. Liquidated Damages
(a) The Company and the Initial Purchasers agree that the
Holders of Transfer Restricted Securities will suffer damages if the Company
fails to fulfill its obligations pursuant to Section 2 or Section 3 hereof and
that it would not be possible to ascertain the extent of such damages.
Accordingly, in the event of such failure by the Company to fulfill such
obligations, the Company hereby agrees to pay liquidated damages ("Liquidated
Damages") to each Holder of Transfer Restricted Securities under the
circumstances and to the extent set forth below:
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<PAGE> 9
(i) if either the Exchange Offer Registration Statement or, if
applicable, the Shelf Registration Statement has not been filed with the
SEC on or prior to the applicable date specified for such filing;
(ii) if either the Exchange Offer Registration Statement or, if
applicable, the Shelf Registration Statement is not declared effective by
the SEC on or prior to the applicable date specified for such
effectiveness (the "Effectiveness Target Date"); or
(iii) if an Exchange Offer Registration Statement becomes
effective, but the Company fails to consummate the Exchange Offer within
45 days of the earlier of the effectiveness of such registration
statement or 135 days after the Issue Date; or
(iv) if the Shelf Registration Statement is declared effective
by the SEC but thereafter such Shelf Registration Statement ceases to be
effective or usable in connection with resales of Series A Debentures
during the Effectiveness Period;
(any of the foregoing, a "Registration Default"), then the Company shall pay
Liquidated Damages to each Holder, with respect to the first 90- day period or
portion thereof immediately following the occurrence of such Registration
Default, in an amount equal to $0.05 per week per $1,000 principal amount of
Transfer Restricted Securities held by such Holder. Upon a Registration
Default, Liquidated Damages will accrue at the rate specified above until such
Registration Default is cured and the amount of Liquidated Damages will
increase by an additional $0.05 per week per $1,000 principal amount of
Transfer Restricted Securities with respect to each subsequent 90-day period or
portion thereof, up to a maximum amount of Liquidated Damages of $0.30 per week
per $1,000 principal amount of Transfer Restricted Securities (regardless of
whether one or more than one Registration Default is outstanding). Following
the cure of any Registration Default relating to any Transfer Restricted
Securities, the accrual of Liquidated Damages with respect to such Registration
Default will cease. A Registration Default under clause (i) above shall be
cured on the date that the Exchange Offer Registration Statement or the Shelf
Registration Statement, as applicable, is filed with the SEC; a Registration
Default under clause (ii) above shall be cured on the date that the Exchange
Offer Registration Statement or the Shelf Registration Statement, as
applicable, is declared effective by the SEC; a Registration Default under
clause (iii) above shall be cured on the earlier of the date (A) the Exchange
Offer is consummated or (B) the Company delivers a Shelf Notice to the Holders
of Transfer Restricted Securities; and a Registration Default under clause (iv)
above shall be cured on the earlier of (A) the date the Shelf Registration
Statement is declared effective and is usable or (B) the Effectiveness Period
expires.
(b) The Company shall notify the Trustee within one business day
after each and every date on which a Registration Default first occurs.
Accrued and unpaid Liquidated Damages shall be paid by the Company to the
Holders by wire transfer of immediately
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<PAGE> 10
available funds to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified on each interest
payment date provided in the Indenture (whether or not any interest is then
payable on the Series A Debentures) and on each payment date provided in the
Indenture, including, without limitation, whether upon redemption, maturity (by
acceleration or otherwise), purchase upon a change of control or purchase upon
a sale of assets. Each obligation to pay Liquidated Damages with respect to
any Registration Default shall be deemed to commence accruing on the date of
such Registration Default and to cease accruing when such Registration Default
has been cured. In no event shall the Company pay Liquidated Damages in excess
of the applicable maximum weekly amount set forth above, regardless of whether
one or multiple Registration Defaults exist.
(c) The parties hereto agree that the Liquidated Damages
provided for in this Section 4 constitute a reasonable estimate of the damages
that will be suffered by Holders by reason of the failure to file the Exchange
Offer Registration Statement or the Shelf Registration Statement, the failure
of the Exchange Offer Registration Statement or the Shelf Registration
Statement to be declared effective, the failure to consummate the Exchange
Offer or the failure of the Shelf Registration Statement to remain effective,
as the case may be, in accordance with this Agreement.
5. Registration Procedures
In connection with the registration of any Series B Debentures
or Transfer Restricted Securities pursuant to Sections 2 or 3 hereof, the
Company shall effect such registration to permit the sale of such Series B
Debentures or Transfer Restricted Securities (as applicable) in accordance with
the intended method or methods of disposition thereof, and pursuant thereto the
Company shall:
(a) Prepare and file with the SEC, a Registration Statement or
Registration Statements as prescribed by Section 2 or Section 3 hereof, and to
use its reasonable best efforts to cause such Registration Statement to become
effective and remain effective as provided herein; provided that if (1) such
filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in an
Exchange Offer Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any Participating Broker-
Dealer who seeks to sell Series B Debentures during the Applicable Period,
before filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Company shall furnish to and afford the Holders of the
Transfer Restricted Securities and each such Participating Broker-Dealer, as
the case may be, covered by such Registration Statement, their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed. Such
documents shall be so furnished at least 3 business days prior to such filing,
or such later date as is reasonable under the circumstances. The Company shall
not file any Registration Statement or
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<PAGE> 11
Prospectus or any amendments or supplements thereto in respect of which the
Holders, pursuant to this Agreement, must be afforded an opportunity to review
prior to the filing of such document, if the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities covered by such
Registration Statement, or such Participating Broker-Dealer, as the case may
be, their counsel, or the managing underwriters, if any, shall reasonably
object within a reasonable time after receipt of any such materials.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration Statement or Exchange
Offer Registration Statement, as the case may be, as may be necessary to keep
such Registration Statement continuously effective for the Effectiveness Period
or the Applicable Period, as the case may be, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Registration
Statement have been sold; cause the related Prospectus to be supplemented by
any required Prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 (or any similar provisions then in force) under the Securities Act;
and comply with the applicable provisions of the Securities Act, the Exchange
Act and the rules and regulations of the SEC promulgated thereunder with
respect to the disposition of all securities covered by such Registration
Statement, as so amended, or in such Prospectus, as so supplemented, and with
respect to the subsequent resale of any Series B Debentures being sold by a
Participating Broker-Dealer covered by any such Prospectus; the Company shall
be deemed not to have used its reasonable best efforts to keep a Registration
Statement effective during the Applicable Period or the Effectiveness Period,
as the case may be, if it voluntarily takes any action that would result in
selling Holders of the Transfer Restricted Securities covered thereby or
Participating Broker-Dealers seeking to sell Series B Debentures not being able
to sell such Transfer Restricted Securities or such Series B Debentures during
such Period, unless (i) such action is required by applicable law, or (ii) such
action is taken by the Company in good faith and for valid business reasons
(not including avoidance of its obligations hereunder), including, but not
limited to, suspension of the Registration Statement or other actions taken
solely in connection with or in anticipation of the acquisition or divestiture
of assets, material financings or other transactions effected in good faith for
valid business reasons.
(c) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Series B Debentures during the Applicable Period, notify the selling
Holders of Transfer Restricted Securities, or each known Participating
Broker-Dealer, as the case may be, their counsel (if previously identified to
the Company in writing) and the managing underwriters, if any, as promptly as
practicable and, if requested, confirm such notice in writing, (i) when a
Prospectus, any Prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post- effective
amendment, when the same has become effective (including in any such written
notice a statement that any Holder may, upon request, obtain, without charge,
one conformed
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<PAGE> 12
copy of such Registration Statement or post-effective amendment including
financial statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the SEC of any
stop order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of any Prospectus or the initiation of
any proceedings for that purpose, (iii) if at any time a Prospectus is required
by the Securities Act to be delivered in connection with sales of the Transfer
Restricted Securities or resales of the Series B Debentures the representations
and warranties of the Company contained in any agreement (including any
underwriting agreement) contemplated by Section 5(1) hereof cease to be true
and correct in all material respects, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of a Registration Statement or any of the Transfer
Restricted Securities or the Series B Debentures to be sold by any
Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation of any proceeding for such purpose, (v) of the happening of any
material event or any material information becoming known that makes any
statement made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case
of the Prospectus, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, and (vi) of the Company's reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.
(d) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Series B Debentures during the Applicable Period, use its reasonable
best efforts to prevent the issuance of any order suspending the effectiveness
of a Registration Statement or of any order preventing or suspending the use of
a Prospectus and, if any such order is issued, to use its reasonable best
efforts to obtain the withdrawal of any such order at the earliest possible
moment.
(e) If a Shelf Registration Statement is filed pursuant to
Section 3 hereof and if requested by the managing underwriters, if any, or the
Holders of a majority in aggregate principal amount of the Transfer Restricted
Securities being sold in connection with an underwritten offering, (i) as
promptly as practicable incorporate in a prospectus supplement or
post-effective amendment such information relating to underwriters, if any, any
Holder of Transfer Restricted Securities or the plan of distribution of the
Transfer Restricted Securities as the managing underwriter, if any, or such
Holders may reasonably request to be included therein, (ii) make all required
filings of such prospectus supplement or such
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<PAGE> 13
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such prospectus supplement or
post-effective amendment pursuant to clause (i), and (iii) supplement or make
amendments to such Registration Statement with such information as is required
in connection with any reasonable request made pursuant to clause (i).
(f) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Series B Debentures during the Applicable Period, furnish to each
selling Holder of Transfer Restricted Securities and to each such Participating
Broker-Dealer who so requests and to each managing underwriter, if any, without
charge, one conformed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto, including financial
statements and schedules, and, if requested, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Series B Debentures during the Applicable Period, deliver to each
selling Holder, or each such Participating Broker-Dealer, as the case may be,
its counsel (if previously identified to the Company in writing), and the
underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of preliminary Prospectus), and each
amendment or supplement thereto and any documents incorporated by reference
therein, as such Persons may reasonably request; and, subject to the last
paragraph of this Section 5 hereof, the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling
Holders or, during the Applicable Period, each such Participating
Broker-Dealer, as the case may be, and their underwriters or agents, if any,
and dealers, if any, in connection with the offering and sale of the Transfer
Restricted Securities covered by, or the sale by Participating Broker-Dealers
of the Series B Debentures pursuant to, such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Transfer Restricted
Securities or any delivery of a Prospectus contained in the Exchange Offer
Registration Statement by any Participating Broker-Dealer who seeks to sell
Series B Debentures during the Applicable Period, use its reasonable best
efforts to register or qualify and to cooperate with the selling Holders of
Transfer Restricted Securities or each such Participating Broker-Dealer, as the
case may be, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Transfer Restricted Securities for offer
and sale under the securities or Blue Sky laws of such jurisdictions as any
selling Holder, Participating Broker-Dealer, or the managing
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<PAGE> 14
underwriters reasonably request in writing; keep each such registration or
qualification (or exemption therefrom), effective during the period such
Registration Statement is required to be kept effective and do any and all
other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Series B Debentures held by
Participating Broker-Dealers or the Transfer Restricted Securities covered by
the applicable Registration Statement; provided that the Company shall not be
required to (A) qualify as a foreign corporation or as a dealer in securities
in any jurisdiction where it is not then so qualified, (B) take any action that
would subject it to general service of process in any such jurisdiction where
it is not then so subject or (C) subject itself to taxation in any such
jurisdiction where it is not then so subject.
(i) If a Shelf Registration Statement is filed pursuant to
Section 3 hereof, cooperate with the selling Holders of Transfer Restricted
Securities and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold, which certificates shall not bear any restrictive
legends and shall be in a form eligible for deposit with The Depository Trust
Company ("DTC"), and enable such Transfer Restricted Securities to be in such
denominations and registered in such names as the managing underwriters, if
any, or Holders may reasonably request at least two business days prior to any
sale of the Transfer Restricted Securities.
(j) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Series B Debentures during the Applicable Period, upon the occurrence
of any event contemplated by paragraph 5(c)(v) or 5(c)(vi) above, as promptly
as practicable prepare and (subject to Section 5(a) hereof) file with the SEC,
at the expense of the Company, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, or
file any other required document so that, as thereafter delivered to the
purchasers of the Transfer Restricted Securities being sold thereunder or to
the purchasers of the Series B Debentures to whom such Prospectus will be
delivered by a Participating Broker-Dealer, any such Prospectus will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(k) Prior to the effective date of the first Registration
Statement relating to the Transfer Restricted Securities, (i) provide the
Trustee with certificates for the Transfer Restricted Securities in a form
eligible for deposit with DTC and (ii) provide a CUSIP number for the Transfer
Restricted Securities.
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<PAGE> 15
(l) In connection with an underwritten offering of Transfer
Restricted Securities pursuant to a Shelf Registration Statement, enter into an
underwriting agreement as is customary in underwritten offerings and take all
other customary and appropriate actions as are reasonably requested by the
managing underwriters in order to expedite or facilitate the registration or
the disposition of such Transfer Restricted Securities, and in such connection,
(i) make such representations and warranties to the underwriters, with respect
to the business of the Company and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, as are customarily made by companies to underwriters in
underwritten offerings; (ii) obtain opinions of counsel to the Company and
updates thereof in form and substance reasonably satisfactory to the managing
underwriters, addressed to the underwriters covering the matters customarily
covered in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by underwriters; (iii) obtain "cold comfort"
letters and updates thereof in form and substance reasonably satisfactory to
the managing underwriters from the independent certified public accountants of
the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired or
proposed to be acquired by its for which financial statements and financial
data are, or are required to be, included in the Registration Statement),
addressed to each of the underwriters, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings and such other matters as are reasonably
requested by underwriters as permitted by Statement on Auditing Standards No.
72; and (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable than those
set forth in Section 7 hereof (or such other reasonable provisions and
procedures acceptable to Holders of a majority in aggregate principal amount of
Transfer Restricted Securities covered by such Registration Statement and the
managing underwriters) with respect to all parties to be indemnified pursuant
to said Section. The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder.
(m) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Series B Debentures during the Applicable Period, make available for
inspection by any selling Holder of such Transfer Restricted Securities being
sold, or each such Participating Broker-Dealer, as the case may be, any
underwriter participating in any such disposition of Transfer Restricted
Securities, if any, and any attorney, accountant or other agent retained by any
such selling Holder or each such Participating Broker-Dealer, as the case may
be, or underwriter (collectively, the "Inspectors"), at the offices where
normally kept, during reasonable business hours, all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries (collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise any applicable due diligence responsibilities, and
cause the officers, directors and employees of the Company and its subsidiaries
to supply all relevant
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<PAGE> 16
information reasonably requested by any such Inspector in connection with such
Registration Statement. Records which the Company determines, in good faith,
to be confidential and any Records which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors, unless (i) the release
of such Records is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction or (ii) the information in such Records has been made
generally available to the public, other than as a result of the disclosure or
failure to safeguard by such Inspector. No information obtained pursuant to
this paragraph (m) shall be used by any person or entity obtaining access
thereto in connection with any transactions in securities of the Company in
violation of law. In addition, notwithstanding anything to the contrary
contained herein, the Company shall not be required to provide any information
to the Holders or the underwriters that the Company is prohibited by law from
disclosing.
(n) Provide an indenture trustee for the Transfer Restricted
Securities or the Series B Debentures, as the case may be, and cause the
Indenture to be qualified under the TIA not later than the effective date of
the Exchange Offer or the first Registration Statement relating to the Transfer
Restricted Securities; and in connection therewith, cooperate with the trustee
under any such indenture and the Holders of the Transfer Restricted Securities,
to effect such changes to such indenture as may be required for such indenture
to be so qualified in accordance with the terms of the TIA; and execute, and
use its reasonable best efforts to cause such trustee to execute, all customary
documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(o) Comply with all applicable rules and regulations of the SEC
and, as soon as reasonably practicable after the effective date of the
applicable Registration Statement, make generally available to the holders of
Series B Debentures and the Holders, if any, a consolidated earning statement
of the Company (which need not be certified by an independent public
accountant) that satisfies the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder.
(p) If an Exchange Offer is to be consummated, upon delivery of
the Transfer Restricted Securities by Holders to the Company (or to such other
Person as directed by the Company), in exchange for the Series B Debentures,
the Company shall, where appropriate, mark or cause to be marked on such
Transfer Restricted Securities that such Transfer Restricted Securities are
being cancelled in exchange for the Series B Debentures; in no event shall such
Transfer Restricted Securities be marked as paid or otherwise satisfied.
(q) Cooperate with each seller of Transfer Restricted Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Transfer Restricted Securities and
their respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. (the "NASD").
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<PAGE> 17
(r) Use its reasonable best efforts to take all other steps
necessary to effect the registration of the Transfer Restricted Securities
covered by a Registration Statement contemplated hereby.
(s) Use its reasonable best efforts to cause the Transfer
Restricted Securities or the Series B Debentures, as applicable, covered by an
effective registration statement required by Section 2 or Section 3 hereof to
be rated by one or two rating agencies, if and as so requested by the Holders
of a majority in aggregate principal amount of Transfer Restricted Securities
relating to such registration statement or the managing underwriters in
connection therewith, if any.
The Company may require each seller of Transfer Restricted
Securities or Participating Broker-Dealer as to which any registration is being
effected to furnish to the Company such information regarding such seller or
Participating Broker-Dealer and the distribution of such Transfer Restricted
Securities or Series B Debentures to be sold by such Participating
Broker-Dealer, as the case may be, as the Company may, from time to time,
reasonably request. The Company may exclude from such registration the
Transfer Restricted Securities or Series B Debentures of any seller or
Participating Broker-Dealer, as the case may be, who fails to furnish such
information within a reasonable time (and in any event within ten business
days) after receiving such request. Each seller of Transfer Restricted
Securities as to which a Shelf Registration is being effected, and each
Participating Broker-Dealer utilizing a Prospectus from the Exchange Offer
Registration Statement, agrees to furnish reasonably promptly to the Company
all information required to be disclosed in order to make any information
previously furnished to the Company by such seller or Participating
Broker-Dealer not materially misleading. No such seller or Participating
Broker Dealer, as applicable, shall be entitled to Liquidated Damages pursuant
to Section 4 hereof if such person fails so to provide all such reasonably
requested information to the extent that any such failure by such person is the
primary reason for the assessment of Liquidated Damages.
Each Holder of Transfer Restricted Securities and each Participating
Broker-Dealer agrees by acquisition of such Transfer Restricted
Securities or Series B Debentures to be sold by such Participating
Broker-Dealer, as the case may be, that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
5(c)(ii), 5(c)(iv), 5(c)(v) or 5(c)(vi) hereof, such Holder shall forthwith
discontinue disposition of such Transfer Restricted Securities covered by such
Registration Statement or Prospectus or such Series B Debentures to be sold by
such Participating Broker-Dealer, as the case may be, until such Holder's or
Participating Broker- Dealer's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(j) hereof, or until it is advised
in writing by the Company that the use of the applicable Prospectus may be
resumed, and has received copies of any amendments or supplements thereto. In
the event the Company gives any such notice, and subsequently delivers to each
Holder or Participating Broker-Dealer copies of such supplemented or amended
Prospectus, then each
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<PAGE> 18
Holder or Participating Broker-Dealer will either destroy or return to the
Company all copies (other than permanent file copies then in such Holder's or
Participating Broker-Dealer's possession) of any Prospectus that, as a result
of such occurrence leading to such notice, is no longer accurate.
6. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company,
whether or not the Exchange Offer or a Shelf Registration Statement is filed or
becomes effective, including, without limitation, (i) all registration and
filing fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten offering
and (B) fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, reasonable fees and disbursements of counsel in
connection with Blue Sky qualifications of the Transfer Restricted Securities or
Series B Debentures), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Transfer Restricted Securities or Series B
Debentures in a form eligible for deposit with DTC and of printing Prospectuses
if the printing of Prospectuses is requested by the managing underwriters, if
any, or, in respect of Transfer Restricted Securities or Series B Debentures to
be sold by any Participating Broker-Dealer during the Applicable Period, by the
Holders of a majority in aggregate principal amount of the Transfer Restricted
Securities included in any Registration Statement or of such Series B
Debentures, as the case may be), (iii) fees and disbursements of counsel for the
Company, (iv) fees and disbursements of all independent certified public
accountants referred to in Section 5(i)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (v) the fees and expenses of any
"qualified independent underwriter" or other independent appraiser participating
in an offering pursuant to Section 3 of Schedule E to the By-laws of the NASD,
(vi) rating agency fees, (vii) fees and expenses of all other Persons retained
by the Company, (viii) internal expenses of the Company (including, without
limitation, all salaries and expenses of officers and employees of the Company
performing legal or accounting duties), (ix) the expense of any required
financial audits and (x) the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities exchange. Nothing
contained in this Section 6 shall create an obligation on the part of the
Company to pay or reimburse any Holder for any underwriting commission or
discount attributable to any such Holder's Transfer Restricted Securities
included in an underwritten offering pursuant to a Registration Statement filed
in accordance with the terms of this Agreement, or to guarantee such Holder any
profit or proceeds from the sale of such Series A Debentures.
(b) In connection with any Shelf Registration Statement
hereunder, the Company shall reimburse the Holders of the Transfer Restricted
Securities being registered in such registration for the reasonable fees and
disbursements of not more than one firm of
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<PAGE> 19
attorneys chosen by the Holders of a majority in aggregate principal amount of
the Transfer Restricted Securities to be included in such Registration
Statement.
7. Indemnification
The Company agrees to indemnify and hold harmless (i) each of
the Initial Purchasers, each Holder of Transfer Restricted Securities, each
Holder of Series B Debentures and each Participating Broker-Dealer, (ii) each
person, if any, who controls (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) any such Person (any of the
persons referred to in this clause (ii) being hereinafter referred to as a
"controlling person"), and (iii) the respective officers, directors, partners,
employees, representatives and agents of any of such Person or any controlling
person (any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an "Indemnified Person") to the fullest extent lawful, from and
against any and all losses, claims, damages, liabilities, judgments, actions
and reasonable expenses (including, without limitation, and as incurred,
reimbursement of all reasonable costs of investigating, preparing, pursuing or
defending any claim or action or any investigation or proceeding by any
governmental agency or body, commenced or threatened, including the reasonable
fees and expenses of counsel to any Indemnified Person) caused by, related to,
based upon, arising out of or in connection with any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary Prospectus,
or caused by, arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by (i) any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with information relating to any Indemnified Person furnished to the Company or
any underwriter in writing by such Indemnified Person expressly for use
therein, or (ii) any untrue statement contained in or omission from a
preliminary Prospectus or Prospectus, as applicable, if a copy of the
Prospectus (as then amended or supplemented, if the Company shall have
furnished to or on behalf of the Holder participating in the distribution
relating to the relevant Registration Statement any amendments or supplements
thereto) was not sent or given by or on behalf of such Holder to the person
asserting any such losses, liabilities, claims, damages or expenses who
purchased Series A Debentures, if such is required by law at or prior to the
written confirmation of the sale of such Series A Debentures to such person and
the untrue statement contained in or omission from such preliminary Prospectus
or Prospectus, as applicable, was corrected in the Prospectus (as then amended
or supplemented). The Company shall notify the Holders promptly upon becoming
aware thereof of the institution, threat or assertion of any claim, proceeding
(including any governmental investigation) or litigation of which it shall have
become aware in connection with the matters addressed by this Agreement which
involves the Company or an Indemnified Person.
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<PAGE> 20
In connection with any Registration Statement in which a Holder of
Transfer Restricted Securities is participating, such Holder of Transfer
Restricted Securities agrees, severally and not jointly, to indemnify and hold
harmless the Company and its directors, officers, partners, employees,
representatives and agents and each person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to each Indemnified
Person, but only with reference to information relating to such Indemnified
Person and furnished to the Company in writing by such Indemnified Person
expressly for use in any Registration Statement or Prospectus, any amendment or
supplement thereto, or any preliminary Prospectus. The liability of any
Indemnified Person pursuant to this paragraph shall in no event exceed the
proceeds (net of reasonable commissions) received by such Indemnified Person
from sales of Transfer Restricted Securities or Series B Debentures giving rise
to such obligations.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of
the two preceding paragraphs, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying person") in writing, (provided that the failure to give such
notice shall not relieve the indemnifying person of its obligations under this
Section 7 unless and only to the extent that the indemnifying person is
materially prejudiced by the failure to notify) and the indemnifying person,
upon request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified party and
any others indemnifying person may reasonably designate in such proceeding and
shall pay the reasonable fees and expenses actually incurred by such counsel
related to such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such indemnified party, unless (i) the
indemnifying person and the indemnified party shall have mutually agreed in
writing to the contrary, (ii) the indemnifying person shall have failed
promptly to assume the defense and employ counsel reasonably satisfactory to
the indemnified party or (iii) the named parties to any such action (including
any impleaded parties) include both such indemnified party and the indemnifying
person, or any affiliate of the indemnifying person and such indemnified party
shall have reasonably advised by counsel that representation of such
indemnified party and any such indemnifying party by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or
not such representation by the same counsel has been proposed) due to actual or
potential differing interests between them (in which case the indemnifying
person shall not have the right to assume the defense of such action on behalf
of such indemnified party), it being understood, however, that the indemnifying
person shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) for all such indemnified parties, which firm shall be
reasonably satisfactory
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<PAGE> 21
to the indemnifying parties. Such separate firm for sellers of Transfer
Restricted Securities shall be designated in writing by those indemnified
parties who sold a majority in outstanding aggregate principal amount of
Transfer Restricted Securities sold by all such indemnified parties, and any
such separate firm for the Company, its directors, its officers and such
control persons of the Company shall be designated in writing by the Company.
The indemnifying person shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
person agrees to indemnify any indemnified party from and against any loss or
liability by reason of such settlement or judgment to the extent of such
indemnifying party's indemnification obligation hereunder. No indemnifying
person shall, without the prior written consent of the indemnified party,
effect any settlement of any pending or threatened proceeding in respect of
which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
If the indemnification provided for in the first and second
paragraphs of this Section 7 is unavailable to an indemnified party in respect
of any losses, claims, damages, liabilities, or expenses referred to therein
(other than by reason of the exceptions provided therein), then each
indemnifying person under such paragraphs, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,
liabilities, or expenses (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnified party on the one hand and the
indemnifying person(s) on the other in connection with the statements or
omissions that resulted in such losses, claims, damages, liabilities, or
expenses or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative faults of the indemnifying person(s) and the indemnified party, as
well as any other relevant equitable considerations. The relative fault of the
Company on the one hand an any Indemnified Persons on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or by such
Indemnified Persons and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties agrees that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if such indemnified parties were treated as one entity for such purpose
or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
indemnified party in connection
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<PAGE> 22
with investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, in no event shall an Indemnified Person be
required to contribute any amount in excess of the amount by which proceeds
received by such Indemnified Person from sales of Transfer Restricted
Securities or Series B Debentures exceeds the amount of any damages that such
Indemnified Person has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the indemnifying parties
may otherwise have to the indemnified parties referred to above. The
Indemnified Persons' obligations to contribute pursuant to this Section 7 are
several in proportion to the respective principal amount of Securities sold by
each of the Indemnified Persons hereunder and not joint.
8. Rules 144 and 144A
The Company covenants that it will file the reports required
to be filed by it pursuant to the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder in a timely manner and, if
at any time the Company is not required to file such reports, it will, upon the
reasonable request of any Holder of Transfer Restricted Securities, make
available information required by Rule 144 and Rule 144A under the Securities
Act in order to permit sales pursuant to Rule 144 and Rule 144A. The Company
further covenants that it will take such further action as any Holder of
Transfer Restricted Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Transfer Restricted
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144 and Rule 144A, or (b) any similar
rule or regulation hereafter adopted by the SEC (it being expressly understood
that the foregoing shall not create any obligation on the part of the Company
to file periodic or other reports under the Exchange Act at any time that it is
not otherwise required to file such reports pursuant to the Exchange Act).
9. Underwritten Registrations
(a) If any of the Transfer Restricted Securities covered by any
Shelf Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will manage
the offering will be selected by the Holders of a majority in aggregate
principal amount of such Transfer Restricted Securities included in such
offering and shall be reasonably acceptable to the Company.
No Holder of Transfer Restricted Securities may participate in
any underwritten registration hereunder, unless such Holder (a) agrees to sell
such Holder's
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<PAGE> 23
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 questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
(b) Each Holder of Transfer Restricted Securities agrees, if
requested (pursuant to a timely written notice) by the managing underwriters in
an underwritten offering or by a placement agent in a private offering of the
Company's debt securities, not to effect any private sale or distribution
(including a sale pursuant to Rule 144(k) or Rule 144A under the Securities Act,
but excluding non- public sales to any of its affiliates, officers, directors,
employees and controlling persons), of any of the Series A Debentures, except
pursuant to an Exchange Offer, during the period beginning 10 days prior to, and
ending 90 days after, the closing date of the underwritten or private offering,
as applicable.
The foregoing provisions shall not apply to any Holder of Transfer
Restricted Securities if such Holder is prevented by applicable statute or
regulation from entering into any such agreement; provided, however, that if it
receives a written request as provided in the preceding paragraph, no such
Holder shall effect any disposition of Series A Debentures that would otherwise
be restricted by the provisions of the preceding paragraph without providing
reasonable advance written notice of such disposition to the Company, the
managing underwriter or the placement agent, as the case may be.
The Company agrees, without the written consent of the managing
underwriters in an underwritten offering of Transfer Restricted Securities
covered by a Registration Statement filed pursuant to Section 3 hereof, not to
effect any public or private sale or distribution of its respective debt
securities, including a sale pursuant to Regulation D or Rule 144A under the
Securities Act, during the period beginning 10 days prior to, and ending 90 days
after, the closing date of each underwritten offering made pursuant to such
Registration Statement (provided, however, that such period shall be extended by
the number of days from and including the date of the giving of any notice
pursuant to Section 5(c)(v) or (c)(vi) hereof to and including the date when
each seller of Transfer Restricted Securities covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 5(j) hereof).
10. Miscellaneous
(a) No Inconsistent Agreements. The Company has not, as of the
date hereof, and the Company shall not, after the date of this Agreement, enter
into any agreement with respect to any of its securities that is inconsistent
with the rights granted to the Holders of Transfer Restricted Securities in this
Agreement or otherwise conflicts with the provisions hereof. The Company will
not enter into any agreement with respect to any of its securities which will
grant to any Person piggy-back registration rights with respect to a
Registration Statement.
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<PAGE> 24
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given, unless the Company has obtained the written consent of
Holders of at least a majority of the then outstanding aggregate principal
amount of Transfer Restricted Securities. Notwithstanding the foregoing, a
waiver or consent to or departures from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders whose securities are
being sold pursuant to a Registration Statement and that does not directly or
indirectly affect, impair, limit or compromise the rights of other Holders may
be given by Holders of at least a majority in aggregate principal amount of the
Transfer Restricted Securities being sold by such Holders pursuant to such
Registration Statement; provided that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(c) Notices. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee),
provided for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Transfer Restricted Securities, at the
most current address given by the Trustee to the Company;
(ii) if to the Company, Liberty Group Publishing, Inc., 3000
Dundee Road, Northbrook, Illinois 60062, Attention: Kenneth L. Serota,
President, with a copy to Leonard Green & Partners, L.P., 11111 Santa
Monica Boulevard, Suite 2000, Los Angeles, California 90025, Attention:
Peter J. Nolan, and with a copy to Mayer, Brown & Platt, 190 South La
Salle Street, Chicago, Illinois 60603, Attention: Scott J. Davis, Esq.;
and
(iii) if to any Initial Purchasers, c/o Donaldson, Lufkin &
Jenrette Securities Corporation, 277 Park Avenue, New York, New York
10172, Attention: Syndicate Department, with a copy to Sullivan &
Cromwell, 444 South Flower Street, Los Angeles, California 90071-2901,
Attention: Alison S. Ressler, Esq.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one
business day after being timely delivered to a nationally recognized next-day
air courier, if made by next-day air courier; and when receipt is acknowledged
by the addressee, if telecopied on a business day on such business day, if not
on a business day, on the first business day thereafter.
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<PAGE> 25
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee
under the Indenture at the address specified in such Indenture.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, including, without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities. The Company
agrees that the Holders of the Series A Debentures shall be third-party creditor
beneficiaries to the agreements made hereunder by the Initial Purchasers and the
Company, and each Holder shall have the right to enforce such agreements
directly to the extent it deems such enforcement necessary or advisable to
protect its rights hereunder
(e) 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.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(h) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties hereto that they would have executed
the remaining terms, provisions, covenants and restrictions without including
any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(i) Entire Agreement. This Agreement, together with the
Purchase Agreement, is intended by the parties hereto as a final expression of
their agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect to the subject
matter contained herein and therein. Any and all prior oral or written
agreements, representations, warranties, contracts, understandings,
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<PAGE> 26
correspondence, conversations and memoranda between the Initial Purchasers, on
the one hand, and the Company, on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof are merged
herein and replaced hereby.
(j) Series A Debentures Held by the Company or its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Transfer Restricted Securities is required hereunder, Transfer Restricted
Securities held by the Company or its affiliates (as such term is defined in
Rule 405 under the Securities Act) (other than the Initial Purchasers or
subsequent Holders of Transfer Restricted Securities or Series B Debentures if
such subsequent Holders are deemed to be affiliates solely by reason of their
holdings of such Transfer Restricted Securities or Series B Debentures), shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
(k) Survival. This Agreement is intended to survive the
consummation of the transactions contemplated by the Purchase Agreement. The
indemnification and contribution obligations under section 7 of this Agreement
shall survive the termination of the Company's obligations under sections 2 and
3 of this Agreement.
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<PAGE> 27
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
LIBERTY GROUP PUBLISHING, INC.
By: /s/ Kenneth L. Serota
--------------------------------------------
Name: Kenneth L. Serota
Title: President and Chief Executive Officer
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<PAGE> 28
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first
above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Donald S. Kinsey
______________________________________
Name: Donald S. Kinsey
Title: Senior Vice President
CITICORP SECURITIES, INC.
By: /s/ Robert Hornstein
______________________________________
Name: Robert Hornstein
Title: Vice President
BT ALEX. BROWN
By: /s/ Anthony Hass
______________________________________
Name: Anthony Hass
Title: Managing Director
CHASE SECURITIES INC.
By: /s/ David Fass
______________________________________
Name: David Fass
Title: Managing Director
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<PAGE> 1
EXHIBIT 10.9
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JANUARY 27, 1998
BY AND AMONG
LIBERTY GROUP PUBLISHING, INC.,
AS ISSUER
AND
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION,
AS INITIAL PURCHASER
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of January 27, 1998, between LIBERTY GROUP PUBLISHING, INC., a
Delaware corporation (the "Company"), and DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION (the "Initial Purchaser").
This Agreement is made pursuant to the Purchase Agreement, dated
January 20, 1998, between the Company and the Initial Purchaser (the "Purchase
Agreement"), which provides for the sale by the Company to the Initial
Purchaser of 1,800,000 shares of Series A 14 3/4% Senior Redeemable
Exchangeable Cumulative Preferred Stock, par value $0.01 per share, with a
liquidation preference of $25 per share (the "Series A Senior Preferred
Stock"), exchangeable at the option of the Company for the Company's 14 3/4%
Senior Subordinated Debentures due 2010 (the "Series A Exchange Debentures").
In order to induce the Initial Purchaser to enter into the Purchase Agreement,
the Company has agreed to provide to the Initial Purchaser and its respective
direct and indirect transferees, among other things, the registration rights
for the Series A Senior Preferred Stock and Series A Exchange Debentures set
forth in this Agreement. The execution of this Agreement is a condition to the
closing of the transactions contemplated by the Purchase Agreement.
For purposes of this Agreement and the registration requirements
contained herein, if the Series A Senior Preferred Stock is exchanged for
Series A Exchange Debentures when the Series A Senior Preferred Stock
constitutes Transfer Restricted Securities, all references herein to Series A
Senior Preferred Stock shall be deemed to refer to such Series A Exchange
Debentures, with similar appropriate modifications (e.g., "liquidation
preference", "transfer agent" and "dividend" shall be deemed to refer to
"principal amount", "Trustee" and "interest," respectively).
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings (and, unless otherwise indicated, capitalized terms used
herein without definition shall have the respective meanings ascribed to them
by the Purchase Agreement):
Applicable Period: See Section 2(b) hereof.
Certificate of Designations: The Certificate of Designations governing
the Series A Senior Preferred Stock and the Exchange Senior Preferred Stock as
filed with the Secretary of State of the State of Delaware.
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<PAGE> 3
Company: See the introductory paragraphs to this Agreement.
controlling person: See Section 7 hereof.
DTC: See Section 5(i) hereof.
Effectiveness Period: See Section 3(a) hereof.
Effectiveness Target Date: See Section 4(a)(ii) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Exchange Debentures: The Series A Exchange Debentures and the Series B
Exchange Debentures issuable in exchange therefor.
Exchange Indenture: The Indenture, dated as of the date hereof, by
and between the Company and State Street Bank and Trust Company, as trustee (the
"Trustee"), pursuant to which the Exchange Debentures may be issued, as amended
or supplemented from time to time in accordance with the terms thereof.
Exchange Offer: See Section 2(a) hereof.
Exchange Offer Registration Statement: See Section 2(a) hereof.
Exchange Senior Preferred Stock: See Section 2(a) hereof.
Holder: Any holder of Transfer Restricted Securities.
indemnified party: See Section 7 hereof.
Indemnified Person: See Section 7 hereof.
indemnifying person: See Section 7 hereof.
Initial Purchaser: See the introductory paragraphs to this Agreement.
Inspectors: See Section 5(m) hereof.
Issue Date: As defined in the Offering Memorandum.
Liquidated Damages: See Section 4(a) hereof.
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<PAGE> 4
NASD: See Section 5(q) hereof.
Offering Memorandum: The final Offering Memorandum dated January 15,
1998 as supplemented by the Supplement To Offering Memorandum dated January 20,
1998, including a supplement describing the Series A Senior Preferred Stock,
dated January 20, 1998.
Participating Broker-Dealer: See Section 2(b) hereof.
Person or person: An individual, trustee, corporation, partnership,
joint stock company, trust, unincorporated association, union, business
association, limited liability company, limited liability partnership, firm or
other legal entity.
Prospectus: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the offering of any portion of the
Exchange Senior Preferred Stock and/or the Transfer Restricted Securities (as
applicable), covered by such Registration Statement, and all other amendments
and supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
Purchase Agreement: See the introductory paragraphs to this Agreement.
Records: See Section 5(m) hereof.
Registration Default: See Section 4(a) hereof.
Registration Statement: The Exchange Offer Registration Statement or a
registration statement of the Company that otherwise covers any of the Transfer
Restricted Securities pursuant to the provisions of this Agreement, including
the Prospectus, amendments and supplements to such registration statement,
including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 promulgated pursuant to the Securities Act, as
currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
Rule 144A: Rule 144A promulgated pursuant to the Securities Act, as
currently in effect, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC.
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<PAGE> 5
Rule 415: Rule 415 promulgated pursuant to the Securities Act, as
such rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations of the SEC promulgated thereunder.
Series A Senior Preferred Stock: See the introductory paragraphs to
this Agreement.
Series B Exchange Debentures: See Section 2(a) hereof.
Shelf Notice: See Section 2(c) hereof.
Shelf Registration Statement: See Section 3(a) hereof.
TIA: The Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated thereunder.
Transfer Agent: BankBoston, N.A. or such other transfer agent for the
Senior Preferred Stock appointed by the Company.
Transfer Restricted Securities: The Series A Senior Preferred Stock
upon original issuance thereof and at all times subsequent thereto, until in
the case of any such Series A Senior Preferred Stock, the earliest to occur of,
the date on which (i) a Registration Statement covering such has been declared
effective by the SEC and such Series A Senior Preferred Stock has been disposed
of in accordance with such effective Registration Statement, (ii) such Series A
Senior Preferred Stock is sold in compliance with Rule 144 or is eligible for
sale under Rule 144(k) or (iii) such Series A Senior Preferred Stock ceases to
be outstanding (including, without limitation, upon an exchange of such Series
A Senior Preferred Stock for Series B Senior Preferred Stock in the Exchange
Offer).
Trustee: See the definition of Exchange Indenture.
Underwritten registration or underwritten offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to
the public.
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<PAGE> 6
2. Exchange Offer
(a) The Company agrees to file with the SEC within 60 days after the
Issue Date a registration statement under the Securities Act with respect to an
offer to exchange (the "Exchange Offer") any and all of the Transfer Restricted
Securities for a like number of shares of (with a liquidation preference equal
to that of the surrendered shares) registered preferred stock of the Company
(the "Exchange Senior Preferred Stock"), which Exchange Senior Preferred Stock
will be (i) substantially identical in all material respects to the Series A
Senior Preferred Stock, except that such Exchange Senior Preferred Stock will
not contain terms with respect to transfer restrictions and will be
exchangeable for registered 14 3/4% Senior Subordinated Debentures due 2010
(the "Series B Exchange Debentures") and (ii) registered pursuant to an
effective Registration Statement in compliance with the Securities Act. The
Exchange Offer will be registered pursuant to the Securities Act on an
appropriate form of Registration Statement (the "Exchange Offer Registration
Statement"), and will comply with all applicable tender offer rules and
regulations promulgated pursuant to the Exchange Act and shall be duly
registered or qualified pursuant to all applicable state securities or Blue Sky
laws, except as would subject the Company to general taxation or service of
process where it is not currently subject. The Exchange Offer shall not be
subject to any condition, other than that the Exchange Offer does not violate
any applicable law, policy or interpretation of the staff of the SEC. No
securities shall be included in the Exchange Offer Registration Statement other
than the Exchange Senior Preferred Stock (and the Exchange Debentures). The
Company agrees (x) to use its reasonable best efforts to cause such Exchange
Offer Registration Statement to be declared effective under the Securities Act
within 135 days after the Issue Date; (y) to keep the Exchange Offer open for
not less than 30 days (or such longer period required by applicable law) after
the date that the notice of the Exchange Offer referred to below is mailed to
Holders; and (z) to use its reasonable best efforts to consummate the Exchange
Offer within 45 days after the Effectiveness Target Date. As promptly as
practicable after the Exchange Offer Registration Statement is declared
effective, the Company will commence the offer of Exchange Senior Preferred
Stock in exchange for properly tendered Series A Senior Preferred Stock. For
each share of Series A Senior Preferred Stock validly tendered pursuant to the
Exchange Offer, the holder of such Series A Senior Preferred Stock will receive
a share of Exchange Senior Preferred Stock having a liquidation preference
equal to that of the tendered Series A Senior Preferred Stock.
Each Holder who participates in the Exchange Offer will be required to
represent that any Exchange Senior Preferred Stock received by it will be
acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Senior Preferred Stock, and that
such Holder is not an "affiliate" of the Company within the meaning of Rule 405
of the Securities Act (or that if it is such an affiliate, it will comply with
the registration and prospectus delivery requirements of the Securities Act to
the extent applicable). Each
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<PAGE> 7
Holder that is not a Participating Broker-Dealer will be required to
represent that it is not engaged in, and does not intend to engage in, the
distribution of the Exchange Senior Preferred Stock. Each Holder that (i) is a
Participating Broker-Dealer and (ii) will receive Exchange Senior Preferred
Stock for its own account in exchange for the Transfer Restricted Securities
that it acquired as the result of market-making or other trading activities
will be required to acknowledge that it will deliver a Prospectus as required
by law in connection with any resale of such Exchange Senior Preferred Stock.
The Company shall allow Participating Broker-Dealers and other persons, if any,
subject to prospectus delivery requirements to use the Prospectus included in
the Exchange Offer Registration Statement in connection with the resale of the
Exchange Senior Preferred Stock. Upon consummation of the Exchange Offer in
accordance with this Agreement, the Company shall have no further obligation to
register Transfer Restricted Securities pursuant to Section 3 of this
Agreement.
(b) The Company shall include within the Exchange Offer Registration
Statement a section entitled "Plan of Distribution," reasonably acceptable to
the Initial Purchaser, which shall contain a summary statement of the positions
taken or policies made by the staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer that acquired Series A Senior
Preferred Stock as the result of market-making activities or other trading
activities (and not directly from the Company) and is the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) of Exchange Senior Preferred
Stock received by such broker-dealer in the Exchange Offer (a "Participating
Broker-Dealer"). Such "Plan of Distribution" section shall also allow the use
of the Prospectus by all persons subject to the prospectus delivery
requirements of the Securities Act, including all Participating Broker-Dealers,
and include a statement describing the means by which Participating
Broker-Dealers may resell the Exchange Senior Preferred Stock.
The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective under the Securities Act and to amend
and supplement the Prospectus contained therein, in order to permit such
Prospectus to be lawfully delivered by all persons subject to the prospectus
delivery requirements of the Securities Act for such period of time as is
necessary to comply with applicable law and the policies, rules and regulations
of the SEC as announced from time to time in connection with any resale of the
Exchange Senior Preferred Stock provided that such period shall not exceed 180
days from the consummation of the Exchange Offer (or such longer period if
extended pursuant to the last paragraph of Section 5 hereof) (the "Applicable
Period").
In connection with the Exchange Offer, the Company shall:
(i) mail as promptly as practicable to each Holder a copy of the
Prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related documents;
(ii) utilize the services of a depositary for the Exchange Offer with
an address
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<PAGE> 8
in the Borough of Manhattan, The City of New York; and
(iii) permit Holders to withdraw tendered Series A Senior Preferred
Stock at any time prior to the close of business, New York time, on the
last business day on which the Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer, the
Company shall:
(i) accept for exchange all Series A Senior Preferred Stock tendered
and not validly withdrawn pursuant to the Exchange Offer;
(ii) deliver, or cause to be delivered, to the Transfer Agent for
cancellation all Series A Senior Preferred Stock so accepted for exchange;
and
(iii) cause the Transfer Agent to authenticate and deliver promptly to
each Holder of Series A Senior Preferred Stock, Exchange Senior Preferred
Stock equal in liquidation preference to the Series A Senior Preferred
Stock of such Holder so accepted for exchange.
(c) If (1) prior to the consummation of the Exchange Offer, any
change in law or in the applicable interpretations of the staff of the SEC do
not permit the Company to effect the Exchange Offer, or (2) for any other
reason the Exchange Offer is not consummated within 180 days of the Issue Date,
then the Company shall as promptly as practicable deliver to the Holders and
the Transfer Agent written notice thereof (the "Shelf Notice"), and the Company
shall file a Registration Statement pursuant to Section 3 hereof. Following
the delivery of a Shelf Notice to the Holders of Transfer Restricted
Securities, the Company shall not have any further obligation to conduct the
Exchange Offer pursuant to this Section 2.
3. Shelf Registration
If the Company is required to deliver a Shelf Notice as contemplated
by Section 2(c) hereof, then:
(a) Shelf Registration. The Company shall prepare and file with the
SEC, within 45 days after such filing obligation arises, a Registration
Statement for an offering to be made on a continuous basis pursuant to Rule 415
covering all of the Transfer Restricted Securities (the "Shelf Registration
Statement"). The Shelf Registration Statement shall be on Form S-1 or another
appropriate form permitting registration of the Transfer Restricted Securities
for resale by the Holders in the manner or manners designated by the Holders of
a majority in aggregate liquidation preference of the outstanding Transfer
Restricted Securities (including, without limitation, an underwritten
offering). The Company shall not
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<PAGE> 9
permit any securities other than the Transfer Restricted Securities to be
included in the Shelf Registration Statement. The Company shall use its
reasonable best efforts to cause the Shelf Registration Statement to be
declared effective pursuant to the Securities Act on or prior to 135 days after
such obligation arises and to keep the Shelf Registration Statement
continuously effective under the Securities Act until the earlier of (i) the
date which is 24 months following the Issue Date (or such longer period if
extended pursuant to the last paragraph of Section 5 hereof), (ii) the date
that all Transfer Restricted Securities covered by the Shelf Registration
Statement have been sold in the manner set forth and as contemplated in the
Shelf Registration Statement or (iii) the date that there ceases to be
outstanding any Transfer Restricted Securities (the "Effectiveness Period").
(b) Supplements and Amendments. The Company shall use its reasonable
best efforts to keep the Shelf Registration Statements continuously effective
during the Effectiveness Period by supplementing and amending the Shelf
Registration Statement if required by the rules, regulations or instructions
applicable to the registration form used for such Shelf Registration Statement,
or if reasonably requested in writing timely received setting forth the reasons
for such request by the Holders of a majority in aggregate liquidation
preference of the Transfer Restricted Securities covered by such Registration
Statement or by any underwriter of such Transfer Restricted Securities.
4. Liquidated Damages
(a) The Company and the Initial Purchaser agree that the Holders of
Transfer Restricted Securities will suffer damages if the Company fails to
fulfill its obligations pursuant to Section 2 or Section 3 hereof and that it
would not be possible to ascertain the extent of such damages. Accordingly, in
the event of such failure by the Company to fulfill such obligations, the
Company hereby agrees to pay liquidated damages ("Liquidated Damages") to each
Holder of Transfer Restricted Securities under the circumstances and to the
extent set forth below:
(i) if either the Exchange Offer Registration Statement or, if
applicable, the Shelf Registration Statement has not been filed with the
SEC on or prior to the applicable date specified for such filing; or
(ii) if either the Exchange Offer Registration Statement or, if
applicable, the Shelf Registration Statement is not declared effective by
the SEC on or prior to the applicable date specified for such
effectiveness (the "Effectiveness Target Date"); or
(iii) if an Exchange Offer Registration Statement becomes effective,
but the Company fails to consummate the Exchange Offer within 45 days of
the earlier of the effectiveness of such registration statement or 135
days after the Issue Date; or
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<PAGE> 10
(iv) if the Shelf Registration Statement is declared effective by the
SEC but thereafter such Shelf Registration Statement ceases to be
effective or usable in connection with resales of Series A Senior
Preferred Stock during the Effectiveness Period;
(any of the foregoing, a "Registration Default"), then the Company shall pay
Liquidated Damages to each Holder, with respect to the first 90-day period or
portion thereof immediately following the occurrence of such Registration
Default, in an amount equal to $0.05 per week per $1,000 liquidation preference
of Transfer Restricted Securities held by such Holder. Upon a Registration
Default, Liquidated Damages will accrue at the rate specified above until such
Registration Default is cured and the amount of Liquidated Damages will
increase by an additional $0.05 per week per $1,000 liquidation preference of
Transfer Restricted Securities with respect to each subsequent 90-day period or
portion thereof, up to a maximum amount of Liquidated Damages of $0.30 per week
per $1,000 liquidation preference of Transfer Restricted Securities (regardless
of whether one or more than one Registration Default is outstanding).
Following the cure of any Registration Default relating to any Transfer
Restricted Securities, the accrual of Liquidated Damages with respect to such
Registration Default will cease. A Registration Default under clause (i) above
shall be cured on the date that the Exchange Offer Registration Statement or
the Shelf Registration Statement, as applicable, is filed with the SEC; a
Registration Default under clause (ii) above shall be cured on the date that
the Exchange Offer Registration Statement or the Shelf Registration Statement,
as applicable, is declared effective by the SEC; a Registration Default under
clause (iii) above shall be cured on the earlier of the date (A) the Exchange
Offer is consummated or (B) the Company delivers a Shelf Notice to the Holders
of Transfer Restricted Securities; and a Registration Default under clause (iv)
above shall be cured on the earlier of (A) the date the Shelf Registration
Statement is declared effective and is usable or (B) the Effectiveness Period
expires.
(b) The Company shall notify the Transfer Agent within one business
day after each and every date on which a Registration Default first occurs.
Accrued and unpaid Liquidated Damages shall be paid by the Company to the
Holders by wire transfer of immediately available funds to the accounts
specified by them or by mailing checks to their registered addresses if no such
accounts have been specified on each dividend payment date provided in the
Certificate of Designations (whether or not any dividends is then payable on
the Series A Senior Preferred Stock) and on each payment date provided in the
Certificate of Designations, including, without limitation, whether upon
redemption, maturity (by acceleration or otherwise), purchase upon a change of
control or purchase upon a sale of assets. Each obligation to pay Liquidated
Damages with respect to any Registration Default shall be deemed to commence
accruing on the date of such Registration Default and to cease accruing when
such Registration Default has been cured. In no event shall the Company pay
Liquidated Damages in excess of the applicable maximum weekly amount set forth
above, regardless of whether one or multiple Registration Defaults exist.
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<PAGE> 11
(c) The parties hereto agree that the Liquidated Damages provided for
in this Section 4 constitute a reasonable estimate of the damages that will be
suffered by Holders by reason of the failure to file the Exchange Offer
Registration Statement or the Shelf Registration Statement, the failure of the
Exchange Offer Registration Statement or the Shelf Registration Statement to be
declared effective, the failure to consummate the Exchange Offer or the failure
of the Shelf Registration Statement to remain effective, as the case may be, in
accordance with this Agreement.
5. Registration Procedures
In connection with the registration of any Exchange Senior Preferred
Stock or Transfer Restricted Securities pursuant to Sections 2 or 3 hereof, the
Company shall effect such registration to permit the sale of such Exchange
Senior Preferred Stock or Transfer Restricted Securities (as applicable) in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Company shall:
(a) Prepare and file with the SEC, a Registration Statement or
Registration Statements as prescribed by Section 2 or Section 3 hereof, and to
use its reasonable best efforts to cause such Registration Statement to become
effective and remain effective as provided herein; provided that if (1) such
filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in an
Exchange Offer Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Senior Preferred Stock during the
Applicable Period, before filing any Registration Statement or Prospectus or
any amendments or supplements thereto, the Company shall furnish to and afford
the Holders of the Transfer Restricted Securities and each such Participating
Broker-Dealer, as the case may be, covered by such Registration Statement,
their counsel and the managing underwriters, if any, a reasonable opportunity
to review copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to be
filed. Such documents shall be so furnished at least 3 business days prior to
such filing, or such later date as is reasonable under the circumstances. The
Company shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto in respect of which the Holders, pursuant to
this Agreement, must be afforded an opportunity to review prior to the filing
of such document, if the Holders of a majority in aggregate liquidation
preference of the Transfer Restricted Securities covered by such Registration
Statement, or such Participating Broker-Dealer, as the case may be, their
counsel, or the managing underwriters, if any, shall reasonably object within a
reasonable time after receipt of any such materials.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer Registration
Statement, as the case may be, as may be necessary to keep such Registration
Statement continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be, or such shorter period as will terminate when all
Transfer Restricted Securities covered by such
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<PAGE> 12
Registration Statement have been sold; cause the related Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 (or any similar provisions then in force) under
the Securities Act; and comply with the applicable provisions of the Securities
Act, the Exchange Act and the rules and regulations of the SEC promulgated
thereunder with respect to the disposition of all securities covered by such
Registration Statement, as so amended, or in such Prospectus, as so
supplemented, and with respect to the subsequent resale of any Exchange Senior
Preferred Stock being sold by a Participating Broker-Dealer covered by any such
Prospectus; the Company shall be deemed not to have used its reasonable best
efforts to keep a Registration Statement effective during the Applicable Period
or the Effectiveness Period, as the case may be, if it voluntarily takes any
action that would result in selling Holders of the Transfer Restricted
Securities covered thereby or Participating Broker-Dealers seeking to sell
Exchange Senior Preferred Stock not being able to sell such Transfer Restricted
Securities or such Exchange Senior Preferred Stock during such Period, unless
(i) such action is required by applicable law, or (ii) such action is taken by
the Company in good faith and for valid business reasons (not including
avoidance of its obligations hereunder), including, but not limited to,
suspension of the Registration Statement or other actions taken solely in
connection with or in anticipation of the acquisition or divestiture of assets,
material financings or other transactions effected in good faith for valid
business reasons.
(c) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Senior Preferred Stock during the Applicable Period, notify
the selling Holders of Transfer Restricted Securities, or each known
Participating Broker-Dealer, as the case may be, their counsel (if previously
identified to the Company in writing) and the managing underwriters, if any, as
promptly as practicable and, if requested, confirm such notice in writing, (i)
when a Prospectus, any Prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective (including in any such written
notice a statement that any Holder may, upon request, obtain, without charge,
one conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or deemed
to be incorporated by reference and exhibits), (ii) of the issuance by the SEC
of any stop order suspending the effectiveness of a Registration Statement or
of any order preventing or suspending the use of any Prospectus or the
initiation of any proceedings for that purpose, (iii) if at any time a
Prospectus is required by the Securities Act to be delivered in connection with
sales of the Transfer Restricted Securities or resales of the Exchange Senior
Preferred Stock the representations and warranties of the Company contained in
any agreement (including any underwriting agreement) contemplated by Section
5(1) hereof cease to be true and correct in all material respects, (iv) of the
receipt by the Company of any notification with respect to the suspension of
the qualification or exemption from qualification of a Registration Statement
or any of the Transfer Restricted Securities or the Exchange Senior
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<PAGE> 13
Preferred Stock to be sold by any Participating Broker-Dealer for offer or
sale in any jurisdiction, or the initiation of any proceeding for such purpose,
(v) of the happening of any material event or any material information becoming
known that makes any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in such Registration Statement, Prospectus or documents so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and that in
the case of the Prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and (vi) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate.
(d) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Senior Preferred Stock during the Applicable Period, use its
reasonable best efforts to prevent the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of a Prospectus and, if any such order is issued, to use its
reasonable best efforts to obtain the withdrawal of any such order at the
earliest possible moment.
(e) If a Shelf Registration Statement is filed pursuant to Section 3
hereof and if requested by the managing underwriters, if any, or the Holders of
a majority in aggregate liquidation preference of the Transfer Restricted
Securities being sold in connection with an underwritten offering, (i) as
promptly as practicable incorporate in a prospectus supplement or
post-effective amendment such information relating to underwriters, if any, any
Holder of Transfer Restricted Securities or the plan of distribution of the
Transfer Restricted Securities as the managing underwriter, if any, or such
Holders may reasonably request to be included therein, (ii) make all required
filings of such prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment pursuant
to clause (i), and (iii) supplement or make amendments to such Registration
Statement with such information as is required in connection with any
reasonable request made pursuant to clause (i).
(f) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Senior Preferred Stock during the Applicable Period, furnish
to each selling Holder of Transfer Restricted Securities and to each such
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<PAGE> 14
Participating Broker-Dealer who so requests and to each managing underwriter,
if any, without charge, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto, including
financial statements and schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Senior Preferred Stock during the Applicable Period, deliver
to each selling Holder, or each such Participating Broker-Dealer, as the case
may be, its counsel (if previously identified to the Company in writing), and
the underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of preliminary Prospectus), and each
amendment or supplement thereto and any documents incorporated by reference
therein, as such Persons may reasonably request; and, subject to the last
paragraph of this Section 5 hereof, the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling
Holders or, during the Applicable Period, each such Participating
Broker-Dealer, as the case may be, and their underwriters or agents, if any,
and dealers, if any, in connection with the offering and sale of the Transfer
Restricted Securities covered by, or the sale by Participating Broker-Dealers
of the Exchange Senior Preferred Stock pursuant to, such Prospectus and any
amendment or supplement thereto.
(h) Prior to any public offering of Transfer Restricted Securities or
any delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange Senior
Preferred Stock during the Applicable Period, use its reasonable best efforts
to register or qualify and to cooperate with the selling Holders of Transfer
Restricted Securities or each such Participating Broker-Dealer, as the case may
be, the underwriters, if any, and their respective counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Transfer Restricted Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions as any selling Holder,
Participating Broker-Dealer, or the managing underwriters reasonably request in
writing; keep each such registration or qualification (or exemption therefrom),
effective during the period such Registration Statement is required to be kept
effective and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Exchange
Senior Preferred Stock held by Participating Broker-Dealers or the Transfer
Restricted Securities covered by the applicable Registration Statement;
provided that the Company shall not be required to (A) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it is not
then so qualified, (B) take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or (C)
subject itself to taxation in any such jurisdiction where it is not then so
subject.
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<PAGE> 15
(i) If a Shelf Registration Statement is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Transfer Restricted Securities
and the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to be
sold, which certificates shall not bear any restrictive legends and shall be in
a form eligible for deposit with The Depository Trust Company ("DTC"), and
enable such Transfer Restricted Securities to be in such denominations and
registered in such names as the managing underwriters, if any, or Holders may
reasonably request at least two business days prior to any sale of the Transfer
Restricted Securities.
(j) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Senior Preferred Stock during the Applicable Period, upon the
occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi) above,
as promptly as practicable prepare and (subject to Section 5(a) hereof) file
with the SEC, at the expense of the Company, a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, or file any other required document so that, as thereafter delivered
to the purchasers of the Transfer Restricted Securities being sold thereunder
or to the purchasers of the Exchange Senior Preferred Stock to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(k) Prior to the effective date of the first Registration Statement
relating to the Transfer Restricted Securities, (i) provide the Transfer Agent
with certificates for the Transfer Restricted Securities in a form eligible for
deposit with DTC and (ii) provide a CUSIP number for the Transfer Restricted
Securities.
(l) In connection with an underwritten offering of Transfer
Restricted Securities pursuant to a Shelf Registration Statement, enter into an
underwriting agreement as is customary in underwritten offerings and take all
other customary and appropriate actions as are reasonably requested by the
managing underwriters in order to expedite or facilitate the registration or
the disposition of such Transfer Restricted Securities, and in such connection,
(i) make such representations and warranties to the underwriters, with respect
to the business of the Company and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, as are customarily made by companies to underwriters in
underwritten offerings; (ii) obtain opinions of counsel to the Company and
updates thereof in form and substance reasonably satisfactory to the managing
underwriters, addressed to the underwriters covering the matters customarily
covered in opinions requested in underwritten offerings and such other matters
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<PAGE> 16
as may be reasonably requested by underwriters; (iii) obtain "cold comfort"
letters and updates thereof in form and substance reasonably satisfactory to
the managing underwriters from the independent certified public accountants of
the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired or
proposed to be acquired by its for which financial statements and financial
data are, or are required to be, included in the Registration Statement),
addressed to each of the underwriters, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings and such other matters as are reasonably
requested by underwriters as permitted by Statement on Auditing Standards No.
72; and (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable than those
set forth in Section 7 hereof (or such other reasonable provisions and
procedures acceptable to Holders of a majority in aggregate liquidation
preference of Transfer Restricted Securities covered by such Registration
Statement and the managing underwriters) with respect to all parties to be
indemnified pursuant to said Section. The above shall be done at each closing
under such underwriting agreement, or as and to the extent required thereunder.
(m) If (1) a Shelf Registration Statement is filed pursuant to
Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who seeks
to sell Exchange Senior Preferred Stock during the Applicable Period, make
available for inspection by any selling Holder of such Transfer Restricted
Securities being sold, or each such Participating Broker-Dealer, as the case
may be, any underwriter participating in any such disposition of Transfer
Restricted Securities, if any, and any attorney, accountant or other agent
retained by any such selling Holder or each such Participating Broker-Dealer,
as the case may be, or underwriter (collectively, the "Inspectors"), at the
offices where normally kept, during reasonable business hours, all financial
and other records, pertinent corporate documents and properties of the Company
and its subsidiaries (collectively, the "Records"), as shall be reasonably
necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and employees of the
Company and its subsidiaries to supply all relevant information reasonably
requested by any such Inspector in connection with such Registration Statement.
Records which the Company determines, in good faith, to be confidential and any
Records which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors, unless (i) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction or
(ii) the information in such Records has been made generally available to the
public, other than as a result of the disclosure or failure to safeguard by
such Inspector. No information obtained pursuant to this paragraph (m) shall
be used by any person or entity obtaining access thereto in connection with any
transactions in securities of the Company in violation of law. In addition,
notwithstanding anything to the contrary contained herein, the Company shall
not be required to provide any information to the Holders or the underwriters
that the Company is prohibited by law from disclosing.
-15-
<PAGE> 17
(n) If Transfer Restricted Securities refers to Exchange Debentures,
provide an indenture trustee for the Exchange Indenture and cause the Exchange
Indenture to be qualified under the TIA not later than the effective date of
the Exchange Offer or the first Registration Statement relating to the Transfer
Restricted Securities; and in connection therewith, cooperate with the trustee
under any such indenture and the Holders of the Transfer Restricted Securities,
to effect such changes to such indenture as may be required for such indenture
to be so qualified in accordance with the terms of the TIA; and execute, and
use its reasonable best efforts to cause such trustee to execute, all customary
documents as may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(o) Comply with all applicable rules and regulations of the SEC and,
as soon as reasonably practicable after the effective date of the applicable
Registration Statement, make generally available to the holders of Exchange
Senior Preferred Stock and the Holders, if any, a consolidated earning
statement of the Company (which need not be certified by an independent public
accountant) that satisfies the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder.
(p) If an Exchange Offer is to be consummated, upon delivery of the
Transfer Restricted Securities by Holders to the Company (or to such other
Person as directed by the Company), in exchange for the Exchange Senior
Preferred Stock, the Company shall, where appropriate, mark or cause to be
marked on such Transfer Restricted Securities that such Transfer Restricted
Securities are being cancelled in exchange for the Exchange Senior Preferred
Stock; in no event shall such Transfer Restricted Securities be marked as paid
or otherwise satisfied.
(q) Cooperate with each seller of Transfer Restricted Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Transfer Restricted Securities and
their respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. (the "NASD").
(r) Use its reasonable best efforts to take all other steps necessary
to effect the registration of the Transfer Restricted Securities covered by a
Registration Statement contemplated hereby.
The Company may require each seller of Transfer Restricted Securities
or Participating Broker-Dealer as to which any registration is being effected
to furnish to the Company such information regarding such seller or
Participating Broker-Dealer and the distribution of such Transfer Restricted
Securities or Exchange Senior Preferred Stock to be sold by such Participating
Broker-Dealer, as the case may be, as the Company may, from time to time,
reasonably request. The Company may exclude from such registration the
Transfer Restricted Securities or Exchange Senior Preferred Stock of any seller
or
-16-
<PAGE> 18
Participating Broker-Dealer, as the case may be, who fails to furnish such
information within a reasonable time (and in any event within ten business
days) after receiving such request. Each seller of Transfer Restricted
Securities as to which a Shelf Registration is being effected, and each
Participating Broker-Dealer utilizing a Prospectus from the Exchange Offer
Registration Statement, agrees to furnish reasonably promptly to the Company
all information required to be disclosed in order to make any information
previously furnished to the Company by such seller or Participating
Broker-Dealer not materially misleading. No such seller or Participating
Broker Dealer, as applicable, shall be entitled to Liquidated Damages pursuant
to Section 4 hereof if such person fails so to provide all such reasonably
requested information to the extent that any such failure by such person is the
primary reason for the assessment of Liquidated Damages.
Each Holder of Transfer Restricted Securities and each Participating
Broker-Dealer agrees by acquisition of such Transfer Restricted Securities or
Exchange Senior Preferred Stock to be sold by such Participating Broker-Dealer,
as the case may be, that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv),
5(c)(v) or 5(c)(vi) hereof, such Holder shall forthwith discontinue disposition
of such Transfer Restricted Securities covered by such Registration Statement
or Prospectus or such Exchange Senior Preferred Stock to be sold by such
Participating Broker-Dealer, as the case may be, until such Holder's or
Participating Broker-Dealer's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 5(j) hereof, or until it is advised
in writing by the Company that the use of the applicable Prospectus may be
resumed, and has received copies of any amendments or supplements thereto. In
the event the Company gives any such notice, and subsequently delivers to each
Holder or Participating Broker-Dealer copies of such supplemented or amended
Prospectus, then each Holder or Participating Broker-Dealer will either destroy
or return to the Company all copies (other than permanent file copies then in
such Holder's or Participating Broker-Dealer's possession) of any Prospectus
that, as a result of such occurrence leading to such notice, is no longer
accurate.
6. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company,
whether or not the Exchange Offer or a Shelf Registration Statement is filed or
becomes effective, including, without limitation, (i) all registration and
filing fees (including, without limitation, (A) fees with respect to filings
required to be made with the NASD in connection with an underwritten offering
and (B) fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, reasonable fees and disbursements of counsel in
connection with Blue Sky qualifications of the Transfer Restricted Securities
or Exchange Senior Preferred Stock), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Transfer Restricted
Securities or Exchange Senior Preferred Stock in a form eligible for deposit
with DTC and of printing Prospectuses if the printing of
-17-
<PAGE> 19
Prospectuses is requested by the managing underwriters, if any, or, in
respect of Transfer Restricted Securities or Exchange Senior Preferred Stock to
be sold by any Participating Broker-Dealer during the Applicable Period, by the
Holders of a majority in aggregate liquidation preference of the Transfer
Restricted Securities included in any Registration Statement or of such
Exchange Senior Preferred Stock, as the case may be), (iii) fees and
disbursements of counsel for the Company, (iv) fees and disbursements of all
independent certified public accountants referred to in Section 5(i)(iii)
hereof (including, without limitation, the expenses of any special audit and
"cold comfort" letters required by or incident to such performance), (v) the
fees and expenses of any "qualified independent underwriter" or other
independent appraiser participating in an offering pursuant to Section 3 of
Schedule E to the By-laws of the NASD, (vi) rating agency fees, (vii) fees and
expenses of all other Persons retained by the Company, (viii) internal expenses
of the Company (including, without limitation, all salaries and expenses of
officers and employees of the Company performing legal or accounting duties),
(ix) the expense of any required financial audits and (x) the fees and expenses
incurred in connection with the listing of the securities to be registered on
any securities exchange. Nothing contained in this Section 6 shall create an
obligation on the part of the Company to pay or reimburse any Holder for any
underwriting commission or discount attributable to any such Holder's Transfer
Restricted Securities included in an underwritten offering pursuant to a
Registration Statement filed in accordance with the terms of this Agreement, or
to guarantee such Holder any profit or proceeds from the sale of such Series A
Senior Preferred Stock.
(b) In connection with any Shelf Registration Statement hereunder,
the Company shall reimburse the Holders of the Transfer Restricted Securities
being registered in such registration for the reasonable fees and disbursements
of not more than one firm of attorneys chosen by the Holders of a majority in
aggregate liquidation preference of the Transfer Restricted Securities to be
included in such Registration Statement.
-18-
<PAGE> 20
7. Indemnification
The Company agrees to indemnify and hold harmless (i) the Initial
Purchaser, each Holder of Transfer Restricted Securities, each Holder of
Exchange Senior Preferred Stock and each Participating Broker-Dealer, (ii) each
person, if any, who controls (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) any such Person (any of the
persons referred to in this clause (ii) being hereinafter referred to as a
"controlling person"), and (iii) the respective officers, directors, partners,
employees, representatives and agents of any of such Person or any controlling
person (any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an "Indemnified Person") to the fullest extent lawful, from and
against any and all losses, claims, damages, liabilities, judgments, actions
and reasonable expenses (including, without limitation, and as incurred,
reimbursement of all reasonable costs of investigating, preparing, pursuing or
defending any claim or action or any investigation or proceeding by any
governmental agency or body, commenced or threatened, including the reasonable
fees and expenses of counsel to any Indemnified Person) caused by, related to,
based upon, arising out of or in connection with any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary Prospectus,
or caused by, arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by (i) any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with information relating to any Indemnified Person furnished to the Company or
any underwriter in writing by such Indemnified Person expressly for use
therein, or (ii) any untrue statement contained in or omission from a
preliminary Prospectus or Prospectus, as applicable, if a copy of the
Prospectus (as then amended or supplemented, if the Company shall have
furnished to or on behalf of the Holder participating in the distribution
relating to the relevant Registration Statement any amendments or supplements
thereto) was not sent or given by or on behalf of such Holder to the person
asserting any such losses, liabilities, claims, damages or expenses who
purchased Series A Senior Preferred Stock, if such is required by law at or
prior to the written confirmation of the sale of such Series A Senior Preferred
Stock to such person and the untrue statement contained in or omission from
such preliminary Prospectus or Prospectus, as applicable, was corrected in the
Prospectus (as then amended or supplemented). The Company shall notify the
Holders promptly upon becoming aware thereof of the institution, threat or
assertion of any claim, proceeding (including any governmental investigation)
or litigation of which it shall have become aware in connection with the
matters addressed by this Agreement which involves the Company or an
Indemnified Person.
In connection with any Registration Statement in which a Holder of
Transfer Restricted Securities is participating, such Holder of Transfer
Restricted Securities agrees, severally and not jointly, to indemnify and hold
harmless the Company and its directors,
-19-
<PAGE> 21
officers, partners, employees, representatives and agents and each person
who controls the Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company to each Indemnified Person, but only with reference to
information relating to such Indemnified Person and furnished to the Company in
writing by such Indemnified Person expressly for use in any Registration
Statement or Prospectus, any amendment or supplement thereto, or any
preliminary Prospectus. The liability of any Indemnified Person pursuant to
this paragraph shall in no event exceed the proceeds (net of reasonable
commissions) received by such Indemnified Person from sales of Transfer
Restricted Securities or Exchange Senior Preferred Stock giving rise to such
obligations.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of
the two preceding paragraphs, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying person") in writing, (provided that the failure to give such
notice shall not relieve the indemnifying person of its obligations under this
Section 7 unless and only to the extent that the indemnifying person is
materially prejudiced by the failure to notify) and the indemnifying person,
upon request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified party and
any others indemnifying person may reasonably designate in such proceeding and
shall pay the reasonable fees and expenses actually incurred by such counsel
related to such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such indemnified party, unless (i) the
indemnifying person and the indemnified party shall have mutually agreed in
writing to the contrary, (ii) the indemnifying person shall have failed
promptly to assume the defense and employ counsel reasonably satisfactory to
the indemnified party or (iii) the named parties to any such action (including
any impleaded parties) include both such indemnified party and the indemnifying
person, or any affiliate of the indemnifying person and such indemnified party
shall have reasonably advised by counsel that representation of such
indemnified party and any such indemnifying party by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or
not such representation by the same counsel has been proposed) due to actual or
potential differing interests between them (in which case the indemnifying
person shall not have the right to assume the defense of such action on behalf
of such indemnified party), it being understood, however, that the indemnifying
person shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) for all such indemnified parties, which firm shall be
reasonably satisfactory to the indemnifying parties. Such separate firm for
sellers of Transfer Restricted Securities shall be designated in writing by
those indemnified parties who sold a majority in outstanding aggregate
liquidation preference of Transfer Restricted Securities sold by all
-20-
<PAGE> 22
such indemnified parties, and any such separate firm for the Company, its
directors, its officers and such control persons of the Company shall be
designated in writing by the Company. The indemnifying person shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying person agrees to indemnify any indemnified
party from and against any loss or liability by reason of such settlement or
judgment to the extent of such indemnifying party's indemnification obligation
hereunder. No indemnifying person shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
If the indemnification provided for in the first and second paragraphs
of this Section 7 is unavailable to an indemnified party in respect of any
losses, claims, damages, liabilities, or expenses referred to therein (other
than by reason of the exceptions provided therein), then each indemnifying
person under such paragraphs, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities, or expenses (i)
in such proportion as is appropriate to reflect the relative benefits received
by the indemnified party on the one hand and the indemnifying person(s) on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities, or expenses or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative faults of the indemnifying
person(s) and the indemnified party, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand an any
Indemnified Persons on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by such Indemnified Persons and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The parties agrees that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if such indemnified parties were treated as one entity for such purpose
or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, in no
event shall an Indemnified Person be required to contribute any amount in
excess of the amount by which proceeds received by such Indemnified Person
-21-
<PAGE> 23
from sales of Transfer Restricted Securities or Exchange Senior Preferred
Stock exceeds the amount of any damages that such Indemnified Person has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability which the indemnifying parties may
otherwise have to the indemnified parties referred to above. The Indemnified
Persons' obligations to contribute pursuant to this Section 7 are several in
proportion to the respective liquidation preference of Series A Senior
Preferred Stock sold by each of the Indemnified Persons hereunder and not
joint.
8. Rules 144 and 144A
The Company covenants that it will file the reports required to be
filed by it pursuant to the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder in a timely manner and, if at any
time the Company is not required to file such reports, it will, upon the
reasonable request of any Holder of Transfer Restricted Securities, make
available information required by Rule 144 and Rule 144A under the Securities
Act in order to permit sales pursuant to Rule 144 and Rule 144A. The Company
further covenants that it will take such further action as any Holder of
Transfer Restricted Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Transfer Restricted
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144 and Rule 144A, or (b) any similar
rule or regulation hereafter adopted by the SEC (it being expressly understood
that the foregoing shall not create any obligation on the part of the Company
to file periodic or other reports under the Exchange Act at any time that it is
not otherwise required to file such reports pursuant to the Exchange Act).
9. Underwritten Registrations
(a) If any of the Transfer Restricted Securities covered by any Shelf
Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the Holders of a majority in aggregate
liquidation preference of such Transfer Restricted Securities included in such
offering and shall be reasonably acceptable to the Company.
No Holder of Transfer Restricted Securities 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
-22-
<PAGE> 24
approved by the Persons entitled hereunder to approve such arrangements
and (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements.
(b) Each Holder of Transfer Restricted Securities agrees, if
requested (pursuant to a timely written notice) by the managing underwriters in
an underwritten offering or by a placement agent in a private offering of the
Company's equity securities, not to effect any private sale or distribution
(including a sale pursuant to Rule 144(k) or Rule 144A under the Securities
Act, but excluding non-public sales to any of its affiliates, officers,
directors, employees and controlling persons), of any of the Series A Senior
Preferred Stock, except pursuant to an Exchange Offer, during the period
beginning 10 days prior to, and ending 90 days after, the closing date of the
underwritten or private offering, as applicable.
The foregoing provisions shall not apply to any Holder of Transfer
Restricted Securities if such Holder is prevented by applicable statute or
regulation from entering into any such agreement; provided, however, that if it
receives a written request as provided in the preceding paragraph, no such
Holder shall effect any disposition of Series A Senior Preferred Stock that
would otherwise be restricted by the provisions of the preceding paragraph
without providing reasonable advance written notice of such disposition to the
Company, the managing underwriter or the placement agent, as the case may be.
The Company agrees, without the written consent of the managing
underwriters in an underwritten offering of Transfer Restricted Securities
covered by a Registration Statement filed pursuant to Section 3 hereof, not to
effect any public or private sale or distribution of its respective equity
securities, including a sale pursuant to Regulation D or Rule 144A under the
Securities Act, during the period beginning 10 days prior to, and ending 90
days after, the closing date of each underwritten offering made pursuant to
such Registration Statement (provided, however, that such period shall be
extended by the number of days from and including the date of the giving of any
notice pursuant to Section 5(c)(v) or (c)(vi) hereof to and including the date
when each seller of Transfer Restricted Securities covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 5(j) hereof).
10. Miscellaneous
(a) No Inconsistent Agreements. The Company has not, as of the date
hereof, and the Company shall not, after the date of this Agreement, enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Transfer Restricted Securities in this
Agreement or otherwise conflicts with the provisions hereof. The Company will
not enter into any agreement with respect to any of its securities which will
grant to any Person piggy-back registration rights with respect to a
Registration Statement.
-23-
<PAGE> 25
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given, unless the Company has obtained the written consent of
Holders of at least a majority of the then outstanding aggregate liquidation
preference of Transfer Restricted Securities. Notwithstanding the foregoing, a
waiver or consent to or departures from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders whose securities are
being sold pursuant to a Registration Statement and that does not directly or
indirectly affect, impair, limit or compromise the rights of other Holders may
be given by Holders of at least a majority in aggregate liquidation preference
of the Transfer Restricted Securities being sold by such Holders pursuant to
such Registration Statement; provided that the provisions of this sentence may
not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(c) Notices. All notices and other communications (including, without
limitation, any notices or other communications to the Transfer Agent),
provided for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Transfer Restricted Securities, at the most
current address given by the Transfer Agent to the Company;
(ii) if to the Company, Liberty Group Publishing, Inc., 3000 Dundee
Road, Northbrook, Illinois 60062, Attention: Kenneth L. Serota, President,
with a copy to Leonard Green & Partners, L.P., 11111 Santa Monica
Boulevard, Suite 2000, Los Angeles, California 90025, Attention: Peter J.
Nolan, and with a copy to Mayer, Brown & Platt, 190 South La Salle Street,
Chicago, Illinois 60603, Attention: Scott J. Davis, Esq.; and
(iii) if to the Initial Purchaser, Donaldson, Lufkin & Jenrette
Securities Corporation, 277 Park Avenue, New York, New York 10172,
Attention: Syndicate Department, with a copy to Sullivan & Cromwell, 444
South Flower Street, Los Angeles, California 90071-2901, Attention: Alison
S. Ressler, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a nationally recognized next-day air courier,
if made by next-day air courier; and when receipt is acknowledged by the
addressee, if telecopied on a business day on such business day, if not on a
business day, on the first business day thereafter.
-24-
<PAGE> 26
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Transfer Agent
under the Certificate of Designations at the address specified in such
Certificate of Designations.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, including, without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities. The Company
agrees that the Holders of the Series A Senior Preferred Stock shall be
third-party creditor beneficiaries to the agreements made hereunder by the
Initial Purchaser and the Company, and each Holder shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights hereunder.
(e) 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.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW.
(h) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their reasonable best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties hereto that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
(i) Entire Agreement. This Agreement, together with the Purchase
Agreement, the Certificate of Designations and the Exchange Indenture, is
intended by the parties hereto as a final expression of their agreement, and is
intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect to the subject matter contained
herein and therein. Any and all prior oral or written
-25-
<PAGE> 27
agreements, representations, warranties, contracts, understandings,
correspondence, conversations and memoranda between the Initial Purchaser, on
the one hand, and the Company, on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof are merged
herein and replaced hereby.
(j) Series A Senior Preferred Stock Held by the Company or its
Affiliates. Whenever the consent or approval of Holders of a specified
percentage of Transfer Restricted Securities is required hereunder, Transfer
Restricted Securities held by the Company or its affiliates (as such term is
defined in Rule 405 under the Securities Act) (other than the Initial Purchaser
or subsequent Holders of Transfer Restricted Securities or Exchange Senior
Preferred Stock if such subsequent Holders are deemed to be affiliates solely
by reason of their holdings of such Transfer Restricted Securities or Exchange
Senior Preferred Stock), shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
(k) Survival. This Agreement is intended to survive the consummation
of the transactions contemplated by the Purchase Agreement. The indemnification
and contribution obligations under section 7 of this Agreement shall survive
the termination of the Company's obligations under sections 2 and 3 of this
Agreement.
-26-
<PAGE> 28
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
LIBERTY GROUP PUBLISHING, INC.
By: /s/ Kenneth L. Serota
------------------------------
Name: Kenneth L. Serota
Title: President and Chief Executive Officer
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first
above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Donald S. Kinsey
------------------------------
Name: Donald S. Kinsey
Title: Senior Vice President
-27-
<PAGE> 1
EXHIBIT 12.1
PRETAX EARNINGS + FIXED CHANGES (INTEREST + 1/3 RENT EXPENSES)
--------------------------------------------------------------
FIXED CHARGES
Calculation Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
Pretax earnings 1,853 4,016 4,971 9,141 12,218
1/3 Rent expense 50 53 49 47 39
Interest expense 10,711 10,991 11,195 10,968 10,551
------------------------------------------------
total 12,614 15,060 16,215 20,156 22,808
Interest expense 10,711 10,991 11,195 10,968 10,551
1/3 Rent expense 50 53 49 47 39
------------------------------------------------
total 10,761 11,044 11,244 11,015 10,590
ratio 1.2 1.4 1.4 1.8 2.2
</TABLE>
<PAGE> 1
EXHIBIT 21.1
<TABLE>
<CAPTION>
STATES IN WHICH NAMES UNDER WHICH
SUBSIDIARY BUSINESS CONDUCTED BUSINESS CONDUCTED
- ---------- ------------------ ------------------
<S> <C> <C>
Liberty Group Operating, Inc. Delaware Liberty Group Operating, Inc.
Liberty Group Arkansas Holdings, Inc. Delaware Liberty Group Arkansas Holdings, Inc.
Arkansas The Sun Times
The Daily World
Daily World "TMC"
Newport Daily Independent
Newport Daily Independent "TMC"
Stuttgart Daily Leader
The Stuttgart Daily "TMC"
Liberty Group Arizona Holdings, Inc. Delaware Liberty Group Arizona Holdings, Inc.
Arizona Arizona Silver Belt
Gila County Advantage
Moccasin
Liberty Group California Holdings, Inc. Delaware Liberty Group California Holdings, Inc.
California LGP California Holdings, Inc.
Dunsmuir News
Mount Shasta Herald
Supersaver Advertiser
Voice of the Mountain
Weed Press
Daily Midway Driller
Siskiyou Daily News
Siskiyou Daily News "Extra"
Liberty Group Illinois Holdings, Inc. Delaware Liberty Group Illinois Holdings, Inc.
Illinois Albion Journal Register
Prairie Post
Benton Evening News
The Benton Standard
Franklin Press
Daily Ledger
Little Giant Advertiser
The Carmi Times
The Weekly Times
White County Shopper News
Chester Herald Tribune
Monday Herald
Christopher Progress
The Ashley News
DuQuoin Evening Call
Perry County Extra
The Blade
Ccap Special
Daily Advocate Press
Money Stretcher
Pennysaver Press
Eldorado Daily Journal
Harrisburg Daily Register
The Spokesman
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
The Spokesman Sunday
Marion Daily Republican
Marion Daily Extra
Daily Review Atlas
Oquawka Current
Pennysaver
American Monday
Murphysboro American
Norris City Banner
Jasper County News Eagle
Advantage
The Olney Daily Mail
The Weekly Mail
Daily Leader
Home Times
Livingston Shopping News
Gallatin Democrat
Ridgway News
Daily American
Trader
Liberty Group Iowa Holdings, Inc. Delaware Liberty Group Iowa Holdings, Inc.
Iowa Charles City Press
The Extra
Six County Shopper
Liberty Group Kansas Holdings, Inc. Delaware Liberty Group Kansas Holdings, Inc.
Kansas The Atchison Daily Globe
Globe Extra
Augusta Advertiser
Augusta Daily Gazette
Daily Reporter
The Record
The Weekly Shopper
The Wichita Journal
The El Dorado Times
El Dorado Times Weekly
Shoppers Guide
The Leavenworth Times
River Bend Journal
McPherson Sentinel
The Sentinel Ad-Viser
Liberty Group Michigan Holdings, Inc. Delaware Liberty Group Michigan Holdings, Inc.
Michigan Cheboygan Daily Tribune
Shoppers Fair
Sentinel-Standard
Sentinel-Standard "TMC"
The Evening News
Tri County Buyers Guide
Liberty Group Minnesota Holdings, Inc. Delaware Liberty Group Minnesota Holdings, Inc.
Minnesota Crookston Daily Times
Crookston Valley Shopper
Liberty Group Missouri Holdings, Inc. Delaware Liberty Group Missouri Holdings, Inc.
Missouri Boonville Daily News
The Record
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Daily News Bulletin
Lake Sun Leader
The Carthage Press
The Carthage Press "TMC"
C.T. Extra
Constitution Tribune
Lake Stockton Shopper
Miller Press
The Vedette
Kirksville Crier
Kirksville Daily Express & News
The Market Place
Chronicle Herald
Macon Journal
Mid-South Trader
Marceline Press/Chariton Courier
Sho-Me Shopper
The Mexico Ledger
The Mexico Ledger "TMC"
Mark Twain Regional News
Monroe City News
Neosho Daily News
Neosho Daily News "Etc."
Vacation News
Rolla Daily News
Rolla Daily News "Plus"
Advertiser
St. James Leader Journal
The Daily Guide
Daily Guide Extra
Fort Wood Constitution
Liberty Group New York Holdings, Inc. Delaware Liberty Group New York Holdings, Inc.
New York Steuben Courier Advocate
Mohawk Valley Pennysaver
Hornell Canisteo Penn-E-Saver
Genesee County Express
Geneseeway Shopper
The Evening Telegram
Images
Evening Tribune
The Spectator (Sunday)
The Tribune Extra
The Evening Times
Times-Saver
Grand Island Record
Record Advertiser
Tonawanda News
Tonawanda News Extra
Chronicle Ad-Viser
The Chronicle-Express
Mountain Pennysaver
Saugerties Pennysaver
Saugerties Post Star
Allegany Co. Pennysaver
Wellsville Daily Reporter
Wellsville Daily "TMC"
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Liberty Group Pennsylvania Holdings, Inc. Delaware Liberty Group Pennsylvania Holdings, Inc.
Pennsylvania Corry Journal
Corry Journal "TMC"
The Independent Extra
The Wayne Independent
Kane Republican
Lewisburg Daily Journal
Milton Daily Standard
The Standard-Journal
Country Neighbors
The Punxsutawney Spirit
The (Punxsutawney) Spirit "TMC"
The Ridgway Record
Shop-Right
The Daily Press
The Daily Press "TMC"
The Evening Times
The Times Extra
Titusville Herald
Titusville Herald "TMC"
Warren County Guide
The Record Herald
Record Herald Shoppers Express
Liberty Group Management Services, Inc. Delaware Liberty Group Management Services, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS'
The Directors
Liberty Group Publishing, Inc.:
We consent to the use of our reports with respect to the balance sheet of
Liberty Group Publishing, Inc. as of November 30, 1997 and the combined
financial statements of The Local Newspaper Group of American Publishing
Company as of December 31, 1997 and 1996 and for each of the years in the
three-year period ended December 31, 1997, included herein, and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
February 24, 1998
<PAGE> 1
EXHIBIT-25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) __
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
LIBERTY GROUP PUBLISHING, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 36-4197635
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3000 DUNDEE ROAD, SUITE 203
NORTHBROOK, IL 60062
(Address of principal executive offices) (Zip Code)
14 3/4 % SUBORDINATED EXCHANGE DEBENTURES DUE 2010
(Title of indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance
Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the
trustee to commence business was necessary or issued is on file
with the Securities and Exchange Commission as Exhibit 2 to
Amendment No. 1 to the Statement of Eligibility and Qualification
of Trustee (Form T-1) filed with the Registration Statement of
Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by
reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by
reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file
with the Securities and Exchange Commission as Exhibit 4 to the
Statement of Eligibility and Qualification of Trustee (Form T-1)
filed with the Registration Statement of Eastern Edison Company
(File No. 33-37823) and is incorporated herein by reference thereto.
1
<PAGE> 3
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Hartford and The
State of Connecticut, on the 23RD OF FEBRUARY 1998
STATE STREET BANK AND TRUST COMPANY
By: /s/ Michael M. Hopkins
-----------------------------
NAME MICHAEL M. HOPKINS
TITLE VICE PRESIDENT
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by
LIBERTY GROUP PUBLISHING, INC. of its 14 3/4 % SUBORDINATED EXCHANGE DEBENTURES
DUE 2010, we hereby consent that reports of examination by Federal, State,
Territorial or District authorities may be furnished by such authorities to the
Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: ________________________________
NAME MICHAEL M. HOPKINS
TITLE VICE PRESIDENT
DATED: FEBRUARY 23, 1998
3
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business September 30, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
Cash and balances due from depository institutions:
<S> <C>
Noninterest-bearing balances and currency and coin ...................................... 1,380,475
Interest-bearing balances ............................................................. 8,821,855
Securities ....................................................................................... 10,461,989
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ..................................................... 6,085,138
Loans and lease financing receivables:
Loans and leases, net of unearned income ........................ 5,597,831
Allowance for loan and lease losses ............................. 79,416
Allocated transfer risk reserve ................................. 0
Loans and leases, net of unearned income and allowances ................................. 5,518,415
Assets held in trading accounts................................................................... 917,895
Premises and fixed assets ........................................................................ 390,028
Other real estate owned .......................................................................... 779
Investments in unconsolidated subsidiaries ...................................................... 34,278
Customers' liability to this bank on acceptances outstanding ..................................... 83,470
Intangible assets ................................................................................ 227,659
Other assets ..................................................................................... 1,969,514
Total assets ..................................................................................... 35,891,495
===========
LIABILITIES
Deposits:
In domestic offices..................................................................... 8,095,559
Noninterest-bearing ............................5,962,025
Interest-bearing ...............................2,133,534
In foreign offices and Edge subsidiary ................................................. 14,399,173
Noninterest-bearing ...............................86,798
Interest-bearing ..............................14,312,375
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary .................................................... 7,660,881
Demand notes issued to the U.S. Treasury and Trading Liabilities ................................. 1,107,552
Other borrowed money ............................................................................ 589,733
Subordinated notes and debentures .............................................................. 0
Bank's liability on acceptances executed and outstanding ....................................... 85,600
Other liabilities................................................................................. 1,830,593
Total liabilities ............................................................................... 33,769,091
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ................................................... 0
Common stock ..................................................................................... 29,931
Surplus .......................................................................................... 437,183
Undivided profits and capital reserves/Net unrealized holding gains (losses) ..................... 1,660,158
Cumulative foreign currency translation adjustments ............................................. (4,868)
Total equity capital ........................................................................... 2,122,404
-----------
Total liabilities and equity capital ............................................................ 35,891,495
</TABLE>
<PAGE> 6
4
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
<PAGE> 7
5
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter of the
obligor, the trustee has relied upon the information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer to Item 2. of this statement will be amended, if necessary,
to reflect any facts which differ from those stated and which would have been
required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation duly
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Hartford and The
State of Connecticut, on the 23RD OF FEBRUARY 1998
STATE STREET BANK AND TRUST COMPANY
By: _________________________________
NAME MICHAEL M. HOPKINS
TITLE VICE PRESIDENT
<PAGE> 8
2
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed
issuance by LIBERTY GROUP PUBLISHING, INC.
of its 14 3/4 % SUBORDINATED EXCHANGE DEBENTURES DUE 2010, we hereby consent
that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: ________________________________
NAME MICHAEL M. HOPKINS
TITLE VICE PRESIDENT
DATED: FEBRUARY 23, 1998
<PAGE> 1
EXHIBIT 25.2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) __
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
MASSACHUSETTS 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
LIBERTY GROUP PUBLISHING, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 36-4197635
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3000 DUNDEE ROAD, SUITE 203
NORTHBROOK, IL 60062
(Address of principal executive offices) (Zip Code)
11 5/8 % NEW SENIOR DISCOUNT DEBENTURES DUE 2009
(Title of indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with
the Securities and Exchange Commission as Exhibit 2 to
Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference
thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4
to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Eastern
Edison Company (File No. 33-37823) and is incorporated herein
by reference thereto.
1
<PAGE> 3
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Hartford and The
State of Connecticut, on the 23RD OF FEBRUARY 1998
STATE STREET BANK AND TRUST COMPANY
By: /s/ Michael M. Hopkins
--------------------------------------
NAME MICHAEL M. HOPKINS
TITLE VICE PRESIDENT
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by
LIBERTY GROUP PUBLISHING, INC.
of its 11 5/8 % NEW SENIOR DISCOUNT DEBENTURES DUE 2009, we hereby
consent that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By:
-------------------------------------
NAME MICHAEL M. HOPKINS
TITLE VICE PRESIDENT
DATED: FEBRUARY 23, 1998
3
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business September 30, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................. 1,380,475
Interest-bearing balances .......................................... 8,821,855
Securities .................................................................. 10,461,989
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ................................ 6,085,138
Loans and lease financing receivables:
Loans and leases, net of unearned income ............... 5,597,831
Allowance for loan and lease losses .................... 79,416
Allocated transfer risk reserve ........................ 0
Loans and leases, net of unearned income and allowances ............ 5,518,415
Assets held in trading accounts ............................................. 917,895
Premises and fixed assets ................................................... 390,028
Other real estate owned ..................................................... 779
Investments in unconsolidated subsidiaries .................................. 34,278
Customers liability to this bank on acceptances outstanding ................. 83,470
Intangible assets ........................................................... 227,659
Other assets ................................................................ 1,969,514
-----------
Total assets ................................................................ 35,891,495
===========
LIABILITIES
Deposits:
In domestic offices ................................................ 8,095,559
Noninterest-bearing ........................... 5,962,025
Interest-bearing .............................. 2,133,534
In foreign offices and Edge subsidiary ............................. 14,399,173
Noninterest-bearing ........................... 86,798
Interest-bearing ..............................14,312,375
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ................................ 7,660,881
Demand notes issued to the U.S. Treasury and Trading Liabilities ............ 1,107,552
Other borrowed money ........................................................ 589,733
Subordinated notes and debentures ........................................... 0
Bank's liability on acceptances executed and outstanding .................... 85,600
Other liabilities ........................................................... 1,830,593
Total liabilities ........................................................... 33,769,091
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ............................... 0
Common stock ................................................................ 29,931
Surplus ..................................................................... 437,183
Undivided profits and capital reserves/Net unrealized holding gains (losses). 1,660,158
Cumulative foreign currency translation adjustments ......................... (4,868)
Total equity capital ........................................................ 2,122,404
-----------
Total liabilities and equity capital ........................................ 35,891,495
</TABLE>
<PAGE> 6
4
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
<PAGE> 7
5
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter of the
obligor, the trustee has relied upon the information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer to Item 2. of this statement will be amended, if necessary,
to reflect any facts which differ from those stated and which would have been
required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation duly
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Hartford and The
State of Connecticut, on the 23RD OF FEBRUARY 1998
STATE STREET BANK AND TRUST COMPANY
By:
-------------------------------
NAME MICHAEL M. HOPKINS
TITLE VICE PRESIDENT
<PAGE> 8
2
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection
with the proposed issuance by LIBERTY GROUP PUBLISHING, INC.
of its 11 5/8 % NEW SENIOR DISCOUNT DEBENTURES DUE 2009, we hereby
consent that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By:
----------------------------------
NAME MICHAEL M. HOPKINS
TITLE VICE PRESIDENT
DATED: FEBRUARY 23, 1998
<PAGE> 1
Exhibit 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
14 3/4% SENIOR REDEEMABLE EXCHANGEABLE CUMULATIVE PREFERRED STOCK
AND
11 5/8% SENIOR DISCOUNT DEBENTURES DUE 2009
OF
LIBERTY GROUP PUBLISHING, INC.
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998,
UNLESS EXTENDED.
- --------------------------------------------------------------------------------
TO: , AS EXCHANGE AGENT FOR THE OLD SENIOR PREFERRED STOCK
By Registered or Certified Mail: By Overnight Courier:
By Hand: By Facsimile:
Attention:
Confirm by telephone:
TO: STATE STREET BANK AND TRUST COMPANY, AS EXCHANGE AGENT FOR THE OLD SENIOR
DISCOUNT DEBENTURES
By Mail (registered or certified By Hand or Overnight Courier:
mail recommended):
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Department, 4th Floor
P.O. Box 778 Two International Plaza
Boston, Massachusetts 02102-0078 Boston, Massachusetts 02110
By Facsimile:
(617) 664-5395
Attention: Sandra Szczsponik
Confirm by telephone: (617) 664-5587
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of
Transmittal is completed.
HOLDERS OF BOTH OLD SENIOR PREFERRED STOCK AND OLD SENIOR DISCOUNT
DEBENTURES (BOTH AS DEFINED BELOW) WILL RECEIVE TWO (2) LETTERS OF TRANSMITTAL
AND MUST DELIVER ONE COMPLETED LETTER OF TRANSMITTAL DESCRIBING THE OLD SENIOR
PREFERRED STOCK TO BE TENDERED TO THE EXCHANGE AGENT FOR THE OLD SENIOR
PREFERRED STOCK AND ONE COMPLETED LETTER OF TRANSMITTAL DESCRIBING THE OLD
SENIOR DISCOUNT DEBENTURES TO THE EXCHANGE AGENT FOR THE OLD SENIOR DISCOUNT
DEBENTURES. SEE INSTRUCTION 1 REGARDING THE COMPLETION OF THIS LETTER OF
TRANSMITTAL PRINTED BELOW.
The undersigned acknowledges that he or she has received the Prospectus
dated , 1998 (the "Prospectus") of Liberty Group Publishing, Inc.
(the "Company") and this Letter of Transmittal (the "Letter of Transmittal"),
which together constitute the Company's offer (the "Exchange Offer") to
exchange one share of its 14 3/4% New Senior Redeemable Exchangeable Cumulative
Preferred Stock (the "New Senior Preferred Stock") and $1,000 principal amount
of its 11 5/8% New Senior Discount Debentures due 2009 (the "New Senior Discount
Debentures" and, together with the New Senior Preferred Stock, the "New
Securities"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement of which
the Prospectus is a part, for each share of its outstanding 14 3/4% Senior
Redeemable Exchangeable Cumulative Preferred Stock and $1,000 principal amount
of its outstanding 11 5/8% Senior Discount Debentures due 2009 (the "Old Senior
Discount Debentures" and, together with the Old Senior Preferred Stock, the
"Old Securities"). The rights and preferences of the New Senior Preferred
Stock and the form and terms of the New Senior Discount Debentures are the
same as the rights and preferences of
<PAGE> 2
the Old Senior Preferred Stock and the form and terms of the Old Senior
Discount Debentures, respectively, except that the New Securities have
been registered under the Securities Act and hence will not bear legends
restricting the transfer thereof. The term "Expiration Date" shall mean 5:00
p.m., New York City time, on , 1998, unless the Company,
in its sole discretion, extends the Exchange Offer, in which case the term
shall mean the latest date and time to which the Exchange Offer is extended.
Capitalized terms used but not defined herein have the meaning given to them in
the Prospectus.
The Letter of Transmittal is to be used by Holders of Old Securities (i)
if certificates representing the Old Securities are to be physically delivered
herewith; or (ii) if tender of the Old Securities is to be made by book-entry
transfer to the Exchange Agent's account at the Depository Trust Company
("DTC"), pursuant to the procedures set forth in the Prospectus under "The
Exchange Offer--Procedures for Tendering" by any financial institution that is
a participant in DTC and whose name appears on a security position listing as
the owner of Old Securities and instructions are not being transmitted through
the DTC Automated Tender Offer Program ("ATOP"), or (iii) if tender of the Old
Securities is to be made according to the guaranteed delivery procedures
described in the Prospectus under caption "The Exchange Offer--Guaranteed
Delivery Procedures."
Holders of Old Securities who are tendering by book-entry transfer to the
Exchange Agent's account at DTC can execute the tender through ATOP for which
the transaction will be eligible. DTC participants that are accepting the
Exchange Offer must transmit their acceptance to DTC, which will verify the
acceptance and execute a book-entry delivery of the Exchange Agent's account at
DTC. DTC will then send an Agent's Message to the Exchange Agent for its
acceptance. Deliver of the Agent's Message by DTC will satisfy the terms of
the Exchange Offer as to execution and delivery of this Letter of Transmittal
by the participant identified in the Agent's Message. The term "Agent's
Message" means a message, transmitted by DTC to and received by the Exchange
Agent and forming a part of a book-entry confirmation, which states that DTC
has received an express acknowledgment from the tendering participant, which
acknowledgment states that such participant has received and agrees to be bound
by the Letter of Transmittal and that the Company may enforce such Letter of
Transmittal against such participant.
Delivery of this Letter of Transmittal or other documents to DTC does not
constitute delivery to the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person (i)
in whose name Old Securities are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered Holder; or (ii) whose Old Securities are held of record by DTC who
desires to deliver such Old Securities by book-entry transfer at DTC. The
undersigned has completed, executed and delivered this Letter of Transmittal to
indicate the action the undersigned desires to take with respect to the
Exchange Offer. Holders who wish to tender their Old Securities must complete
this letter in its entirety.
<PAGE> 3
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOX
<TABLE>
<CAPTION>
<S><C>
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD SECURITIES
- ------------------------------------------------------------------------------------------------------------------------------------
Aggregate Principal Amount
Principal Tendered
Amount (must be in
Names and Address(es) of Registered Holder(s) Represented by Integral Multiples
(Please fill in, if blank)* Certificate Certificate(s) of $1,000)**
- ------------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
TOTAL
----------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," any tendering Holder of Old Securities will be deemed
to have tendered the entire aggregate principal amount represented by the column labeled "Aggregate Principal Amount
Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers and principal amounts on a separate signed schedule
and affix the list to this Letter of Transmittal.
The minimum permitted tender of Old Senior Preferred Stock is one share. The minimum permitted tender of Old Senior
Discount Debentures is $1,000 in principal amount. All other tenders of Old Senior Discount Debentures must be integral
multiples of $1,000.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------- -------------------------------------------------------------
SPECIAL REGISTRATION SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS (SEE INSTRUCTIONS 4, 5 AND 6)
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Old
To be completed ONLY if certificates for Old Securities in a Securities in a principal amount not tendered, or New
principal amount not tendered, or New Securities issued in exchange Securities issued in exchange for Old Securities
for Old Securities accepted for exchange, are to be issued in the accepted for exchange, are to be sent to someone
name of someone other than the undersigned, or if the Old Securities other than the undersigned, or to the undersigned at
tendered by book-entry transfer that are not accepted for exchange an address other than that shown above.
are to be credited to an account at DTC.
Deliver certificate(s) to:
Issue certificate(s) to:
Name
Name -------------------------------------------------------
------------------------------------------------------------ (Please Print)
(Please Print)
Address Address
--------------------------------------------------------- ----------------------------------------------------
(Include Zip Code) (Include Zip Code)
- ------------------------------------------------------------------- -------------------------------------------------------------
(Tax Identification or Social Security No.) (Tax Identification or Social Security No.)
</TABLE>
<PAGE> 4
REQUESTS FOR PROSPECTUSES
(SEE INSTRUCTION 10)
To be completed ONLY if you are a broker or dealer and are required under
Federal securities laws to deliver a Prospectus in connection with resales of
New Securities.
Deliver _________ Prospectuses to:
(Quantity)
Name of Firm
--------------------------------------------------------------------
(Please Print)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Attention
-----------------------------------------------------------------------
Telephone
-----------------------------------------------------------------------
Facsimile
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 5
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Old Securities indicated
above. Subject to and effective upon the acceptance for exchange of the
principal amount of Old Securities tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, the Company all right, title and interest in and to the Old Securities
tendered hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent its agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as the agent of the Company) with respect to the
tendered Old Securities with full power of substitution to (i) deliver
certificates for such Old Securities to the Company, or transfer ownership of
such Old Securities on the account books maintained by DTC, and deliver all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company and (ii) present such Old Securities for transfer on the books of
the Company and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Old Securities, all in accordance with the terms
of the Exchange Offer. The power of attorney granted in this paragraph shall
be deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, sell, assign and transfer the Old Securities
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim, when the same are acquired by the
Company. The undersigned hereby further represents that any New Securities
acquired in exchange for Old Securities tendered hereby will have been acquired
in the ordinary course of business of the person receiving such New Securities,
whether or not such person is the undersigned, that neither the Holder nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Securities and that neither the
Holder nor any such other person is an "affiliate," as defined in Rule 405
under the Securities Act, of the Company. If the undersigned is not a
broker-dealer, the undersigned represents that it is not engaged in, and does
not intend to engage in, a distribution of New Securities. If the undersigned
is a broker-dealer that will receive New Securities, it represents that the Old
Securities to be exchanged for New Securities were acquired as a result of
market-making activities or other trading activities and not acquired directly
from the Company, and it acknowledges that it will deliver a Prospectus in
connection with any resale of such New Securities; however, by so acknowledging
and by delivering a Prospectus the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Exchange Agent or the Company to be necessary or desirable to
complete the assignment, transfer and purchase of the Old Securities tendered
hereby.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Securities when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
If any tendered Old Securities are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Old
Securities will be returned, without expense, to the undersigned at the address
shown below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned understands that tenders of Old Securities pursuant to the
procedures described under the caption "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Registration Instructions,"
please issue the certificates representing the New Securities issued in
exchange for the Old Securities accepted for exchange and any certificates for
Old Securities not tendered or not exchanged, in the name(s) of the undersigned
(or in either such event in the case of Old Securities tendered by DTC, by
credit to the undersigned's account at DTC). Similarly, unless otherwise
indicated under "Special Delivery Instructions," please send the certificates
representing the New Securities issued in exchange for the Old Securities
accepted for exchange and any certificates for Old Securities not tendered or
not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below the undersigned's signature(s), unless, in either
event, tender is being made through DTC. In the event that both "Special
Registration Instructions" and "Special Delivery Instructions" are completed,
please issue the certificates representing the New Securities issued in
exchange for the Old Securities accepted for exchange in the name(s) of, and
return any certificates for Old Securities not tendered or not exchanged to,
the person(s) so indicated. The undersigned understands that the Company has
no obligation pursuant to the "Special Registration Instructions" and "Special
Delivery Instructions" to transfer any Old Securities from the name of the
registered Holder(s) thereof if the Company does not accept for exchange any of
the Old Securities so tendered.
Holders who wish to tender their Old Securities and (i) whose Old
Securities are not immediately available or (ii) who cannot deliver their Old
Securities, this Letter of Transmittal or any other documents required hereby
to the Exchange Agent, or cannot complete the procedure for book-entry
transfer, prior to the Expiration Date, may tender their Old Securities
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See
Instruction 1 regarding the completion of this Letter of Transmittal printed
below.
<PAGE> 6
<TABLE>
<CAPTION>
<S><C>
PLEASE SIGN HERE WHETHER OR NOT
OLD SECURITIES ARE BEING PHYSICALLY TENDERED HEREBY
X
- -------------------------------------------------------------------------- --------------------------------------------
Date
X
- -------------------------------------------------------------------------- --------------------------------------------
Signature(s) of Registered Holder(s) or Authorized Signatory Date
Area Code and Telephone Number:
-------------------------------------------
The above lines must be signed by the registered Holder(s) as their name(s) appear(s) on the Old Securities or, if the Old
Securities are tendered by a participant in DTC, as such participant's name appears on a security position listing as the owner of
the Old Securities, or by person(s) authorized to become registered Holder(s) by a properly completed bond power from the
registered Holder(s), a copy of which must be transmitted with this Letter of Transmittal. If Old Securities to which this
Letter of Transmittal relate are held of record by two or more joint Holders, then all such Holders must sign this Letter of
Transmittal. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, then such person must (i) set forth his or her full title below and (ii)
unless waived by the Company, submit evidence satisfactory to the Company of such person's authority so to act. See Instruction 4
regarding the completion of this Letter of Transmittal printed below.
Name(s):
---------------------------------------------------------------------------------------------------------------------------
(Please Print)
- ------------------------------------------------------------------------------------------------------------------------------------
Capacity:
---------------------------------------------------------------------------------------------------------------------------
Address:
----------------------------------------------------------------------------------------------------------------------------
(Include Zip Code)
- ------------------------------------------------------------------------------------------------------------------------------------
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 4)
------------------------------------------------------------------------------------------------------
(Authorized Signature)
------------------------------------------------------------------------------------------------------
(Title)
------------------------------------------------------------------------------------------------------
(Name of Firm)
Dated: , 1998
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD SECURITIES. The
tendered Old Securities (or a confirmation of a book-entry transfer into
the Exchange Agent's account at DTC of all Old Securities delivered
electronically), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof and any other documents required by
this Letter of Transmittal must be received by the Exchange Agent at its address
set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date.
The method of delivery of the tendered Old Securities, this Letter of
Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the Holder and, except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange Agent.
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
assure timely delivery. No Letter of Transmittal or Old Securities should be
sent to the Company.
HOLDERS OF BOTH OLD SENIOR PREFERRED STOCK AND OLD SENIOR DISCOUNT
DEBENTURES WILL RECEIVE TWO (2) LETTERS OF TRANSMITTAL AND MUST DELIVER ONE
COMPLETED LETTER OF TRANSMITTAL DESCRIBING THE OLD SENIOR PREFERRED STOCK TO BE
TENDERED TO THE EXCHANGE AGENT FOR THE OLD SENIOR PREFERRED STOCK AND ONE
COMPLETED LETTER OF TRANSMITTAL DESCRIBING THE OLD SENIOR DISCOUNT DEBENTURES
TO THE EXCHANGE AGENT FOR THE OLD SENIOR DISCOUNT DEBENTURES.
Holders who wish to tender their Old Securities and (i) whose Old
Securities are not immediately available, (ii) who cannot deliver their Old
Securities, (iii) who are ATOP members but who elect not to use ATOP, or (iv)
who are not ATOP members, this Letter of Transmittal or any other documents
required hereby to the Exchange Agent prior to the Expiration Date must tender
their Old Securities according to the guaranteed delivery procedures set forth
in the Prospectus. Pursuant to such procedure: (a) such tender must be made by
or through an Eligible Institution (as defined in Instruction 4); (b) prior to
the Expiration Date, the Exchange Agent must have received from 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 such Old
Securities and the principal amount of Old Securities tendered, stating that
the tender is being made thereby and guaranteeing that, within five New York
Stock Exchange trading days after the Expiration Date, this Letter of
Transmittal (or facsimile hereof) together with the certificate(s) representing
the Old Securities (or a confirmation of electronic delivery of book-entry
delivery into the Exchange Agent's account at DTC) and any other required
documents will be deposited by the Eligible Institution with the Exchange
Agent; and (c) such properly completed and executed Letter of Transmittal (or
facsimile hereof), as well as all other documents required by this Letter of
Transmittal and the certificate(s) representing all tendered Old Securities in
proper form for transfer (or a confirmation of electronic delivery of
book-entry delivery 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, all as provided in the Prospectus under the caption "The
Exchange Offer--Guaranteed Delivery Procedures" or such Holder must properly
complete and duly execute an ATOP ticket in accordance with DTC procedures. Any
Holder who wishes to tender his Old Securities pursuant to the guaranteed
delivery procedures described above must ensure that the Exchange Agent
receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York City
time, on the Expiration Date. Upon request to the Exchange Agent, a Notice of
Guaranteed Delivery will be sent to Holders who wish to tender their Old
Securities according to the guaranteed delivery procedures set forth above.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Securities, and withdrawal of tendered Old
Securities will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Securities not properly tendered or any Old
Securities the Company's acceptance of which would, in the opinion of counsel
for the Company, be unlawful. The Company also reserves the right to waive any
irregularities or conditions of tender as to particular Old Securities. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in this Letter of Transmittal) shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Securities must be cured within such time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Old Securities, nor shall any of them
incur any liability for failure to give such notification. Tenders of Old
Securities will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Securities received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders, unless otherwise provided in this Letter of
Transmittal as soon as practicable following the Expiration Date.
2. TENDER BY HOLDER. Only a Holder of Old Securities may tender such Old
Securities in the Exchange Offer. Any beneficial owner of Old Securities who
is not the registered Holder and who wishes to tender should arrange with such
Holder to execute and deliver this Letter of Transmittal on such owner's behalf
or must, prior to completing and executing this Letter of Transmittal and
delivering his or her Old Securities, either make appropriate arrangements to
register ownership of the Old Securities in such owner's name or obtain a
properly completed bond power from the registered Holder.
<PAGE> 8
3. PARTIAL TENDERS. The minimum permitted tender of Old Senior
Preferred Stock is one share. Tenders of Old Senior Discount Debentures
will be accepted only in integral multiples of $1,000. If less than the entire
principal amount of any Old Securities is tendered the tendering Holder should
fill in the principal amount tendered in the fourth column of the box entitled
"Description of Old Securities" above. The entire principal amount of any Old
Securities delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of all Old
Securities is not tendered, then Old Securities for the principal amount of Old
Securities not tendered and a certificate or certificates representing New
Securities issued in exchange for any Old Securities accepted will be sent to
the Holder at his or her registered address, unless a different address is
provided in the appropriate box on this Letter of Transmittal, promptly after
the Old Securities are accepted for exchange.
4. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or facsimile hereof)
is signed by the registered Holder(s) of the Old Securities tendered hereby,
the signature must correspond with the name(s) as written on the face of the
Old Securities or, if the Old Securities are tendered by a participant in DTC,
as such participant's name appears on a security position listing as the owner
of the Old Securities, without alteration, enlargement or any change
whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Old Securities tendered and the certificate or
certificates for New Securities issued in exchange therefor is to be issued (or
any untendered principal amount of Old Securities is to be reissued) to the
registered Holder, then such Holder need not and should not endorse any
tendered Old Securities, nor provide a separate bond power. In any other case,
such Holder must either properly endorse the Old Securities tendered or
transmit a properly completed separate bond power with this Letter of
Transmittal with the signatures on the endorsement or bond power guaranteed by
an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered Holder or Holders of any Old Securities listed, such
Old Securities must be endorsed or accompanied by appropriate bond powers in
each case signed as the name of the registered Holder or Holders appears on the
Old Securities.
If this Letter of Transmittal (or facsimile hereof) or any Old Securities
or bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Securities or signatures on bond powers required by
this Instruction 4 must be guaranteed by an Eligible Institution.
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a firm that 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 an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an
"Eligible Institution"). Signatures on this Letter of Transmittal need not be
guaranteed if (a) this Letter of Transmittal is signed by the registered
Holder(s) of the Old Securities tendered herewith and such Holder(s) have not
completed the box set forth herein entitled "Special Registration Instructions"
or the box entitled "Special Delivery Instructions" or (b) such Old Securities
are tendered of the account for an Eligible Institution.
5. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering Holders
should indicate, in the applicable box or boxes, the name and address to
which New Securities or substitute Old Securities for principal amounts not
tendered or not accepted for exchange are to be issued or sent, if different
from the name and address of the person signing this Letter of Transmittal (or
in the case of tender of Old Securities through DTC, if different from DTC). In
the case of issuance in a different name, the taxpayer identification or social
security number of the person named must also be indicated.
6. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Securities pursuant to the Exchange Offer.
If, however, certificates representing New Securities or Old Securities for
principal amounts not tendered or accepted for exchange are to be delivered to,
or are to be registered in the name of, any person other than the registered
Holder of the Old Securities tendered hereby, or if tendered Old Securities are
registered in the name of any person other than the person signing this Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Securities pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered Holder or on any
other persons) will be payable by the tendering Holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
this Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering Holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Securities listed in this Letter
of Transmittal.
<PAGE> 9
7. WAIVER OF CONDITIONS. The Company reserves the right, in its sole
discretion, to amend, waive or modify specified conditions in the Exchange
Offer in the case of any Old Securities tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED OLD SECURITIES. Any tendering
Holder whose Old Securities have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated herein for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal 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.
10. REQUESTS FOR PROSPECTUSES. Brokers and dealers that are required
under Federal securities laws to deliver a Prospectus in connection with
resales of New Securities should complete the applicable box to obtain copies
of the Prospectus and any amendments and supplements to the Prospectus to
enable them to comply with such prospectus delivery requirements. If you
require additional copies of the Prospectus or any amendments or supplements
thereto, please call of the Company.
(DO NOT WRITE IN SPACE BELOW)
<TABLE>
<CAPTION>
<S><C>
Certificate Old Securities Old Securities
Surrendered Tendered Accepted
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
Delivery Prepared by Checked By Date
-------------------- -------------- ---------------------
</TABLE>
<PAGE> 1
EXHIBIT 99.2
LIBERTY GROUP PUBLISHING, INC.
NOTICE OF GUARANTEED DELIVERY
OF
14 3/4% SENIOR REDEEMABLE EXCHANGEABLE CUMULATIVE PREFERRED STOCK
AND
11 5/8% SENIOR DISCOUNT DEBENTURES DUE 2009
As set forth in the Prospectus dated , 1998 (as the same may be amended
from time to time, the "Prospectus") of Liberty Group Publishing, Inc. (the
"Company") under the caption "The Exchange Offer--Guaranteed Delivery
Procedures," this form or one substantially equivalent hereto must be used to
accept the Company's offer (the "Exchange Offer") to exchange one share of its
14 3/4% New Senior Redeemable Exchangeable Cumulative Preferred Stock (the "New
Senior Preferred Stock") and $1,000 principal amount at maturity of its 11 5/8%
New Senior Discount Debentures due 2009 (the "New Senior Discount Debentures,"
and together with the New Senior Preferred Stock, the "New Securities"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), for each share of its outstanding 14 3/4% Senior Redeemable
Exchangeable Cumulative Preferred Stock (the "Old Senior Preferred Stock") and
$1,000 principal amount at maturity of its outstanding 11 5/8% Senior Discount
Debentures due 2009 (the "Old Senior Discount Debentures," and together with the
Old Senior Preferred Stock, the "Old Securities"), respectively, if (i)
certificates representing the Old Securities to be exchanged are not lost but
are not immediately available or (ii) time will not permit all required
documents to reach the Exchange Agent prior to the Expiration Date. This form
may be delivered by an Eligible Institution by mail or hand delivery or
transmitted, via facsimile, to the Exchange Agent at its address set forth below
not later than 5:00 p.m., New York City time, on , 1998. All capitalized terms
used herein but not defined herein shall have the meanings ascribed to them in
the Prospectus.
The Exchange Agent for the Old Senior Preferred Stock is:
By Registered or Certified Mail: By Overnight Courier:
By Facsimile:
By Hand: Attention:
Confirm by telephone:
The Exchange Agent for the Old Senior Discount Debentures is:
STATE STREET BANK AND TRUST COMPANY
By Mail (registered or certified By Hand or Overnight Courier:
mail recommended):
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Department, 4th Floor
P.O. Box 778 Two International Plaza
Boston, Massachusetts 02102-0078 Boston, Massachusetts 02110
By Facsimile:
(617) 664-5395
Attention: Sandra Szczsponik
Confirm by telephone: (617) 664-5587
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
HOLDERS OF BOTH OLD SENIOR PREFERRED STOCK AND OLD SENIOR DISCOUNT DEBENTURES
WILL RECEIVE TWO (2) NOTICES OF GUARANTEED DELIVERY AND MUST DELIVER ONE
COMPLETED NOTICE OF GUARNATEED DELIVERY IN CONNECTION WITH THE OLD SENIOR
PREFERRED STOCK TO BE TENDERED TO THE EXCHANGE AGENT FOR THE OLD SENIOR
PREFERRED STOCK AND ONE COMPLETED NOTICE OF GUARANTEED DELIVERY IN CONNECTION
WITH THE OLD SENIOR DISCOUNT DEBENTURES TO THE EXCHANGE AGENT FOR THE OLD SENIOR
DISCOUNT DEBENTURES.
Ladies and Gentlemen:
The undersigned hereby tender(s) for exchange to the Company, upon the
terms and subject to the conditions set forth in the Prospectus and Letter of
Transmittal, receipt of which is hereby acknowledged, the number or principal
amount of Old Securities, as the case may be, set forth below pursuant to the
guaranteed delivery procedures set forth in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures."
The undersigned understands and acknowledges that the Exchange Offer will
expire at 5:00 p.m., New York City time, on 1998, unless extended by the
Company. With respect to the Exchange Offer, "Expiration Date" means such time
and date, or if the Exchange Offer is extended, the latest time and date to
which the Exchange Offer is so extended by the Company.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
SIGNATURES
- ------------------------------------------------
Signature of Owner
- ------------------------------------------------
Signature of Owner (if more than one)
Dated: , 1998
Name(s):
----------------------------------------
(Please Print)
----------------------------------------
Address:
----------------------------------------
----------------------------------------
----------------------------------------
(Include Zip Code)
Area Code and
Telephone No.:
----------------------------------
Capacity (full title), if signing in a
representative capacity:
------------------------
Taxpayer Identification or
Social Security No.:
----------------------------
Number or Principal Amount of Old Securities
Exchanged:
--------------------------------------
Certificate Nos. of Old Securities (if available)
- ------------------------------------------------
- ------------------------------------------------
Total $
-----------------------------------------
IF OLD SECURITIES WILL BE DELIVERED BY
BOOK-ENTRY TRANSFER, PROVIDE THE
DEPOSITORY TRUST COMPANY ("DTC")
ACCOUNT NO.:
Account No.:
------------------------------------
2
<PAGE> 3
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national security exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or a correspondent in the United States,
hereby guarantees that (a) that the above named person(s) "own(s)" the Old
Securities tendered hereby within the meaning of Rule 10b-4 under the Securities
Exchange Act of 1934, (b) that such tender of Old Securities complies with Rule
10b-4 and (c) within five New York Stock Exchange trading days from the date of
this Notice of Guaranteed Delivery, certificates representing the Old Securities
tendered hereby, in proper form for transfer, or, in the case of a book-entry
transfer, confirmation of a book-entry transfer into the Exchange Agent's
account at DTC, together, in each case, with a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), will be delivered by
the undersigned to the Exchange Agent.
Name of Firm:
---------------------------------------
Address:
--------------------------------------------
- ----------------------------------------------------
Area Code and Telephone No.:
------------------------
- ----------------------------------------------------
Authorized Signature
Name:
-----------------------------------------------
Title:
----------------------------------------------
Date:
-----------------------------------------------
NOTE: DO NOT SEND OLD SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF OLD
SECURITIES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, THE LETTER OF
TRANSMITTAL.
3
