<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 26, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
Commission File Number: 0-24617
IDG BOOKS WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3078409
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
919 East Hillsdale Blvd., Suite 400, Foster City, California
94404 (Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (650) 655-3000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the issuer's Common Stock as of July 30,
1999 was 14,438,563.
This quarterly report on Form 10-Q contains a total of 17 pages, of which this
page is page 1.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
--------
<S> <C>
Item 1: Consolidated Financial Statements
Consolidated Balance Sheets
as of June 30, 1999 (Unaudited) and September 30, 1998...............3
Consolidated Statements of Income for the Three
and Nine Months Ended June 30, 1999 and 1998 (Unaudited).............4
Consolidated Statements of Cash Flows
for the Nine Months Ended June 30, 1999 and 1998 (Unaudited).........5
Notes to Consolidated Financial Statements.........................6-8
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations........................9-15
PART II. OTHER INFORMATION
Item 6: Exhibits........................................................16
Signatures......................................................17
</TABLE>
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<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
IDG BOOKS WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1999 SEPTEMBER 30, 1998
--------------- -------------------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash ........................................................... $ 751 $ 15,466
Accounts receivable - net ...................................... 42,915 27,477
Inventory - net ................................................ 14,481 10,367
Receivable from parent ......................................... -- 1,514
Other current assets ........................................... 1,552 903
Deferred tax assets ............................................ 21,073 18,144
-------- --------
Total current assets ........................................ 80,772 73,871
Royalty advances - net ......................................... 6,472 5,195
Property and equipment - net ................................... 5,183 5,605
Intangible assets - net ........................................ 19,050 3,583
Other assets ................................................... 2,031 --
-------- --------
Total Assets ............................................. $113,508 $ 88,254
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ............................................... $ 7,672 $ 5,885
Accrued liabilities ............................................ 42,716 35,779
Line of credit ................................................. 4,000 --
-------- --------
Total current liabilities ................................... 54,388 41,664
-------- --------
Stockholders' Equity:
Preferred stock, $.001 par value; authorized:
5,000,000 shares; issued and outstanding: 0 shares .......... -- --
Common stock, $.001 par value; authorized:
25,000,000 Class A shares and 400,000 Class B shares;
Issued and outstanding:
FY 1999 - 14,238,178 Class A and 200,000 Class B shares ...... 14
FY 1998 - 14,080,000 Class A and 200,000 Class B shares ...... 14
Additional paid-in capital ........................................ 46,197 44,029
Retained earnings ................................................. 12,909 2,547
-------- --------
Total stockholders' equity .................................. 59,120 46,590
-------- --------
Total Liabilities and Stockholders' Equity ............... $113,508 $ 88,254
======== ========
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE> 4
IDG BOOKS WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
Net Sales ................................ $ 39,896 $ 33,160 $119,149 $102,742
Licensing revenues and other ............. 1,586 1,133 4,324 3,466
-------- -------- -------- --------
Net revenue ........................ 41,482 34,293 123,473 106,208
-------- -------- -------- --------
Operating Costs and Expenses:
Cost of sales ............................ 20,680 17,832 60,850 55,688
Selling, general and administrative ...... 14,888 12,294 40,828 33,041
Depreciation and amortization ............ 1,303 875 3,772 2,542
-------- -------- -------- --------
Total operating costs and expenses.. 36,871 31,001 105,450 91,271
-------- -------- -------- --------
Operating Income ............................ 4,611 3,292 18,023 14,937
-------- -------- -------- --------
Interest Expense - net ................... 74 -- 92 --
-------- -------- -------- --------
Income Before Provision for Income Taxes .... 4,537 3,292 17,931 14,937
Provision for Income Taxes ............... 1,906 1,350 7,569 6,125
-------- -------- -------- --------
Net Income .................................. $ 2,631 $ 1,942 $ 10,362 $ 8,812
======== ======== ======== ========
Net Income per Share:
Basic .................................... $ 0.18 $ 0.17 $ 0.72 $ 0.79
======== ======== ======== ========
Diluted .................................. $ 0.17 $ 0.17 $ 0.70 $ 0.79
======== ======== ======== ========
Pro Forma Net Income per Share(1):
Basic .................................... $ 0.14 $ 0.64
======== ========
Diluted .................................. $ 0.14 $ 0.63
======== ========
Shares Used in per Share Calculations:
Basic net income ......................... 14,438 11,100 14,379 11,100
======== ======== ======== ========
Diluted net income ....................... 15,162 11,220 14,773 11,140
======== ======== ======== ========
Pro forma basic net income(1) ............ 13,873 13,873
======== ========
Pro forma diluted net income(1) .......... 13,993 13,913
======== ========
</TABLE>
(1) Pro forma amounts for the three and nine months ended June 30, 1998 reflect
as outstanding the number of shares required to be sold in the July 1998 initial
public offering to pay a $38.4 million dividend declared prior to the offering
(see Note 2).
See notes to consolidated financial statements
-4-
<PAGE> 5
IDG BOOKS WORLDWIDE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
1999 1998
-------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income ...................................................................... $ 10,362 $ 8,812
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization .............................................. 3,772 2,542
Deferred income taxes ...................................................... (1,085) (5,046)
Changes in operating assets and liabilities:
Accounts receivable - net ................................................ (13,651) 4,107
Inventory - net .......................................................... (2,978) (3,556)
Royalty advances ......................................................... (1,278) (2,149)
Other current assets ..................................................... 939 (1,859)
Accounts payable ......................................................... 1,375 935
Accrued liabilities ...................................................... 5,363 5,039
-------- --------
Net cash provided by operating activities............................... 2,819 8,825
Cash Flows from Investing Activities:
Capital expenditures ............................................................ (2,428) (2,652)
Acquisitions .................................................................... (17,118) (3,439)
Other investments ............................................................... (1,891) --
-------- --------
Net cash used by investing activities .................................. (21,437) (6,091)
Cash Flows from Financing Activities:
Advances on the line of credit .................................................. 4,000 --
Exercises of stock options ...................................................... 245 --
Repayment of Cliffs Notes, Inc. line of credit .................................. (342) --
Advances due to Parent - net change ............................................. -- 3,198
-------- --------
Net cash provided by financing activities .............................. 3,903 3,198
-------- --------
Net Increase (Decrease) in Cash .................................................... (14,715) 5,932
Cash, Beginning of Period .......................................................... 15,466 74
-------- --------
Cash, End of Period ................................................................ $ 751 $ 6,006
======== ========
Noncash Investing Activity:
Acquisitions (Note 6):
Assets ....................................................................... $ 5,217 $ 1,400
Goodwill (Notes 2) ........................................................... 15,449 --
Other intangible assets (Notes 2) ............................................ 700 --
Publishing rights ............................................................ -- 4,000
Less: cash paid .............................................................. (17,118) (3,439)
-------- --------
Liabilities assumed .......................................................... $ 4,248 $ 1,961
======== ========
</TABLE>
See notes to consolidated financial statements
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<PAGE> 6
IDG BOOKS WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED JUNE 30, 1999 AND 1998 AND
AS OF JUNE 30, 1999 AND SEPTEMBER 30, 1998
1. BASIS OF PRESENTATION
The accompanying interim consolidated financial statements for the three and
nine months ended June 30, 1999 and 1998, and as of June 30, 1999 are unaudited,
but have been prepared in accordance with generally accepted accounting
principles for interim consolidated financial statements. Certain information or
footnote disclosure normally included in the financial statements prepared in
accordance with generally accepted accounting principles has been condensed or
omitted in accordance with guidance for interim financial statements. In the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation have been included.
The results of operations of any interim period are not necessarily indicative
of the results of the operations for the full year. These consolidated financial
statements should be read in conjunction with the audited, consolidated
financial statements as of and for the year ended September 30, 1998, and the
related notes thereto, included in the Company's Form 10-K filed with the SEC.
Organization and Description of Business -- IDG Books Worldwide, Inc. ("the
Company"), a Massachusetts company, was founded in 1990 as a wholly-owned
subsidiary (through intermediate companies) of International Data Group, Inc.
("Parent"). On March 24, 1998, the Company was reincorporated in Delaware. On
July 31, 1998, the Company consummated its initial public offering (the
"Offering") of 3,180,000 shares of Class A common stock at an offering price of
$15.50 per share pursuant to a Registration Statement declared effective by the
SEC on July 27, 1998. After deducting expenses, the net proceeds to the Company
from the Offering were $44,032,000. The Company used $38,400,000 of the net
proceeds of the Offering to repay indebtedness owed to the Parent.
The Company is a leading global knowledge company with best-selling technology,
business and general know-how books and computer-based training tools designed
to make learning accessible and fun. The Company publishes and markets its books
under brand names, including the "...For Dummies(R)" series and the Cliffs'
Notes brand.
Principles of Consolidation -- The consolidated financial statements include the
accounts of IDG Books Worldwide, Inc. and its majority controlled subsidiaries
(collectively referred to as the Company). All significant intercompany accounts
and transactions have been eliminated.
Reclassifications -- Certain amounts in prior years' consolidated financial
statements and related notes have been reclassified to conform to the fiscal
1999 presentation.
2. SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year -- The Company's fiscal year ends on the last Saturday of each
September. Fiscal year 1998, ended on September 26, 1998, and consisted of 52
weeks. For convenience, fiscal year-ends are denoted in the accompanying
consolidated financial statements as September 30. Similarly, the thirteen- and
thirty-nine-week periods ended June 26, 1999 and June 27, 1998 are referred to
as the three-and nine months ended June 30, 1999, and 1998, respectively.
Intangible Assets - Intangible assets represent goodwill, publishing rights and
other intangible assets, as applicable to the period reported. Amortization is
provided on a straight-line method over the estimated useful lives of these
assets, not exceeding forty years.
Net Income Per Share -- Net income per share is computed using the basic and
diluted weighted average number of common shares outstanding during the year in
accordance with Statement of Financial Accounting Standards (SFAS) No. 128,
Earnings Per Share. Basic net income per share excludes dilution and is computed
using the weighted average number of common shares outstanding for the period.
Diluted net income per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock (stock options) were
exercised or converted into common stock. For the three and nine months ended
June 30, 1999, approximately 724,000 and 394,000 shares reflecting the dilutive
effects of outstanding stock options, respectively, were included in computing
diluted net income per share.
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<PAGE> 7
IDG BOOKS WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
Unaudited Pro Forma Earnings Per Share - For the three and nine months ended
June 30, 1998, unaudited pro forma basic net income per share amounts were
calculated using common shares outstanding plus the number of shares (2,773,000)
whose proceeds were required to be used to repay a $38.4 million note payable
(issued as a pre-offering dividend) at the $15.50 initial public offering price
reduced by per share offering costs. The pro forma diluted net income per share
amounts also reflect the dilutive effect of outstanding stock options.
Comprehensive Income - Under SFAS No. 130, an enterprise is required to report
the change in its net assets during the period from nonowner sources
("Comprehensive Income"). The Company's comprehensive income for the three and
nine months ended June 30, 1999 and 1998 was equal to its net income for those
periods.
Accounting for Derivative Instruments and Hedging Activities - In June 1998, the
Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which defines derivatives,
requires that derivatives be carried at fair value, and provides for hedge
accounting when certain conditions are met. This statement is effective for the
Company beginning in the first quarter of its fiscal year 2001. Although the
Company has not fully assessed the implications of this new statement, the
Company does not believe adoption of this statement will have a material impact
on its financial statements.
3. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, 1999 September 30, 1998
------------- ------------------
(unaudited)
<S> <C> <C>
Accounts receivable ................................. $ 71,926 $ 53,922
Allowance for doubtful accounts ..................... (4,643) (4,555)
Allowance for sales returns ......................... (24,368) (21,890)
-------- --------
Total .......................................... $ 42,915 $ 27,477
======== ========
</TABLE>
4. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, 1999 September 30, 1998
------------- ------------------
(unaudited)
<S> <C> <C>
Books (finished goods) ....... $ 26,507 $ 22,185
Paper ........................ 1,658 2,560
-------- --------
Total Inventory ........... 28,165 24,745
Reserve for obsolescence ..... (13,684) (14,378)
-------- --------
Net Inventory ............. $ 14,481 $ 10,367
======== ========
</TABLE>
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<PAGE> 8
IDG BOOKS WORLDWIDE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
5. ACCRUED LIABILITIES
Accrued liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, 1999 September 30, 1998
------------- ------------------
(unaudited)
<S> <C> <C>
Accrued royalties ............................ $12,724 $11,545
Accrued compensation and benefits ............ 7,113 9,315
Accrued promotion ............................ 12,932 9,923
Accrued federal and state corporate taxes .... 1,043 1,272
Other accrued liabilities .................... 8,904 3,724
------- -------
Total ................................... $42,716 $35,779
======= =======
</TABLE>
6. ACQUISITION ACTIVITY
In December 1998, the Company purchased all of the capital stock of Cliffs
Notes, Inc., a privately held publisher of the popular study guides. The
acquisition price included approximately $17.1 million in payments to Cliffs'
shareholders, retirement of shareholder notes and bank debt, plus $.5 million in
transaction costs. The acquisition was accounted for as a purchase business
combination and, accordingly, the acquisition cost has been allocated to the
fair value of the assets acquired of $5.2 million and liabilities assumed of
$4.2 million. Assumed liabilities include $1.8 million for the cost of a
restructuring plan to relocate certain employees of Cliffs and terminate certain
facility leases and other business contracts. Of the acquisition cost, $15.4
million was allocated to goodwill. As of June 30, 1999, approximately $700,000
of restructuring plan costs had been incurred.
The unaudited pro forma information in the following paragraph presents the
combined results of operations of the Company as if the Cliffs' Notes, Inc.
acquisition had occurred on October 1, 1997. The pro forma adjustments are based
upon available information and assumptions that management believes are
reasonable. This unaudited pro forma information is not necessarily indicative
of the results that the Company would have achieved if the Cliffs' Notes, Inc.
acquisition had taken place on October 1, 1997.
Pro forma net revenue for the three and nine month periods ended June 30, 1998
would have been $36.6 million and $113.9 million reflecting Cliffs' net revenues
of $2.3 million and $7.7 million for the respective periods. This compares to
reported net revenue of $34.3 million and $106.2 million for the three and nine
month periods ending June 30, 1998, respectively. Pro forma net income would
have been $1.6 million and $7.6 million for the three and nine month periods
ending June 30, 1998. This compares to reported net income of $1.9 million and
$8.8 million for the three and nine month periods ending June 30, 1998,
respectively. Pro forma diluted net income per share would have been $0.14 per
share and $0.63 per share for the three and nine month periods ending June 30,
1998 compared to reported net income of $0.17 per share and $0.79 per share,
respectively.
7. SUBSEQUENT EVENTS
On July 30, 1999 the Company entered into a $110 million credit agreement with a
group of banks. On August 2, 1999, the Company completed the purchase of all the
outstanding common stock of Macmillan General Reference USA Inc. from Pearson
Education, Inc. for $83 million, subject to adjustments for changes in working
capital. The Company borrowed $87 million under the new agreement including $83
million used to fund this acquisition and $4 million for working capital needs.
The acquisition includes over 3,000 active titles and such leading brands as the
Frommer's Travel Guides(R), Weight Watchers(R) and Betty Crocker(R) Dieting and
Cookbooks, Webster's New World(TM) Dictionaries and J.K. Lasser(TM) Tax Guides.
Additionally the Company acquired the travel website, frommers.com and related
rights. The Company's existing $20 million working capital facility, under which
no amounts were outstanding as of August 2, 1999 was terminated in conjunction
with the closing of the new agreement.
-8-
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
IDG Books is a leading global knowledge company featuring a diverse portfolio of
technology, business and general know-how books and computer-based learning
tools. The Company publishes and markets 20 book series under well-known brand
names, including its popular "...For Dummies(R)" series. These books have
created widespread recognition of the Company's brands by consumers, enabling it
to successfully publish across a variety of categories in technology, business
and general know-how. The Company's portfolio of brand names includes more than
1,000 active titles. The Company has over 94 million English-language books in
print and has translated its books into 36 languages. The Company believes that
its readers value and trust its products and brands to help obtain computer
proficiency and professional certification, general business know-how, career
growth and personal enrichment.
In December 1998, the Company purchased all of the capital stock of Cliffs
Notes, Inc., a privately held publisher of the popular literary study guides.
Cliffs Notes currently publishes approximately 300 titles, including its
original Cliffs Notes(R) plus Cliffs Quick Review(R) for high school and college
courses, Test Preparation guides, Advanced Placement study aids, and Test
Preparation software.
On August 2, 1999, the Company completed the purchase of all the outstanding
common stock of Macmillan General Reference USA Inc. (MGR) from Pearson
Education, Inc. for $83 million, subject to adjustments for changes in working
capital. The acquisition includes over 3,000 active titles and such leading
brands as the Frommer's Travel Guides(R), Weight Watchers(R) and Betty
Crocker(R) Dieting and Cookbooks, Webster's New World(TM) Dictionaries and J.K.
Lasser(TM) Tax Guides. Additionally the Company acquired the travel website,
frommers.com and related rights.
Sales of technology-related books account for a majority of the Company's net
revenue. In this regard, sales of books devoted to the use of software products
sold by Microsoft, including its Windows operating system, accounted for
approximately 44% and 42% of the Company's net revenue for the three and nine
months ended June 30, 1999. As a result of the acquisition of MGR, the Company
does not expect the percentage of net revenue related to the sale of Microsoft
software products to be as significant as it has in the past.
The Company's customers consist principally of national retail chain
booksellers, wholesale distributors, office superstores, membership clubs and
computer/electronic superstores located primarily in the United States and
Canada. Over the last several years, there has been significant consolidation in
the distribution channels for books, including retail outlets, although
alternative distribution channels have emerged. As a result, the Company expects
that this trend will lead to increased concentration within each distribution
channel. During the three and nine months ended June 30, 1999, the Company's top
three customers accounted for approximately 34.2% and 36.4% of the Company's net
revenue as compared to 27.7% and 38.5% in 1998, respectively.
-9-
<PAGE> 10
RESULTS OF OPERATIONS
The following table summarizes the results of operations as a percentage of net
revenue for the periods shown:
<TABLE>
<CAPTION>
Three months ended June 30, Nine months ended June 30,
--------------------------- ----------------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net Revenue:
Branded Franchise Group ......................... 61.8% 60.0% 64.0% 63.4%
IDG Books Technology ............................ 38.2 40.0 36.0 36.6
------- ------- ------- -------
Total Net Revenue ............................... 100.0% 100.0% 100.0% 100.0%
======= ======= ======= =======
Cost of Sales.................................... 49.9% 52.0% 49.3% 52.4%
Selling, general and administrative expenses .... 35.9 35.8 33.1 31.1
Depreciation and amortization ................... 3.1 2.6 3.0 2.4
------- ------- ------- -------
Operating Income ................................ 11.1 9.6 14.6 14.1
Interest Expense- net ........................... 0.2 0.0 0.1 0.0
------- ------- ------- -------
Income before provision for income taxes ........ 10.9 9.6 14.5 14.1
------- ------- ------- -------
Net income ...................................... 6.3% 5.7% 8.4% 8.3%
======= ======= ======= =======
OTHER DATA:
EBITDA(1) ....................................... 14.3% 12.2% 17.7% 16.5%
======= ======= ======= =======
</TABLE>
THIRD QUARTER ENDED JUNE 30, 1999 COMPARED TO THIRD QUARTER ENDED JUNE 30, 1998
Net Revenue. Net revenue increased $7.2 million, or 21.0%, to $41.5
million for the three months ended June 30, 1999 from $34.3 million for the
three months ended June 30, 1998. This increase was primarily the result of an
increase in net revenue of $5.1 million, or 24.8%, for the Company's branded
franchise group, which includes the "...For Dummies(R)" brand and Cliffs Notes
brand, and $2.1 million, or 15.2%, for the IDGB Technology Group. Of the
Company's net revenue for the three months ended June 30, 1999, $15.3 million
was attributable to sales of titles (including new editions) first published
during that period, as compared to $16.3 million for titles (including new
editions) first published during the same period for 1998.
Cost of Sales. Cost of sales increased $2.8 million, or 16.0%, to $20.7
million for the three months ended June 30, 1999 from $17.8 million for the
three months ended June 30, 1998. Cost of sales as a percentage of net revenue
was 49.9% and 52.0% for the three months ended June 30, 1999 and June 30, 1998,
respectively. Product costs, including paper, printing, binding, royalty, and
inventory obsolescence expenses decreased as a percentage of net revenue to
30.0% for the three months ended June 30, 1999 from 30.9% for the three months
ended June 30, 1998 as a result of favorable paper, printing and binding prices.
Product development costs remained consistent as a percentage of net revenue at
12.3% for the three months ended June 30, 1999 and 1998, reflecting the
Company's consistent release of new titles in the two quarters. Fulfillment and
distribution expense decreased as a percentage of net revenue to 7.6% for the
three months ended June 30, 1999 from 8.8% for the three months ended June 30,
1998 as a result of efficiencies achieved in the Company's distribution
facilities.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $2.6 million, or 21.1%, to $14.9 million for
the three months ended June 30, 1999 from $12.3 million for the three months
ended June 30, 1998. Approximately $2.1 million of this increase was
attributable to increased selling and marketing expenses including increases as
a result of the implementation of a new retail marketing incentive program and
expenses for other marketing programs where costs increase as net revenues
increase.
- ----------
(1)"EBITDA" is defined as income before provision for income taxes, interest,
depreciation and amortization. EBITDA is not intended to represent cash flows
from operations and should not be considered as an alternative to net income as
an indicator of the Company's operating performance or to cash flows as a
measure of liquidity. The Company believes EBITDA is a standard measure commonly
reported and widely used by analysts, investors and other interested parties in
the publishing and media industries, however, EBITDA, as presented herein, may
not be comparable to similarly titled measures reported by other companies.
EBITDA for the three and nine months ended June 30, 1999 was $5.9 million and
$21.8 million, respectively, compared to $4.2 million and $17.5 million,
respectively, for the three and nine months ended June 30, 1998.
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<PAGE> 11
Operating Income. Operating income increased $1.3 million, or 40.1%, to
$4.6 million for the three months ended June 30, 1999 from $3.3 million for the
three months ended June 30, 1998. Operating income increased as a percentage of
net revenue to 11.1% for the three months ended June 30, 1999 from 9.6% for the
same period the prior year due to an increase in sales and a decrease in cost of
sales as a percentage of net revenue.
Income before Provision for Income Taxes. Income before provision for
income taxes increased $1.2 million, or 37.8%, to $4.5 million for the three
months ended June 30, 1999 from $3.3 million for the three months ended June 30,
1998. Income before provision for income taxes increased as a percentage of net
revenue to 10.9% in the three months ended June 30, 1999 from 9.6% for the same
period the prior year due to an increase in sales and a decrease in cost of
sales as a percentage of net revenue.
Net Income. Net income of $2.6 million for the three months ended June
30, 1999 increased $0.7 million, or 35.5%, from net income of $1.9 million for
the three months ended June 30, 1998. This increase was primarily due to an
increase in sales and a decrease in cost of sales as a percentage of net
revenue.
NINE MONTHS ENDED JUNE 30, 1999 COMPARED TO NINE MONTHS ENDED JUNE 30, 1998
Net Revenue. Net revenue increased $17.3 million, or 16.3%, to $123.5
million for the nine months ended June 30, 1999 from $106.2 million for the nine
months ended June 30, 1998. This increase was primarily the result of an
increase in net revenue of $11.5 million, or 17.0%, for the Company's branded
franchise group, which includes the "...For Dummies(R)" brand and Cliffs Notes
brand, and $5.8 million, or 14.9%, for the IDGB Technology Group. Of the
Company's net revenue for the nine months ended June 30, 1999, $35.8 million was
attributable to sales of titles (including new editions) first published during
that period, as compared to $38.2 million for titles (including new editions)
first published during the same period for 1998.
Cost of Sales. Cost of sales increased $5.2 million, or 9.3%, to $60.9
million for the nine months ended June 30, 1999 from $55.7 million for the nine
months ended June 30, 1998. Cost of sales as a percentage of net revenue was
49.3% and 52.4% for the nine months ended June 30, 1999 and June 30, 1998,
respectively. Product costs, including paper, printing, binding, royalty, and
inventory obsolescence expenses decreased as a percentage of net revenue to
31.4% for the nine months ended June 30, 1999 from 32.6% for the nine months
ended June 30, 1998 as a result of favorable paper, printing and binding prices.
Product development costs decreased as a percentage of net revenue to 10.6% for
the nine months ended June 30, 1999 from 11.6% for the nine months ended June
30, 1998, reflecting the Company's decrease in new title releases as compared to
the same period in 1998. Fulfillment and distribution expense decreased as a
percentage of net revenue to 7.2% for the nine months ended June 30, 1999 from
8.2% for the nine months ended June 30, 1998 as a result of efficiencies
achieved in the Company's distribution facilities.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $7.8 million, or 23.6%, to $40.8 million for
the nine months ended June 30, 1999 from $33.0 million for the nine months ended
June 30, 1998. Approximately $5.3 million of this increase was attributable to
increased selling and marketing expenses including increases as a result of the
implementation of a new retail marketing incentive program and expenses for
other marketing programs where costs increase as net revenues increase. The
remainder of the increase was attributed to a $2.5 million increase in general
and administrative expenses, including costs incurred relating to the
elimination of the Parent Corporate Services Fee on January 1, 1998 and
subsequent, but gradual, increase in staff and expenses to replace these
services during the balance of fiscal year 1998. These additional expenses are
included as general and administrative expenses on the Company's books.
Operating Income. Operating income increased $3.1 million, or 20.7%, to
$18.0 million for the nine months ended June 30, 1999 from $14.9 million for the
nine months ended June 30, 1998. Operating income increased as a percentage of
net revenue to 14.6% for the nine months ended June 30, 1999 from 14.1% for the
same period the prior year due to an increase in sales and a decrease in cost of
sales, offset by an increase in selling, general and administrative expense as a
percentage of net revenue, as described above.
Income before Provision for Income Taxes. Income before provision for
income taxes increased $3.0 million, or 20.0%, to $17.9 million for the nine
months ended June 30, 1999 from $14.9 million for the nine months ended June 30,
1998. Income before provision for income taxes increased as a percentage of net
revenue to 14.5% in the nine months ended June 30, 1999 from 14.1% for the same
period the prior year due to an increase in sales and a decrease in cost of
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<PAGE> 12
sales, offset by an increase in selling, general and administrative expense as a
percentage of net revenue, as described above.
Net Income. Net income of $10.4 million for the nine months ended June
30, 1999 increased $1.6 million, or 17.6%, from net income of $8.8 million for
the nine months ended June 30, 1998. This increase was primarily due to an
increase in sales and a decrease in cost of sales, offset by an increase in
selling, general and administrative expense as a percentage of net revenue, as
described above.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Historically, the financing requirements of the Company were funded through
intercompany advances from IDG, its parent, while excess cash generated by the
Company was remitted to IDG. Accordingly, the Company maintained minimal cash
balances. In addition, balances owed to or due from IDG were non-interest
bearing and periodic settlements of the net amounts were not made. As of June
22, 1998, IDG suspended the cash sweep process allowing cash receipts and cash
generated by the Company to be retained by the Company. During the Company's
fiscal fourth quarter ended September 30, 1998, the advances due from Parent
account balance was paid by IDG and reduced to zero.
As of June 30, 1999 the Company's working capital decreased $5.8 million to
$26.4 million from $32.2 million at September 30, 1998. The decrease in working
capital at June 30, 1999 was primarily the result of a net decrease in cash of
$14.1 million due to the acquisition of Cliffs Notes, Inc. Additionally, there
was a $6.9 million increase in accrued liabilities, and a $4.0 million increase
in the line of credit, offset by an $15.4 million increase in net accounts
receivable, and a $3.6 million increase in other current assets and deferred tax
assets.
The Company's net cash used in investing activities for the nine months ended
June 30, 1999 was $21.4 million. In December 1998, the Company acquired all of
the capital stock of Cliffs Notes, Inc. which included $17.1 million in payments
to Cliffs' shareholders, retirement of stockholder notes and bank debt.
The Company's net cash provided by financing activities was $3.9 million for the
nine months ended June 30, 1999 as a result of borrowing on the line of credit
and $3.2 million for the nine months ended June 30, 1998, as a result of changes
in the net amount of intercompany advances from IDG or excess cash generated by
the Company and retained by IDG prior to June 22, 1998.
On July 30, 1999 the Company entered into a $110 million credit agreement with a
group of banks. On August 2, 1999, the Company borrowed $87 million under the
new agreement including $83 million used to fund the acquisition of Macmillan
General Reference USA Inc. and $4 million for working capital needs. The
Company's existing $20 million working capital facility was terminated in
conjunction with the closing of the new agreement.
FACTORS AFFECTING FUTURE OPERATING RESULTS
Dependence on Microsoft Products and Competition with Microsoft Press.
Sales of books devoted to the use of software products sold by Microsoft
Corporation ("Microsoft"), including its Windows operating system, accounted for
approximately 44% and 42% of the Company's net revenue for the three and nine
months ended June 30, 1999, respectively. As a result, future financial results
will depend in large part on continued consumer demand for Microsoft products. A
decline in the use of Microsoft products would likely result in decreased demand
for the Company's books and could adversely affect future financial results.
However, the acquisition of Macmillan General Reference USA Inc. is expected to
reduce this dependence on Microsoft and its products.
In addition to relying on the sales of books devoted to Microsoft
products, the Company competes with Microsoft's publishing division, Microsoft
Press, for readers of computer-related books, including books covering Microsoft
products. Microsoft Press has substantially greater financial resources than the
Company and, because it is owned by Microsoft, may have better access to planned
and new Microsoft products. As a result, Microsoft Press may have a competitive
advantage over the Company in providing books devoted to the use of software
products sold by Microsoft.
Dependence on " . . . For Dummies(R)" Publications. The Company derives
a substantial proportion of its net revenue from the sale of the " . . . For
Dummies(R)" family of books. In addition, the Company has devoted substantial
resources to the publication of these books and the development of the " . . .
For Dummies(R)" brand name. As a result, any change in reader preferences
leading to a decline in demand for the " . . . For Dummies(R)" books would
likely have a material adverse effect on future financial results.
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Risks of New Product Introductions. Generally as a particular book gets
older, the Company sells fewer copies of that book. Consequently, the Company's
future success depends on its ability to identify trends in the technology,
business and general know-how markets and to offer new titles, as well as other
products and services, that address the changing needs of the target audiences.
To establish market acceptance of a new publication, the Company must dedicate
significant resources to research and editorial development, production and
sales and marketing. The Company incurs significant costs in developing,
publishing and selling a new book, which often significantly precede meaningful
revenues from its sale. Consequently, new publications can require significant
time and investment to achieve profitability. Investors should note, however,
that there can be no assurance that the Company's efforts to introduce new
publications or other products or services will be successful or profitable.
The Company records as an expense the costs related to the development
of new publications and products, other than author advances, as they are
incurred. As a result, the Company's profitability from quarter-to-quarter and
from year-to-year may be adversely affected by the number and timing of new
publications and product launches in any period and the level of acceptance
gained by such publications and products.
Risks Associated with Fluctuations in Paper Costs. Paper is the
principal raw material used in the Company's business. The Company generally
purchases paper from merchants representing the paper mills. The Company does
not have long-term paper supply contracts with these paper merchants. The
arrangements with merchants are negotiated each year and provide for quarterly
price adjustments. Paper prices have been volatile over the past several years
and are affected by many factors, including demand, mill capacity, pulp supply,
energy costs and general economic conditions. Consequently, the Company's cost
of paper, relative to our net revenue, can vary from period-to-period. In the
past, paper has also been difficult to obtain due to industry-wide shortages.
Significant paper price increases, sustained over a period of time, could
adversely affect the Company's future financial condition or operating results.
Fluctuations in Quarterly Results and Cyclicality of Revenue. The
Company's operating expenses, which include product development costs and
selling, general and administrative expenses, are relatively fixed in the
short-term and are based on our long-term revenue expectations. If the Company
sells fewer books or otherwise has lower revenue than expected, the Company may
not be able to quickly reduce its spending. Any shortfall in the Company's
revenue would have a direct impact on its results of operations, and
fluctuations in quarterly results could affect the market price of its Class A
common stock in a manner unrelated to the Company's long-term operating
performance. The Company typically sells more books during the first and second
quarters because of increased sales during the Christmas season. In addition,
the Company sells more books in quarters in which software manufacturers release
new or updated versions of popular software products. Because a substantial
portion of the Company's selling, general and administrative expenses are
incurred evenly throughout the year, the Company generally experiences
relatively lower net profit during quarters not impacted by increases in net
revenue due to seasonal or other factors discussed above.
In addition, the Company typically publishes books relating to new
trends and technologies. Accordingly, if general economic conditions worsen,
people may defer spending on these new trends and technologies, which could
reduce the number of books sold.
Risks Associated with Product Distribution Channels; Risk of Product
Returns. The Company sells its books primarily to large retail chains, large
wholesalers, warehouse clubs, office superstores and computer and electronics
superstores. In the three months ended June 30, 1999, the Company's three
largest customers, Barnes & Noble, Inc., Borders/Walden, Inc., and Ingram Book
Company accounted for approximately 16%, 11% and 7% of net revenue,
respectively. In the nine months ended June 30, 1999, the Company's three
largest customers, Barnes & Noble, Inc., Ingram Book Company, and
Borders/Walden, Inc. accounted for approximately 15%, 11% and 11% of net
revenue, respectively. The Company's future financial results depend in large
part on its relationships with its customers. Any disruption in relationships
with its customers could adversely affect financial performance.
The Company's sales policy generally permits book customers to return
any unsold or damaged books for full credit. The Company records as revenue all
books sold to its customers in a particular quarter and, at the same time,
records a provision for estimated returns. During the three and nine months
ended June 30, 1999, the Company recorded a provision for returns of
approximately 22% of its gross sales. If, during any period, customers return
more books than previously estimated, the Company's financial results in that
period would be adversely affected.
Competition. The Company faces competition directly from other book
publishers and indirectly from non-print media. Competition in book publishing
stems mainly from editorial quality, timely introduction of new titles, product
positioning, pricing and brand name recognition. In addition to the Company,
Pearson Education, Microsoft Press and
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<PAGE> 14
McGraw-Hill all have a strong market presence in the United States and
internationally in technology publishing. The principal competitors for the
Company's business and general know-how titles include Random House, Simon &
Schuster and HarperCollins. Each of these competitors has substantially greater
financial resources than the Company.
Non-print media, such as the Internet and CD-ROMs, may also present
substantial competition. If computer users increase their reliance on
instruction and other information disseminated on-line, the Company's business
could be adversely affected.
Control by IDG; Potential Conflicts of Interests; Benefits to IDG. IDG
owns all of the shares of the Class B common stock, each share of which is
entitled to ten votes per share on most stockholder actions, and has
approximately 78% of the combined voting power of both classes of common stock
as of June 30, 1999. The remaining holders of the shares of Class A common stock
are entitled to one vote per share and have approximately 22% of the combined
voting power. IDG has two representatives on the Company's Board of Directors
and has enough votes to elect all members of the Board of Directors.
As a result of its stock ownership, IDG is in a position, without the
approval of the Company's public stockholders, to: amend the Company's charter
or approve a merger, sale of assets or other major corporate transaction; defeat
any non-negotiated takeover attempt that might otherwise benefit the public
stockholders; determine the amount and timing of dividends paid to itself and to
the Company's public stockholders; and otherwise control the Company's
management and operations and the outcome of all matters submitted for a
stockholder vote that could conflict with the interests of its public
stockholders.
Dependence on Key Personnel. The Company relies, and will continue to
rely, on its senior executive officers and other key management personnel. If
any of these people leaves the Company, the relationships that these people have
with the Company's authors, customers or manufacturers could be lost, and the
Company would need to find people that could develop new relationships. The
competition for employees at all levels of the book publishing industry is
intense and is increasing. In our Northern California operations, in particular,
the Company has experienced increased turnover of employees and is experiencing
difficulty in attracting new employees. If the Company does not succeed in
attracting new employees or retaining and motivating current employees, the
Company's business could suffer significantly.
Transition to New Distribution Service. The Company outsources
distribution and fulfillment functions to retail and wholesale customers through
two vendors. The contracts with these vendors expire in September 1999. One of
these vendors accounted for more than 60% of our distribution and order
fulfillment costs in each of fiscal 1996, 1997 and 1998. The Company has
selected a single-source vendor for distribution and fulfillment, but has not
started the transition to the new vendor. Any difficulties in transitioning to
the new distribution vendor could adversely impact day-to-day operating
performance and future financial results.
Risks Associated with Acquisitions. As part of the Company's growth
strategy, it may buy, or make significant investments in complementary
companies, publications or products. The Company has completed the acquisition
of Cliffs Notes, Inc. and recently completed the acquisition of Macmillan
General Reference USA Inc. These acquisitions, as well as any future
acquisition, will be accompanied by the risks commonly encountered in making
acquisitions of products, companies and technologies.
For example, it could have difficulty assimilating the personnel and
operations of the acquired company. This could cause a disruption of its ongoing
business, distraction of management and other resources, and difficulty in
maintaining uniform standards, controls and procedures. There can be no
assurance that the Company would succeed in overcoming these risks or any other
problems encountered in connection with any acquisitions it may make. In
addition, the Company may be required to incur debt or issue equity to pay for
any future acquisitions.
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YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. Beginning in 2000, these
date code fields will need to accept four-digit entries in order to distinguish
21st Century dates from 20th Century dates. As a result, the computer systems
and/or software used by many companies will need to be upgraded to comply with
"Year 2000" requirements by the end of 1999. Significant uncertainty exists in
the software industry concerning the potential effects associated with such
compliance issues.
The Company has completed the review of its computer systems to determine the
extent and impact of the Year 2000 issues. The Company uses a number of computer
software programs and operating systems, including applications for its internal
electronic communications network and for various administrative and billing
functions. Many of the Company's systems are new and were designed to
accommodate the Year 2000 issue when originally installed. The Company has
completed testing its systems for compliance, and believes it has implemented
the necessary changes. The Company believes it has completed corrective measures
to its mission-critical systems. The Company has assessed the scope of its risks
related to problems its computer systems may have related to the Year 2000 issue
and believes such risks are not material. This conclusion is partly based on
statements provided by the manufacturers of hardware and software used by the
Company. The Company is not in a position to confirm or deny the claims of the
manufacturers' products in use. The estimated costs to modify or replace these
applications are included in the Company's cost for its computer systems and
infrastructure upgrades. The Company currently does not have a contingency plan
in the event that the remedial efforts it has completed fail to make its systems
Year 2000 compliant.
The Company is continuing to communicate with its customers, suppliers, and
business partners in an effort to assess how they intend to resolve their Year
2000 issues. The Company, at this time, is not able to form an opinion as to
whether its customers or suppliers will be able to resolve their Year 2000
issues in a satisfactory and timely manner, or the magnitude of the adverse
impact it would have on the Company's operations if they fail to do so. No
assurance can be given that all of these third party systems will be Year 2000
compliant. Any failure of the Company's customers, suppliers, or business
partners to satisfactorily address their Year 2000 problems could have a
material adverse effect on the Company's business, financial condition, and
results of operations.
With respect to the acquisition of the Macmillan General Reference business, the
Company does not plan to retain any mission-critical business systems from this
acquisition.
FINANCIAL MARKET RISK
For the nine months ended June 30, 1999, there were no material changes in the
Company's exposure to financial market risks, including changes in interest
rates and foreign currency exchange rates.
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Quarterly Report contains
forward-looking statements. The forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those reflected in such forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's opinion only as of the date hereof. The Company undertakes
no obligation to revise or publicly release the results of any revision to these
forward-looking statements. Readers should carefully review the risk factors
described in other documents the Company files from time to time with the SEC,
including the Company's Registration Statement on Form S-1 (file no. 333-53433)
filed in connection with the Company's initial public offering, and Form 10-K as
of and for the year ended September 30, 1998.
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PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10 - Credit Agreement among IDG Books Worldwide, Inc., as borrower,
and a group of lending banks, dated July 30, 1999.
27 - Financial Data Schedule
(b) Reports on Form 8-K; none
ITEMS 1, 2, 3, 4 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IDG BOOKS WORLDWIDE, INC.
Date: August 10, 1999 By: /s/ James A. Doehrman
---------------------------------
James A. Doehrman,
Vice President and Chief Financial Officer
(Principal Accounting Officer
and Duly Authorized Officer)
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<PAGE> 18
EXHIBIT INDEX
Exhibit
No. Document
- ------- --------
10 Credit Agreement among IDG Books Worldwide, Inc., as borrower,
and a group of lending banks, dated July 30, 1999.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
================================================================================
$110,000,000
CREDIT AGREEMENT
-AMONG-
IDG BOOKS WORLDWIDE, INC.,
AS BORROWER
THE SEVERAL LENDERS FROM TIME
TO TIME PARTY TO THIS AGREEMENT
BANKBOSTON, N.A.,
AS ADMINISTRATIVE AGENT
BANKBOSTON, N.A.,
AS ISSUING LENDER
WELLS FARGO BANK, NATIONAL ASSOCIATION,
AS SYNDICATION AGENT
-AND-
THE FIRST NATIONAL BANK OF CHICAGO,
AS DOCUMENTATION AGENT
--------------------------------
BANCBOSTON ROBERTSON STEPHENS INC.,
AS LEAD ARRANGER
--------------------------------
DATED AS OF JULY 30, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I. DEFINITIONS...........................................................1
1.1. Defined Terms....................................................1
1.2. Use of Defined Terms............................................32
1.3. Cross-References................................................32
1.4. Accounting and Financial Determinations.........................32
1.5. General Provisions Relating to Definitions......................32
ARTICLE II. THE CREDIT FACILITIES...............................................33
2.1. Amounts and Terms of Commitments................................33
(a) The Term Loans...........................................33
(b) The Revolving Loans......................................33
(c) The Incremental Facility.................................33
2.2. Loan Accounts; Notes............................................34
2.3. Procedure for Borrowing.........................................34
2.4. Conversion and Continuation Elections for all Borrowings........35
2.5. Reduction and Termination of Commitments........................36
2.6. Voluntary Prepayments...........................................37
2.7. Mandatory Prepayments...........................................38
2.8. Repayment of Principal..........................................40
(a) The Term Loan............................................40
(b) The Revolving Loans......................................41
(c) The Incremental Loans....................................41
(d) Maturity Date............................................42
2.9. Fees............................................................42
(a) Commitment Fees..........................................42
(b) Other Fees...............................................43
2.10. Computation of Fees and Interest................................43
2.11. Interest........................................................43
2.12. Payments by the Borrower; Pro Rata Treatment; etc...............44
2.13. Payments by Lenders to the Administrative Agent.................45
2.14. Sharing of Payments, etc........................................46
2.15. Collateral and Subsidiary Guaranty..............................46
2.16. Procedure for Incremental Commitment Requests...................47
ARTICLE III. THE LETTERS OF CREDIT..............................................47
3.1. Letter of Credit Subfacility....................................47
3.2. Issuance, Amendment and Renewal of Letters of Credit............48
3.3. Participations, Drawings and Reimbursement......................50
3.4. Repayment of Participation......................................51
3.5. Role of Issuing Lender..........................................52
3.6. Obligations Absolute............................................52
3.7. Cash Collateral Pledge..........................................53
3.8. Letter of Credit Fees...........................................53
3.9. Uniform Customs and Practice....................................54
ARTICLE IV. TAXES, YIELD PROTECTION AND LEGALITY................................54
4.1. Taxes...........................................................54
4.2. Illegality......................................................58
4.3. Increased Costs and Reductions of Return........................58
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4.4. Funding Losses..................................................59
4.5. Inability to Determine Rates....................................60
4.6. Reserves on Eurodollar Loans....................................60
4.7. Certificates of Lenders.........................................60
4.8. Change of Lending Office........................................60
ARTICLE V. CONDITIONS PRECEDENT.................................................61
5.1. Conditions to Making First Credit Extensions....................61
5.1.1. Execution and Delivery of this Agreement and Notes...61
5.1.2. Pledge Agreement.....................................61
5.1.3. Security Agreement; UCC Filings; etc.................61
5.1.4. Other Loan Documents and Related Documents...........62
5.1.5. Completion of Macmillan Acquisition, etc.............63
5.1.6. Compliance Certificate, etc..........................63
5.1.7. Solvency Certificate.................................63
5.1.8. Certificates of Insurance............................63
5.1.9. Resolutions, etc.....................................64
5.1.10. Certificates of Good Standing, etc...................64
5.1.11. Financial Statements.................................64
5.1.12. No Materially Adverse Effect.........................65
5.1.13. Affiliate Transactions; Other Corporate Transactions.65
5.1.14. Fees and Expenses....................................65
5.1.15. Opinions of Counsel..................................65
5.2. All Credit Extensions...........................................65
5.2.1. Compliance with Warranties; No Default; etc..........65
5.2.2. Notice of Borrowing; Continuation/Conversion Notice..66
5.2.3. Legality of Transactions.............................66
5.2.4. Satisfactory Legal Form, etc.........................66
ARTICLE VI. REPRESENTATIONS AND WARRANTIES.....................................66
6.1. Corporate Existence and Power, etc..............................66
6.2. Corporate Authorization; etc....................................67
6.3. Governmental Authorization......................................67
6.4. Binding Effect..................................................67
6.5. Collateral Documents............................................67
6.6. No Default......................................................68
6.7. Use of Proceeds; Margin Regulations.............................68
6.8. Financial Statements, etc.......................................68
6.9. Materially Adverse Effect.......................................68
6.10. Existing Indebtedness; Absence of Defaults; etc.................69
6.11. Transactions with Affiliates....................................69
6.12. Corporate Structure, etc........................................69
6.13. Title to Properties.............................................70
6.14. Trademarks, etc.................................................70
6.15. Litigation......................................................70
6.16. Compliance with Applicable Law, etc.............................70
6.17. Governmental Regulation.........................................70
6.18. Taxes...........................................................70
6.19. ERISA Compliance................................................71
6.20. Hazardous Materials.............................................71
6.21. Labor Controversies.............................................72
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6.22. Year 2000 Compliance............................................72
6.23. Accuracy of Information.........................................72
ARTICLE VII. AFFIRMATIVE COVENANTS..............................................72
7.1. Financial Information, etc......................................72
7.2. Certificates; Other Information.................................73
7.3. Notices.........................................................74
7.4. Maintenance of Corporate Existence, etc.........................74
7.5. Foreign Qualification, etc......................................74
7.6. Payment of Taxes; etc...........................................75
7.7. Maintenance of Property; Insurance..............................75
7.8. Compliance with Laws, etc.......................................75
7.9. Books and Records...............................................75
7.10. Use of Proceeds.................................................76
7.11. Interest Rate Protection........................................76
7.12. Identification of Subsidiaries; Provision of Collateral.........76
7.13. Additional Security; Further Assurances.........................78
7.14. Year 2000 Compliance............................................79
ARTICLE VIII. NEGATIVE COVENANTS................................................80
8.1. Limitations on Lines of Business................................80
8.2. Indebtedness....................................................80
8.3. Liens...........................................................81
8.4. Financial Covenants.............................................81
(a) Maximum Leverage.........................................81
(b) Minimum Interest Coverage................................82
(c) Minimum Fixed Charge Coverage............................82
8.5. Consolidations, Mergers, Sales, etc.............................82
8.6. Investments and Acquisitions....................................83
8.7. Restricted Payments.............................................84
8.8. Limitations on Negative Pledge Clauses..........................84
8.9. Limitation on Restrictions on Subsidiary Distributions..........84
8.10. Transactions with Affiliates....................................85
8.11. Sale of Capital Stock, etc......................................86
8.12. Change of Control...............................................86
8.13. Use of Credits; Compliance with Margin Regulations..............86
8.14. Environmental Liabilities.......................................86
ARTICLE IX. EVENTS OF DEFAULT...................................................86
9.1. Events of Default...............................................86
9.1.1. Non-Payment of Obligations...........................87
9.1.2. Non-Performance of Certain Obligations...............87
9.1.3. Non-Performance of Other Obligations.................87
9.1.4. Breach of Representation or Warranty.................87
9.1.5. Cross-Default........................................87
9.1.6. Insolvency; Voluntary Proceedings....................88
9.1.7. Involuntary Proceedings..............................88
9.1.8. ERISA................................................88
9.1.9. Judgments............................................88
9.1.10. Change of Control....................................88
9.1.11. Subsidiary Guaranty..................................88
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9.1.12. Security Documents...................................89
9.2. Remedies........................................................89
ARTICLE X. THE ADMINISTRATIVE AGENT AND OTHER AGENTS............................90
10.1. Appointment and Authorization...................................90
10.2. Delegation of Duties............................................90
10.3. Liability of Administrative Agent...............................90
10.4. Reliance by Administrative Agent................................91
10.5. Notice of Default...............................................91
10.6. Credit Decisions................................................92
10.7. Indemnification.................................................92
10.8. Administrative Agent in its Individual Capacity.................93
10.9. Successor Administrative Agent..................................93
10.10. Collateral Documents and Subsidiary Guaranty....................94
10.11. Other Agents....................................................94
ARTICLE XI. MISCELLANEOUS.......................................................94
11.1. Amendments and Waivers..........................................94
11.2. Notices.........................................................96
11.3. No Waiver; Cumulative Remedies..................................97
11.4. Costs and Expenses..............................................97
11.5. Indemnity.......................................................98
11.6. Successors and Assigns..........................................98
11.7. Assignments, Participations, etc................................98
11.8. Confidentiality................................................100
11.9. Set-off........................................................100
11.10. Survival of Representations, Warranties and Agreements.........101
11.11. Marshalling; Payments Set Aside................................101
11.12. Obligations Several; Independent Nature of Lenders' Rights.....101
11.13. Notification of Addresses, Lending Offices, etc................101
11.14. Counterparts...................................................102
11.15. Severability...................................................102
11.16. No Third Parties Benefited.....................................102
11.17. Governing Law and Jurisdiction; Waiver of Trial by Jury........102
</TABLE>
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-iv-
<PAGE> 6
SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
- -------- -----------
<S> <C>
SCHEDULE 1.1 LENDING OFFICES/NOTICE ADDRESSES
SCHEDULE 2.1 COMMITMENTS OF LENDERS
EXHIBIT DESCRIPTION
EXHIBIT A FORM OF TERM NOTE
EXHIBIT B FORM OF REVOLVING CREDIT NOTE
EXHIBIT C FORM OF NOTICE OF BORROWING
EXHIBIT D FORM OF NOTICE OF CONVERSION/CONTINUATION
EXHIBIT E FORM OF PLEDGE AGREEMENT
EXHIBIT F FORM OF SECURITY AGREEMENT
EXHIBIT G FORM OF COPYRIGHT SECURITY AGREEMENT
EXHIBIT H FORM OF TRADEMARK SECURITY AGREEMENT
EXHIBIT I FORM OF SUBSIDIARY GUARANTY
EXHIBIT J FORM OF GUARANTOR SUPPLEMENT
EXHIBIT K FORM OF LEVERAGE RATIO CERTIFICATE
EXHIBIT L FORM OF COMPLIANCE CERTIFICATE
EXHIBIT M FORM OF ASSIGNMENT AND ASSUMPTION
EXHIBIT N FORM OF SOLVENCY CERTIFICATE
EXHIBIT O FORM OF OPINION OF SPECIAL COUNSEL FOR BORROWER
EXHIBIT P FORM OF OPINION OF SPECIAL COUNSEL FOR ADMINISTRATIVE AGENT
</TABLE>
-v-
<PAGE> 7
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of July 30, 1999, among IDG BOOKS
WORLDWIDE, INC., a Delaware corporation (hereinafter, together with its
successors in title and assigns, called the "BORROWER"), the several financial
institutions from time to time party to this Agreement as lenders hereunder
("LENDERS"), BANKBOSTON, N.A., as Administrative Agent for the Lenders,
BANKBOSTON, N.A., as Issuing Lender, WELLS FARGO BANK, NATIONAL ASSOCIATION, as
Syndication Agent for the Lenders, and THE FIRST NATIONAL BANK OF CHICAGO, as
Documentation Agent for the Lenders.
RECITALS:
A. The Borrower has entered into a Stock Purchase Agreement,
dated as of June 29, 1999, with Pearson Education, Inc. (hereinafter, together
with all schedules and exhibits attached thereto, and as amended, supplemented
or otherwise modified from time to time, called the "MACMILLAN PURCHASE
AGREEMENT"), pursuant to which the Borrower will acquire Macmillan General
Reference USA Inc., a Delaware corporation (hereinafter, together with its
successors in title and assigns, called "MACMILLAN"), by and through the
acquisition ("MACMILLAN ACQUISITION") of all of the issued and outstanding
shares of the common stock of Macmillan ("MACMILLAN SHARES").
B. The Borrower intends to finance the Macmillan Acquisition
and to pay related fees and expenses from borrowings under the senior secured
credit facilities created by this Agreement.
C. The Lenders have agreed to make available to the Borrower
senior secured term loan and revolving credit facilities upon the terms and
subject to the conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements,
promises and covenants contained herein, the parties hereto hereby agree as
follows:
ARTICLE I.
DEFINITIONS
1.1. DEFINED TERMS. As used in this Agreement, the capitalized terms in
the preamble and in the Recitals hereto shall have the meanings therein given to
them, and the following words and terms shall have the meanings specified below:
"ACQUISITION" means any transaction, or any series of related
transactions, in which the Borrower or any of its Subsidiaries (a) acquires any
business or all or any substantial part of the Property of any Person or any
division or other business unit thereof, whether through purchase of assets,
merger or otherwise, (b) directly or indirectly acquires ownership or control of
at least a majority (in number of votes) of the Voting Interests of any Person,
or (c) directly or indirectly acquires ownership or control of at least a
majority of the Equity Interests of any Person.
"ACQUISITION CERTIFICATE" means, with respect to any proposed
Acquisition, a certificate signed by an Authorized Officer of the Borrower in
the form of a compliance certificate
<PAGE> 8
containing Acquisition Pro Formas with respect to such Acquisition and
certifying: (a) as to the maximum Amount of such Acquisition; (b) as to the
accuracy and completeness of the Acquisition Pro Formas attached to such
certificate; (c) as to the accuracy after giving effect to the transactions
contemplated by such Acquisition Pro Formas of the matters set forth in each of
clauses (a), (b), (c) and (d) of the definition of "PERMITTED ACQUISITION
CONDITIONS", and with respect to the matters set forth in clause (c) of such
definition, the calculations in support thereof; (d) that on the date of such
proposed Acquisition, both immediately before and immediately after giving
effect to such Acquisition, all of the representations and warranties set forth
in the Loan Documents shall be true and correct in all material respects (except
those representations and warranties that relate solely to a prior date); and
(e) that no Defaults are then continuing.
"ACQUISITION DOCUMENTATION" means, collectively, in relation to any
Acquisition undertaken and completed or (as the case may be) to be undertaken
and completed by the Borrower or any of its Subsidiaries: (a) the letters of
intent, agreements in principle, asset purchase agreements, securities purchase
agreements, merger agreements or other similar agreements or Instruments
pursuant to which such Acquisition is or (as the case may be) is to be effected;
and (b) all schedules, exhibits, annexes and amendments thereto and all side
letters and agreements affecting the terms thereof or to be entered into in
connection therewith, in each case, as amended, supplemented or otherwise
modified from time to time.
"ACQUISITION PRO FORMAS" means, in connection with any proposed
Acquisition by the Borrower or any of its Subsidiaries, a consolidated balance
sheet, income statement and cash flow statement of the Borrower and its
Subsidiaries as of the last day of and for the most recent Measurement Period
for which financial statements have been delivered pursuant to Section 7.1, each
in reasonable detail and prepared on a combined Pro Forma Basis after giving
effect to, as applicable, (a) the proposed Acquisition and each other proposed
Acquisition for which a definitive agreement has been executed at the time of
delivery of the applicable Acquisition Pro Formas and any related increase in
Consolidated Total Debt, or (b) solely the proposed Acquisition and any related
increase in Consolidated Total Debt, in the case of each of clause (a) and
clause (b) above, as if each applicable Acquisition has been consummated, and
all applicable Indebtedness issued or incurred, as of the first day of such
period.
"ADDITIONAL SECURITY DOCUMENTS" has the meaning specified in Section
7.13(a).
"ADMINISTRATIVE AGENT" means BankBoston, in its capacity as
administrative agent for the Agents, the Issuing Lender and the Lenders under
this Agreement and the other Loan Documents, and any successor to such
administrative agent.
"ADMINISTRATIVE AGENT-RELATED PERSONS" has the meaning specified in
Section 10.3.
"ADMINISTRATIVE AGENT'S PAYMENT OFFICE" means the address for payments
set forth on the signature pages hereto in relation to the Administrative Agent
or such other address as the Administrative Agent may from time to time specify
in accordance with Section 11.2.
"AFFILIATE" means, with respect to any Person, any other Person (a)
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person, or (b) that directly or indirectly owns or
controls more than 10% of any class of the Capital Stock of, or Equity Interests
in, such Person. A Person shall be deemed to control another Person if such
Person possesses, directly or indirectly, the power to direct or to cause the
direction of the
<PAGE> 9
-2-
management and policies of such other Person, whether through the ownership of
Voting Interests, by contract or otherwise. For purposes of this Agreement and
the other Loan Documents, (i) the Borrower shall not be or be deemed to be an
Affiliate of any of the Borrower's Subsidiaries, (ii) none of the Subsidiaries
of the Borrower shall be or be deemed to be an Affiliate of the Borrower or of
any of the other Subsidiaries of the Borrower, and (iii) neither the Agents nor
the Lenders shall be or be deemed to be an Affiliate of the Borrower or of any
of its Subsidiaries.
"AFFILIATE TRANSACTION" means any of the following transactions or
arrangements:
(a) the making by the Borrower or any of its Subsidiaries of
any payment or prepayment (whether of principal, premium, interest or any other
sum) of or on account of, or any payment or other distribution by the Borrower
or any of its Subsidiaries on account of the redemption, repurchase, defeasance
or other acquisition for value of, any Indebtedness of any kind whatsoever (i)
of any Affiliate of the Borrower, or (ii) of the Borrower or any of its
Subsidiaries to any Affiliate of the Borrower;
(b) the making of any loans, advances or other Investments of
any kind whatsoever by the Borrower or any of its Subsidiaries to or in any
Affiliate of the Borrower or to or in any holder of any Indebtedness described
in clause (a) of this definition;
(c) the Sale by the Borrower or any of its Subsidiaries of all
or any part of its Property to, or for the direct or indirect benefit of, any
Affiliate of the Borrower;
(d) the incurrence by the Borrower or any of its Subsidiaries
of any Indebtedness to any Affiliate of the Borrower;
(e) the declaration or payment by the Borrower or any of its
Subsidiaries of any dividends or other distributions on account of, or the
making by the Borrower or any of its Subsidiaries of any payment or other
distribution on account of the purchase, repurchase, redemption or other
acquisition for value of, any shares of Capital Stock or any other Equity
Interests or Securities of any Affiliate of the Borrower;
(f) the payment by the Borrower or any of its Subsidiaries to
any Affiliate of the Borrower of any fees or commissions of any kind, including,
without limitation, management or consulting fees, non-competition payments or
other similar fees, investment banking or underwriting fees or commissions,
arrangement, placement or syndication fees, or brokers', finders' or other
transaction fees or commissions; or
(g) any other transaction or Contractual Obligation between
any Affiliate of the Borrower, on the one hand, and the Borrower, on the other
hand, or between any Affiliate of the Borrower, on the one hand, and any
Subsidiary of the Borrower, on the other hand.
"AGENTS" means, collectively, the Administrative Agent, the Collateral
Agent, the Syndication Agent, the Documentation Agent, and the Lead Arranger.
"AGGREGATE COMMITMENT" means the Aggregate Revolving Commitment,
Aggregate Term Commitment and Aggregate Incremental Commitment.
<PAGE> 10
-3-
"AGGREGATE INCREMENTAL COMMITMENT" means the combined Incremental
Commitments of the Lenders in the initial aggregate amount equal to zero, as
such amount may be increased pursuant to Section 2.1(c) (in an aggregate amount
not to exceed the Maximum Incremental Amount), and as such amount may be reduced
from time to time pursuant to this Agreement.
"AGGREGATE REVOLVING COMMITMENT" means the combined Revolving
Commitments of all of the Lenders, in the initial aggregate amount of
$40,000,000, as such amount may be reduced from time to time pursuant to this
Agreement.
"AGGREGATE TERM COMMITMENT" means the combined Term Commitments of all
of the Lenders, in the initial aggregate amount of $70,000,000, as such amount
may be reduced from time to time pursuant to this Agreement.
"AGREEMENT" means this Credit Agreement as amended, supplemented or
otherwise modified from time to time.
"ALTERNATE BASE RATE" means, for any day, the GREATER of (a) the Base
Rate in effect on such day, or (b) the Federal Funds Rate, in effect on such
day, plus 1/2%.
"ALTERNATIVE INCREMENTAL MARGINS" has the meaning specified in Section
2.16(a).
"AMOUNT" means, with respect to any Acquisition, all consideration paid
in respect thereof, including consideration in the form of cash, Property (as
valued at the time of such Acquisition), or the assumption of Indebtedness or
other obligations or liabilities.
"ANCILLARY DOCUMENTS" means, collectively, the Governing Documents of
each of the Borrower and its Subsidiaries, the Macmillan Purchase Agreement, the
other Related Agreements, and all other Instruments that shall from time to time
be identified by the Borrower and the Administrative Agent in writing as
"ANCILLARY DOCUMENTS" for purposes of this Agreement and the other Loan
Documents.
"ANTICIPATED REINVESTMENT AMOUNT" means, with respect to any
Reinvestment Election, the amount specified in the Reinvestment Notice delivered
by the Borrower in connection therewith as the amount of the Net Cash Proceeds
from the related Reinvestment Event that the Borrower intends to use, or (as the
case may be) to cause one or more Subsidiaries of the Borrower to use, to
purchase, construct or otherwise acquire Reinvestment Assets.
"APPLICABLE COMMITMENT FEE PERCENTAGE" means, with respect to Revolving
Loans, a percentage, per annum, determined by reference to the Consolidated
Leverage Ratio in effect from time to time as set forth in the pricing grid
below:
<PAGE> 11
-4-
<TABLE>
<CAPTION>
================================================================================
COMMITMENT
CONSOLIDATED LEVERAGE RATIO FEE
- --------------------------------------------------------------------------------
<S> <C> <C>
> 3.50:1.00 0.500%
- --------------------------------------------------------------------------------
< 3.50:1.00 0.375%
> 3.00:1.00
-
- --------------------------------------------------------------------------------
< 3.00:1.00 0.375%
> 2.50:1.00
-
- --------------------------------------------------------------------------------
< 2.50:1.00 0.300%
================================================================================
</TABLE>
The "APPLICABLE COMMITMENT FEE PERCENTAGE" shall be determined by reference to
the Consolidated Leverage Ratio set forth in the most recent Leverage Ratio
Certificate delivered pursuant to Section 7.2(b). No change in the Applicable
Commitment Fee Percentage shall be effective until three (3) Business Days after
the date on which the Administrative Agent shall have received the applicable
financial statements and a Leverage Ratio Certificate pursuant to Section 7.2(b)
calculating such new Consolidated Leverage Ratio. At any time the Borrower has
not submitted to the Administrative Agent the applicable information within
fifteen (15) days after the same is required under Section 7.2(b), the
Applicable Commitment Fee Percentage shall be determined, from and after the
expiration of such period of fifteen (15) days, as if the Consolidated Leverage
Ratio were in excess of 3.50:1.00. Promptly following receipt of the applicable
information as and when required under Section 7.2(b), the Administrative Agent
shall give each Lender facsimile or telephonic notice (confirmed in writing) of
the Applicable Commitment Fee Percentage in effect from such date. Anything
herein to the contrary notwithstanding, during the period from the Closing Date
until the 180th day after the Closing Date, the Applicable Commitment Fee
Percentage shall not in any event be less than the Applicable Commitment Fee
Percentage that would be applicable if the Consolidated Leverage Ratio in effect
at all times during that period was less than 3.50:1.00 but equal to or greater
than 3.00:1.00.
"APPLICABLE LAW" means, in relation to any Person or its Property,
statutes and rules and regulations thereunder and interpretations thereof by any
Governmental Authority charged with the administration or the interpretation
thereof, and orders, requests, directives, instructions and notices of any
Governmental Authority, in each case, applicable to or binding upon such Person
or any of its Property.
"APPLICABLE MARGIN" means, with respect to Term Loans and Revolving
Loans, a percentage, per annum, determined by reference to the Consolidated
Leverage Ratio in effect from time to time as set forth in the pricing grid
below:
<PAGE> 12
-5-
<TABLE>
<CAPTION>
========================================================================================
PRICING GRID
TERM LOANS AND REVOLVING LOANS
- ----------------------------------------------------------------------------------------
CONSOLIDATED
LEVERAGE BASE RATE EURODOLLAR
RATIO LOANS LOANS
- ----------------------------------------------------------------------------------------
<S> <C> <C>
> 3.50: 1.00 0.375% 1.625%
-
- ----------------------------------------------------------------------------------------
< 3.50: 1.00 0.250% 1.500%
> 3.00: 1.00
-
- ----------------------------------------------------------------------------------------
< 3.00: 1.00 0.125% 1.375%
> 2.50: 1.00
-
- ----------------------------------------------------------------------------------------
< 2.50: 1.00 0.000% 1.125%
> 2.00: 1.00
-
- ----------------------------------------------------------------------------------------
< 2.00: 1.00 0.000% 0.875%
========================================================================================
</TABLE>
The "APPLICABLE MARGIN" shall be determined by reference to the Consolidated
Leverage Ratio set forth in the most recent Leverage Ratio Certificate delivered
pursuant to Section 7.2(b). No change in the Applicable Margin with respect to
Term Loans and Revolving Loans shall be effective until three (3) Business Days
after the date on which the Administrative Agent shall have received the
applicable financial statements and a Leverage Ratio Certificate pursuant to
Section 7.2(b) calculating such new Consolidated Leverage Ratio. At any time the
Borrower has not submitted to the Administrative Agent the applicable
information within fifteen (15) days after the same is required under Section
7.2(b), the Applicable Margin shall be determined, from and after the expiration
of such period of fifteen (15) days, as if the Consolidated Leverage Ratio were
in excess of 3.50:1.00. Promptly following receipt of the applicable information
as and when required under Section 7.2(b), the Administrative Agent shall give
each Lender facsimile or telephonic notice (confirmed in writing) of the
Applicable Margin in effect from such date. Anything herein to the contrary
notwithstanding, during the period from the Closing Date until the 180th day
after the Closing Date, the Applicable Margin shall not in any event be less
than the Applicable Margin that would be applicable if the Consolidated Leverage
Ratio in effect at all times during that period was less than 3.50:1.00 but
equal to or greater than 3.00:1.00
"ASSET SALE" means any direct or indirect Sale (including any Sale of
all or any part of any Subsidiary of the Borrower by or through the issue or
Sale of any Equity Interests of such Subsidiary, and also including any Sale
pursuant to a sale and leaseback transaction), whether in a single transaction
or in a series of related transactions, by the Borrower or by any of its
Subsidiaries of any businesses or Property of the Borrower or of any of its
Subsidiaries, whether now owned or from time to time hereafter created, arising
or acquired, including Equity Interests (including Equity Interests of any such
Subsidiaries, but excluding Equity Interests of the Borrower); provided,
however, that the term "ASSET SALE" shall not include any Permitted
Dispositions.
"ASSIGNEE" has the meaning specified in Section 11.7(a).
"ASSIGNMENT AND ASSUMPTION" has the meaning specified in Section
11.7(a).
<PAGE> 13
-6-
"ATTORNEY COSTS" means and includes all reasonable fees and
disbursements of any law firm or other external legal counsel and, without
duplication, the reasonable allocated cost of internal legal counsel and other
internal legal services, and all reasonable disbursements of internal legal
counsel and other internal legal services.
"AUTHORIZED OFFICERS" has the meaning specified in Section 5.1.9(a).
"BANKBOSTON" means BankBoston, N.A., a national banking association
organized under the laws of the United States.
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. Section 101, et seq.), as amended from time to time.
"BASE RATE" means the rate of interest publicly announced from time to
time by BankBoston at its head office in Boston, Massachusetts as its "base
rate". Any change in the Base Rate announced by BankBoston shall take effect at
the opening of business on the day specified in the public announcement of such
change.
"BASE RATE LOAN" means any Loan that bears interest at an interest rate
based on the Alternate Base Rate.
"BORROWER" has the meaning specified in the preamble hereto.
"BORROWING" means any borrowing hereunder consisting of one or more
Loans made or to be made to the Borrower on the same Borrowing Date by Lenders
pursuant to Section 2.1.
"BORROWING DATE" means, in relation to any Loan, the date of the
borrowing of such Loan, as specified in the relevant Notice of Borrowing for
such Loan.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day
on which commercial banks in Boston, Massachusetts, New York City or Los
Angeles, California are authorized or required by law to close, so long as, if
such term shall be used in relation to any Eurodollar Loan or any Interest
Period relating thereto, on such day dealings are also carried on by and between
banks in Dollar deposits in the applicable interbank market.
"CAPITAL ADEQUACY REGULATION" means any guideline, request or directive
of any central bank or other Governmental Authority, whether or not having the
force of law, and any other Applicable Law regarding or affecting the capital
adequacy of any bank or of any corporation controlling a bank.
"CAPITAL ASSETS" means, with respect to any Person, all equipment,
fixed assets and real Property or improvements of such Person, or replacements
or substitutions therefor or additions thereto, that, in accordance with GAAP,
have been or should be reflected as additions to Property, plant or equipment on
the balance sheet of such Person.
"CAPITAL EXPENDITURES" means, with respect to any Person for any
period, all expenditures made directly or indirectly by such Person during such
period for Capital Assets (whether paid in cash or other consideration or
accrued as a liability and, including, without limitation, all expenditures for
maintenance and repairs which are required, in accordance with GAAP, to be
capitalized on the books of such Person).
<PAGE> 14
-7-
"CAPITAL LEASE" has the meaning specified in the definition of the term
"CAPITAL LEASE OBLIGATIONS".
"CAPITAL LEASE OBLIGATIONS" means, with respect to any Person, all
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangements 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 (each, a "CAPITAL LEASE") on a balance sheet of
such Person under GAAP, and, for the purposes of this Agreement, the amount of
such obligations at any time shall be the capitalized amount thereof at such
time determined in accordance with GAAP.
"CAPITAL STOCK" means (a) in the case of any corporation, any corporate
capital stock of any class or series, (b) in the case of any association or
business entity, any shares, interests, participations, rights or other
equivalents (howsoever designated) of corporate capital stock, and (c) in the
case of any partnership or limited liability company, partnership or membership
interests (whether general or limited).
"CASH COLLATERALIZE" means to pledge and deposit with or deliver to the
Administrative Agent, for the benefit of the Agents, the Issuing Lender and the
Lenders, as collateral for Letter of Credit Obligations, cash or deposit account
balances pursuant to documentation in form and substance reasonably satisfactory
to the Administrative Agent and the Issuing Lender. Derivatives of such term
shall have corresponding meanings. The Borrower hereby grants to the
Administrative Agent, for the benefit of the Agents, the Issuing Lender and the
Lenders, a security interest in and Lien upon all such cash and deposit account
balances. Cash Collateral shall be invested in Cash Equivalents of a tenor
reasonably satisfactory to the Administrative Agent as instructed by the
Borrower from time to time, which Cash Equivalents shall be held in the name of
the Borrower and under the control of the Administrative Agent in a manner
reasonably satisfactory to the Administrative Agent.
"CASH EQUIVALENTS" means any or all of the following: (a) obligations
of, or guaranteed as to principal and interest by, the United States government
or any agency thereof maturing within one year after the date on which such
obligations are purchased; (b) open market commercial paper of any corporation
(other than the Parent Company, the Borrower or any their respective
Subsidiaries) incorporated under the laws of the United States or any State
thereof or the District of Columbia rated P-1 or its equivalent or higher by
Moody's or A-1 or its equivalent or higher by S&P; (c) time deposits,
certificates of deposit or bankers' acceptances maturing within one year after
the acquisition thereof issued by commercial banks organized under the laws of
any country which is a member of the OECD and having a combined capital and
surplus in excess of $250,000,000 or which is a Lender; (d) repurchase
agreements with respect to Securities described in clause (a) above entered into
with an office of a bank or trust company meeting the criteria specified in
clause (c); (e) money market funds investing only in Investments described in
clauses (a) through (d); (f) direct obligations of, or obligations the principal
and interest of which are unconditionally guaranteed by any State of the United
States or any foreign state having, at the date of its acquisition by the
Borrower or any of its Subsidiaries, a rating of at least AA by S&P or Aa by
Moody's, in each case maturing within one year from the date of the acquisition;
and (g) other investments permitted by the Borrower's investment policy as
approved from time to time by its board of directors.
"CHANGE OF CONTROL" means any event or series of related events
(including the Sale or issuance (or series of Sales or issuances) of Equity
Interests of the Borrower by the Borrower or
<PAGE> 15
-8-
by any holder or holders thereof, or any merger, consolidation,
recapitalization, reorganization or other transaction or arrangement) as a
result of which: (a) the Parent Affiliated Companies shall together cease to own
and control, legally and beneficially, with full power to vote, (i) more than
forty-five percent (45%) of the Voting Interests of the Borrower outstanding
from time to time, or (ii) Voting Interests of the Borrower that exceed the
outstanding Voting Interests of the Borrower owned or controlled, whether
legally or beneficially, by any Person or group of Persons acting in concert by
an amount representing more than fifteen percent (15%) of the Voting Interests
of the Borrower outstanding from time to time; or (b) a majority of the members
of the board of directors of the Borrower shall at any time not be nominated or
otherwise approved by the Parent Affiliated Companies.
"CLOSING DATE" means the Borrowing Date on which the first Credit
Extensions are made or to be made by the Lenders to the Borrower hereunder.
"CODE" means the Internal Revenue Code of 1986, and the rules and
regulations promulgated thereunder as from time to time in effect.
"COLLATERAL" means, collectively, (a) the Pledged Collateral, (b) the
Security Agreement Collateral, and (c) any and all other collateral provided by
the Borrower or by any of its Subsidiaries to the Agents, the Issuing Lender and
the Lenders from time to time pursuant to the Collateral Documents and the other
Loan Documents.
"COLLATERAL AGENT" means BankBoston, in its capacity as collateral
agent for the Agents, the Issuing Lender and the Lenders under this Agreement,
the Collateral Documents and the other Loan Documents, and any successor to such
collateral agent.
"COLLATERAL DOCUMENTS" means, collectively, the Security Agreement, the
Pledge Agreement, the Copyright Security Agreements, the Trademark Security
Agreements, the Additional Security Documents, all other Instruments executed
and delivered to the Administrative Agent or the Collateral Agent on the
Effective Date or from time to time thereafter pursuant to Section 2.15, Section
7.12 or Section 7.13, and all other Security Instruments executed and/or
delivered from time to time pursuant to any of the foregoing.
"COMMITMENT" means, for each Lender, the sum of its Incremental
Commitment, Revolving Commitment and Term Commitment.
"COMMITMENT PERCENTAGE" means, as to any Lender (a) its Term Commitment
Percentage, its Revolving Commitment Percentage, or its Incremental Commitment
Percentage, or (b) as the context may require, the percentage equivalent of such
Lender's Commitment divided by the Aggregate Commitment, provided that, if the
Aggregate Commitment has terminated in full, then such Commitment Percentage
shall be determined by dividing such Lender's Commitment in effect immediately
prior to such termination by the Aggregate Commitment in effect immediately
prior to such termination.
"COMPLIANCE CERTIFICATE" means a compliance certificate, in or
substantially in the form of Exhibit L, duly executed by the chief financial
officer of the Borrower and delivered pursuant to Section 7.2(a).
"CONSOLIDATED ADJUSTED CURRENT ASSETS" means, in relation to any Person
and its Subsidiaries as at any date, all amounts (other than cash and Cash
Equivalents) which would, in
<PAGE> 16
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conformity with GAAP, be set forth opposite the caption "total current assets"
(or any like caption) on a consolidated balance sheet of such Person and its
Subsidiaries as at such date.
"CONSOLIDATED ADJUSTED CURRENT LIABILITIES" means, in relation to any
Person and its Subsidiaries as at any date, all amounts which would, in
conformity with GAAP, be set forth opposite the caption "total current
liabilities" (or any like caption) on a consolidated balance sheet of such
Person and its Subsidiaries as at such date, but excluding the current portion
of any Indebtedness of such Person and its Subsidiaries.
"CONSOLIDATED ADJUSTED EBITDA" means, in relation to the Borrower and
its Subsidiaries for any period, the Consolidated EBITDA of the Borrower and its
Subsidiaries for such period; provided, however, that, for purposes of
calculating Consolidated Adjusted EBITDA of the Borrower and its Subsidiaries
for any period: (a) the Consolidated EBITDA of any Person or attributable to any
business acquired by the Borrower or by any of its Subsidiaries during such
period shall be included on a Pro Forma Basis for such period (assuming the
consummation of such Acquisition occurred on the first day of such period and
giving pro forma effect to any non-recurring expenses, non-recurring costs and
cost reductions within the first year after such acquisition which are
reasonably anticipated by the Borrower if the Borrower delivers to the
Administrative Agent an officer's certificate executed by the chief financial
officer of the Borrower certifying to and describing and quantifying with
reasonable specificity such non-recurring expenses, non-recurring costs and cost
reductions), if the consolidated balance sheet of such acquired Person or
business, as the case may be, and its consolidated Subsidiaries as at the end of
the period preceding the Acquisition of such Person and the related consolidated
statements of income and stockholders' equity and of cash flows for the period
in respect of which Consolidated EBITDA is to be calculated (i) have been
previously provided to the Administrative Agent, and (ii) either (A) have been
reported on without a qualification arising out of the scope of the audit by
independent certified public accountants of nationally recognized standing, or
(B) have been found acceptable by the Administrative Agent; and (b) the
Consolidated EBITDA of any Person or attributable to any business sold or
otherwise disposed of by the Borrower or any of its Subsidiaries during such
period shall be excluded on a Pro Forma Basis for such period (assuming the
consummation of such disposition occurred on the first day of such period).
"CONSOLIDATED CAPITAL EXPENDITURES" means, in relation to any Person
and its Subsidiaries for any period, all Capital Expenditures by such Person and
its Subsidiaries for such period, all as determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED CASH INTEREST EXPENSE" means, in relation to any Person
and its Subsidiaries for any period, Consolidated Interest Expense of such
Person and its Subsidiaries for such period, but excluding, to the extent
otherwise included therein, interest expense to the extent not paid or required
to be paid in cash in such period, all as determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED EBITDA" means, in relation to any Person and its
Subsidiaries for any period, Consolidated Net Income of such Person and its
Subsidiaries for such period, PLUS, without duplication, and only to the extent
reflected as a charge in the statement of such Consolidated Net Income for such
period, the SUM of (a) provisions for income tax expense (including, without
limitation, any franchise taxes imposed in lieu of income taxes), PLUS (b)
Consolidated Interest Expense, amortization or write-off of deferred financing
fees, debt discount and debt issuance costs and commissions, discounts and other
fees and charges associated with
<PAGE> 17
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Indebtedness, PLUS (c) depreciation and amortization expense, PLUS (d)
amortization of intangibles (including, without limitation, goodwill) and
organization costs, and PLUS (e) any non-cash charges or expenses or non-cash
losses (including non-cash losses on Sales of assets outside of the ordinary
course of business), and MINUS, without duplication, and only to the extent
included in the statement of such Consolidated Net Income for such period, the
SUM of (i) any extraordinary, unusual or non-recurring income or gains
(including gains on the Sales of assets outside of the ordinary course of
business), PLUS (ii) any other non-cash income, all as determined on a
consolidated basis and in accordance with GAAP.
"CONSOLIDATED EXCESS CASH FLOW" means, for any Fiscal Year of the
Borrower, the EXCESS, if any, of (a) the SUM of (i) the Consolidated EBITDA of
the Borrower and its Subsidiaries for such Fiscal Year, and (ii) the
Consolidated Working Capital Adjustment of the Borrower and its Subsidiaries for
such Fiscal Year, OVER (b) the SUM, without duplication, of (i) the aggregate
amount of all prepayments of Revolving Loans during such Fiscal Year but only if
and to the extent accompanied by permanent reductions of the Aggregate Revolving
Commitment, and the aggregate amount of all prepayments of the Term Loans during
such Fiscal Year pursuant to Section 2.6 or Section 2.7, (ii) the aggregate
amount of all regularly scheduled payments required to be made during such
Fiscal Year (other than in respect of any revolving credit facility to the
extent there is not an equivalent permanent reduction in commitments
thereunder), on account of principal of Indebtedness of the Borrower and its
Subsidiaries (including regularly scheduled principal payments in respect of the
Loans, and also including the principal component of any scheduled payments in
respect of Capital Lease Obligations), (iii) the Consolidated Cash Interest
Expense of the Borrower and its Subsidiaries for such period, (iv) the aggregate
amount paid or required to be paid in cash in respect of income taxes by the
Borrower and its Subsidiaries during such Fiscal Year, (v) Consolidated Capital
Expenditures of the Borrower and its Subsidiaries in such Fiscal Year, and (vi)
the sum of $1,000,000.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, as of the last day of
any Fiscal Quarter, the RATIO of (a) Consolidated Adjusted EBITDA of the
Borrower and its Subsidiaries for the Measurement Period ending on such date, to
(b) Consolidated Fixed Charges of the Borrower and its Subsidiaries for such
Measurement Period.
"CONSOLIDATED FIXED CHARGES" means, in relation to any Person and its
Subsidiaries for any Measurement Period, the SUM (without duplication) of (a)
Consolidated Cash Interest Expense of such Person and its Subsidiaries for such
period, PLUS (b) the aggregate amount paid or required to be paid in cash in
respect of income taxes by such Person or any of its Subsidiaries on a
consolidated basis during such period, PLUS (c) Consolidated Capital
Expenditures of such Person and its Subsidiaries for such period, PLUS (d) all
regularly scheduled payments required to be made during the next Measurement
Period commencing at the end of such period on account of principal of
Indebtedness of such Person or of any of its Subsidiaries (including regularly
scheduled principal payments in respect of the Loans, and also including the
principal component of any scheduled payments in respect of Capital Lease
Obligations), all as determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST COVERAGE RATIO" means, as of the last day of any
Fiscal Quarter, the RATIO of (a) Consolidated Adjusted EBITDA of the Borrower
and its Subsidiaries for the Measurement Period ending on such date, to (b)
Consolidated Cash Interest Expense of the Borrower and its Subsidiaries for such
Measurement Period.
<PAGE> 18
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"CONSOLIDATED INTEREST EXPENSE" means, in relation to any Person and
its Subsidiaries for any period, (a) interest expense on all Indebtedness of
such Person or of any of its Subsidiaries for such period, whether paid or
accrued, all as determined on a consolidated basis in accordance with GAAP, and
including: (i) interest expense in respect of Indebtedness (including the
Obligations), (ii) the interest component of Capital Lease Obligations, (iii)
commissions, discounts and other fees and charges payable in connection with
letters of credit and bankers' acceptances, (iv) the net payment, if any,
payable in connection with Interest Rate Protection Agreements, less the net
credit, if any, received in connection with Interest Rate Protection Agreements,
and (v) all Fees payable by such Person, LESS (b) interest income of such Person
and its Subsidiaries for such period, determined on a consolidated basis and in
accordance with GAAP.
"CONSOLIDATED LEVERAGE RATIO" means, as of the last day of any Fiscal
Quarter, the RATIO of (a) Consolidated Total Debt of the Borrower and its
Subsidiaries as of such date, to (b) Consolidated Adjusted EBITDA of the
Borrower and its Subsidiaries for the Measurement Period ending on such date.
"CONSOLIDATED NET INCOME" means, in relation to any Person and its
Subsidiaries for any period, the consolidated net income (or loss) of such
Person and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP.
"CONSOLIDATED TOTAL DEBT" means, in relation to any Person and its
Subsidiaries as at any date, the aggregate amount of all of the Indebtedness of
such Person and its Subsidiaries as at such date, determined on a consolidated
basis.
"CONSOLIDATED WORKING CAPITAL" means, in relation to any Person and its
Subsidiaries as at any date, the EXCESS of the Consolidated Adjusted Current
Assets of such Person and its Subsidiaries as at such date, OVER the
Consolidated Adjusted Current Liabilities of such Person and its Subsidiaries as
at such date.
"CONSOLIDATED WORKING CAPITAL ADJUSTMENT" means, in relation to any
Person and its Subsidiaries for any period, the amount (which may be a negative
number) by which Consolidated Working Capital of such Person and its
Subsidiaries as of the beginning of such period exceeds (or is less than)
Consolidated Working Capital of such Person and its Subsidiaries as of the end
of such period.
"CONTINUATION DATE" means any date on which a Eurodollar Loan is to be
continued as a Eurodollar Loan for a further Interest Period, in each case, in
accordance with the provisions of Section 2.4.
"CONTRACTUAL OBLIGATION" means, as to any Person, any agreement or
obligation under any Security issued by such Person or under any agreement,
undertaking, contract or other Instrument to which such Person is a party or by
which it or any of its Property is bound.
"CONVERSION DATE" means any date on which a Base Rate Loan is to be
converted to a Eurodollar Loan, or a Eurodollar Loan is to be converted to a
Base Rate Loan, in each case, in accordance with the provisions of Section 2.4.
"COPYRIGHT SECURITY AGREEMENT" means a Copyright Security Agreement, in
or substantially in the form of Exhibit G, to be executed and delivered by each
of the Borrower and
<PAGE> 19
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certain of its Subsidiaries in favor of the Collateral Agent in compliance with
the terms of this Agreement and the Security Agreement.
"COVENANT DETERMINATION DATE" means, at any particular time, the last
day of the then most recent Fiscal Quarter of the Borrower for which financial
statements of the Borrower have been furnished to the Administrative Agent
pursuant to Section 7.1(a) or Section 7.1(b).
"CREDIT EXTENSION" means (a) the making of any Loan to the Borrower
pursuant to this Agreement, or (b) the issuance, amendment or renewal of any
Letter of Credit by the Issuing Lender pursuant to this Agreement.
"CREDIT PARTIES" means, collectively, the Borrower and the Subsidiary
Guarantors.
"DEFAULT" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.
"DISBURSEMENT DATE" has the meaning specified in Section 3.3(b).
"DISCLOSURE LETTER" means the letter, dated as of the Effective Date,
duly executed by an Authorized Officer of the Borrower, and delivered by the
Borrower to the Administrative Agent in connection with this Agreement and
identified as the "DISCLOSURE LETTER".
"DOCUMENTATION AGENT" means The First National Bank of Chicago, in its
capacity as documentation agent for the Agents, the Issuing Lender and the
Lenders under this Agreement and the other Loan Documents, and any successor to
such documentation agent.
"DOLLARS" and "$" mean lawful money of the United States.
"DOMESTIC LENDING OFFICE" has the meaning specified in the definition
of the term "LENDING OFFICE".
"DOMESTIC SUBSIDIARY" means, in relation to any Person, any Subsidiary
of such Person organized under the laws of the United States of America, any
State thereof or the District of Columbia.
"EFFECTIVE DATE" means July 30, 1999, the date of this Agreement.
"ELIGIBLE ASSIGNEE" means and includes (a) any Lender or any Affiliate
of any Lender, and (b) any commercial bank, insurance company, investment or
mutual fund or other entity that is an "accredited investor" (as defined in
Regulation D under the Securities Act of 1933) and that extends credit or buys
loans as one of its businesses; provided, however, that none of the Borrower or
any of its Subsidiaries or Affiliates shall be an Eligible Assignee for purposes
of this Agreement or any of the other Loan Documents.
"ENVIRONMENTAL CLAIMS" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, Liens, notices of
noncompliance or violation, investigations or proceedings relating in any way to
any violation of, or liability under, any Environmental Law or any permit
issued, or any approval given, under any such Environmental Law (hereafter,
"CLAIMS"),including, without limitation, (a) any and all Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages
<PAGE> 20
-13-
pursuant to any applicable Environmental Law, and (b) any and all Claims by any
third party or other Person seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from Hazardous Materials
or arising from alleged injury or threat of injury to health, safety or the
environment.
"ENVIRONMENTAL LAW" has the meaning specified in the definition of the
term "HAZARDOUS MATERIAL".
"EQUITY INTERESTS" means and includes Capital Stock and all warrants,
options or other rights to purchase or otherwise acquire Capital Stock (but
excluding any debt Securities that are convertible into, or exchangeable for,
Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations promulgated thereunder as from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) under common control with the Borrower or any of its Subsidiaries
within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and
(o) for purposes of provisions relating to Sections 412, 414(t)(2) and 4971 of
the Code).
"ERISA EVENT" means: (a) a Reportable Event with respect to a Pension
Plan or Multiemployer Plan which could reasonably be expected to result in a
material liability to the Borrower or any of its Subsidiaries; (b) a withdrawal
by the Borrower, any of its Subsidiaries or any ERISA Affiliate from a Pension
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations which is treated as such a withdrawal under Section 4062(e) of
ERISA where such withdrawal or cessation could reasonably be expected to result
in a material liability to the Borrower or any of its Subsidiaries; (c) a
complete or partial withdrawal by the Borrower, any of its Subsidiaries or any
ERISA Affiliate from a Multiemployer Plan which could reasonably be expected to
result in a material liability to the Borrower and/or any of its Subsidiaries or
notification that a Multiemployer Plan is insolvent or in reorganization; (d)
the filing of a notice of intent to terminate other than under a standard
termination pursuant to Section 4041(b) of ERISA where such standard termination
or the process of affecting such standard termination will not result in a
material liability to the Borrower, any of its Subsidiaries or an ERISA
Affiliate, the treatment of a plan amendment as a termination under Section 4041
or 4041A of ERISA or the commencement of proceedings by the PBGC to terminate a
Pension Plan or Multiemployer Plan; (e) a failure by the Borrower, any of its
Subsidiaries or any ERISA Affiliate to make required contributions to a Pension
Plan, Multiemployer Plan or other Plan subject to Section 412 of the Code; (f)
an event or condition which could reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; (g) the
imposition of any material liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower,
any of its Subsidiaries or any ERISA Affiliate; or (h) an application for a
funding waiver or an extension of any amortization period pursuant to Section
412 of the Code with respect to any Plan.
"EURODOLLAR LENDING OFFICE" has the meaning specified in the definition
of the term "LENDING OFFICE".
<PAGE> 21
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"EURODOLLAR LOAN" means any Loan that bears interest at an interest
rate based on the Eurodollar Rate.
"EURODOLLAR RATE" means, for any Eurodollar Loan and for any Interest
Period relating thereto, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page)
as the London interbank offered rate for deposits in Dollars at approximately
11:00 a.m. (London time) two (2) Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period. If, for any
reason, such rate is not available, the term "EURODOLLAR RATE" shall mean, for
any Eurodollar Loan for any Interest Period relating thereto, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two (2) Business Days prior to the first
day of such Interest Period for a term comparable to such Interest Period;
provided that if more than one rate is specified on Reuters Screen LIBO Page,
the applicable rate shall be the arithmetic mean of all such rates (rounded
upwards, if necessary, to the nearest 1/100 of 1%).
"EVENT OF DEFAULT" has the meaning specified in Section 9.1.
"EXCESS CASH FLOW APPLICATION DATES" means (a) December 31, 2000, and
(b) December 31 of each calendar year thereafter.
"FAIR MARKET VALUE" means, with respect to any Property, the price
which could be negotiated in an arm's length free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction.
"FEDERAL FUNDS RATE" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)." If, on any relevant day, the appropriate rate for such previous
day is not yet published in H.15(519), the rate for such day will be the
arithmetic mean of the rates for the last transaction in overnight federal funds
arranged prior to 9:00 a.m. (New York City time) on that day by each of three
leading brokers of federal funds transactions in New York City selected by the
Administrative Agent.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"FEES" means, collectively, (a) the Revolving Commitment Fees, (b) the
Letter of Credit Fees, (c) all other fees payable to the Issuing Lender from
time to time pursuant to Section 3.8, and (d) all other fees payable to any of
the Agents or the Lenders from time to time pursuant to Section 2.9.
"FISCAL QUARTER" means any fiscal quarter of any Fiscal Year of the
Borrower.
"FISCAL YEAR" means the fiscal year of Borrower ending on September 30
of each calendar year.
"FOREIGN SUBSIDIARY" means, in relation to any Person, any Subsidiary
of such Person that is not a Domestic Subsidiary of such Person.
<PAGE> 22
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"FORM W-8BEN" has the meaning specified in Section 4.1(f)(i).
"FORM W-8ECI" has the meaning specified in Section 4.1(f)(i).
"GAAP" has the meaning specified in Section 1.4.
"GOVERNING DOCUMENTS" means, with respect to any Person, the
certificate of incorporation or registration (including, if applicable,
certificate of change of name), articles of incorporation or association,
memorandum of association, charter, bylaws, partnership agreement, trust
agreement, joint venture agreement, limited liability company operating or
members agreement, or any one or more similar agreements, Instruments or
documents constituting the organization or formation of such Person. If any
provision of any of the Loan Documents requires any Governing Document to be
certified by any Governmental Authority, the reference to any such "Governing
Document" shall only be to a document of a type customarily certified by such
Governmental Authority.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"GUARANTOR SUPPLEMENT" means a supplement to the Subsidiary Guaranty,
in or substantially in the form of Exhibit J.
"GUARANTY OBLIGATIONS" means, as applied to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "PRIMARY OBLIGATIONS") of
another Person (the "PRIMARY OBLIGOR"), including any obligation of that Person,
whether or not contingent, without duplication: (a) to purchase, repurchase or
otherwise acquire such primary obligations or any Property constituting direct
or indirect security therefor; (b) to advance or provide funds (i) for the
payment or discharge of any such primary obligation, or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency or any balance sheet item, level of income or financial
condition of the primary obligor; (c) to purchase Property, Securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation; or (d) otherwise to assure or hold harmless the holder of any such
primary obligation against loss in respect thereof; in each case, including
arrangements ("NON-RECOURSE GUARANTY ARRANGEMENTS") in which the rights and
remedies of the holder of the primary obligation are limited to repossession or
Sale of certain Property of such Person. The amount of any Guaranty Obligation
shall be deemed equal to the stated or determinable amount of the primary
obligation in respect of which such Guaranty Obligation is made (or, if less,
the stated or determinable amount of such Guaranty Obligation) or, if not stated
or if indeterminable, the maximum reasonably anticipated liability in respect
thereof; provided, however, that the amount of any non-recourse guaranty
arrangement shall not be deemed to exceed the Fair Market Value of the Property
which may be repossessed or sold by the holder of the primary obligation in
question.
"HAZARDOUS MATERIAL" means and includes (a) any asbestos,
urea-formaldehyde, PCBs or dioxins or insulation or other material composed of
or containing asbestos, PCBs or dioxins, (b) crude oil, any fraction thereof,
and any petroleum product, (c) any natural gas, natural gas liquids, liquefied
natural gas or other natural gas product or synthetic gas, and (d) any hazardous
<PAGE> 23
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or toxic waste, substance or material or pollutant or contaminant defined as
such in (or for purposes of), or that may result in the imposition of liability
under, any "ENVIRONMENTAL LAW", which means the Comprehensive Environmental
Response, Compensation and Liability Act, any so-called "Superfund" or any other
Applicable Law, as now or at any time hereafter in effect, regulating, relating
to, or imposing liability concerning the environment, the impact of the
environment on human health, or any hazardous or toxic waste, substance or
material or pollutant or contaminant.
"IMPERMISSIBLE QUALIFICATION" means, relative to the opinion or
certification of the Independent Public Accountant as to any financial
statements of the Borrower or any of its Subsidiaries, any qualification or
exception to such opinion or certification: (a) which is of a "going concern" or
similar nature; (b) which relates to the limited scope of examination of matters
relevant to such financial statement; or (c) which relates to the treatment or
classification of any item in such financial statement and which, as a condition
to its removal, would require an adjustment to such item the effect of which
would be to cause the Borrower to be in default of any of its Obligations under
Section 8.4.
"INCREMENTAL COMMITMENT" of any Lender means (a) the amount set forth
opposite such Lender's name under the caption "INCREMENTAL COMMITMENT" on
Schedule 2.1 (as such Schedule shall be deemed to have been amended pursuant to
Section 2.1(c)(ii)), as such amount may be reduced from time to time pursuant to
the provisions hereof, or (b) as the context may require, the obligation of such
Lender to make Incremental Loans in an aggregate unpaid principal amount not
exceeding such amount.
"INCREMENTAL COMMITMENT FEES" has the meaning specified in Section
2.16(a).
"INCREMENTAL COMMITMENT PERCENTAGE" means, as to any Lender, the
percentage equivalent of such Lender's Incremental Commitment divided by the
Aggregate Incremental Commitment; provided, however, that if the Aggregate
Incremental Commitment has been terminated in full, the "INCREMENTAL COMMITMENT
PERCENTAGE" of each Lender shall be determined by dividing such Lender's
Incremental Commitment in effect immediately prior to such termination by the
Aggregate Incremental Commitment in effect immediately prior to such
termination.
"INCREMENTAL COMMITMENT TERMINATION DATE" means 5:00 p.m. (Boston,
Massachusetts time) on January 31, 2001.
"INCREMENTAL FACILITY" has the meaning specified in Section 2.1(c)(i).
"INCREMENTAL LENDER" means any Lender that has an Incremental
Commitment or that has made any Incremental Loans to the Borrower.
"INCREMENTAL LOAN" means any Loan by an Incremental Lender to the
Borrower, which may be a Eurodollar Loan or a Base Rate Loan.
"INCREMENTAL LOAN BALANCE" has the meaning specified in Section 2.8(c).
"INCREMENTAL LOAN NOTE" has the meaning specified in Section 2.2(b).
"INCREMENTAL UPFRONT FEES" has the meaning specified in Section
2,16(a).
<PAGE> 24
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"INDEBTEDNESS" of any Person means, without duplication: (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of Property or services (other than (i)
trade payables entered into in the ordinary course of business pursuant to
ordinary terms, and (ii) ordinary course purchase price adjustments); (c) all
reimbursement or payment obligations with respect to letters of credit or
reimbursement or other payment obligations with respect to bankers' acceptances,
surety bonds and other similar documents; (d) all obligations evidenced by
promissory notes, bonds, debentures or other similar Instruments, including
obligations so evidenced incurred in connection with the acquisition of Property
or businesses; (e) all indebtedness created or arising under any conditional
sale or other title retention agreements or Sales of accounts receivable, in any
such case, with respect to Property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreements in the event
of default are limited to repossession or Sale of such Property); (f) all
Capital Lease Obligations; (g) all net obligations with respect to Interest Rate
Protection Agreements; (h) all indebtedness referred to in clause (a) through
clause (g) secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
Property (including accounts and contracts rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness (in which event the amount of such indebtedness shall not be deemed
to exceed the Fair Market Value of such Property); and (i) all Guaranty
Obligations in respect of indebtedness and obligations of the kinds referred to
in clause (a) through clause (h) above.
"INDEMNIFIED LIABILITIES" has the meaning provided in Section 11.5.
"INDEMNIFIED PERSON" has the meaning provided in Section 11.5.
"INDEPENDENT PUBLIC ACCOUNTANT" means any one of the so-called
"big-five" firms of certified public accountants or any other firm of certified
public accountants of recognized standing selected by the Borrower.
"INSOLVENCY PROCEEDING" means (a) any case, action or proceeding before
any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors, or other similar
arrangements in respect of its creditors, generally; in each case, undertaken
under U.S. Federal, State or foreign law, including the Bankruptcy Code.
"INSTRUMENT" means any contract, agreement, indenture, mortgage or
other document or writing (whether a formal agreement, letter or otherwise)
under which any obligation is evidenced, assumed or undertaken, or any right to
any Lien is granted or perfected.
"INTEREST PAYMENT DATE" means (a) with respect to each Base Rate Loan,
the last day of each calendar quarter and also the Maturity Date, and (b) with
respect to each Eurodollar Loan, the last day of each Interest Period applicable
to such Eurodollar Loan and also the date on which such Eurodollar Loan shall be
repaid or prepaid; provided, however, that, if any Interest Period for any
Eurodollar Loan exceeds three (3) months, then also the date which falls three
(3) months after the beginning of such Interest Period, and, if applicable, the
last day of each three-month interval thereafter, shall also be an "INTEREST
PAYMENT DATE".
"INTEREST PERIOD" means, in relation to any Eurodollar Loan, the period
commencing on the applicable Borrowing Date or any Conversion Date or
Continuation Date with respect thereto
<PAGE> 25
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and ending on the date one, two, three or six months thereafter, as selected or
deemed to be selected by the Borrower in its Notice of Borrowing or Notice of
Conversion/Continuation; provided, however, that:
(a) if any Interest Period would otherwise end on a day which
is not a Business Day, then such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be to carry
such Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Business Day;
(b) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on the
last Business Day of the calendar month which is one, two, three, six months, as
the case may be, after the calendar month in which such Interest Period began;
and
(c) no Interest Period for any Loan shall extend beyond the
Maturity Date.
"INTEREST RATE PROTECTION AGREEMENT" means any interest rate swap, cap,
collar or similar arrangement entered into to hedge interest rate risk (and not
for speculative purposes).
"INVESTMENT" means, in relation to any Person:
(a) any loan, advance or other extension of credit made by
such Person to any other Person;
(b) the creation of any Guaranty Obligation of such Person to
support any of the Indebtedness of any other Person; or
(c) any capital contribution by such Person to, or purchase by
such Person of any Equity Interests or other Securities of, any other Person, or
any other investment evidencing an ownership or other similar interest of such
Person in any other Person.
"ISSUING LENDER" means BankBoston, in its capacity as issuer of one or
more Letters of Credit pursuant to this Agreement.
"LEAD ARRANGER" means BancBoston Robertson Stephens Inc., in its
capacity as Lead Arranger for the Agents, the Issuing Lender and the Lenders
under this Agreement.
"LENDER AFFILIATE" means any Person engaged primarily in the business
of commercial banking that is an Affiliate of any Lender.
"LENDERS" has the meaning specified in the preamble hereto.
"LENDING OFFICE" means, with respect to any Lender, the office or
offices of such Lender specified as ITS "LENDING OFFICE", "DOMESTIC LENDING
OFFICE" or "EURODOLLAR LENDING OFFICE", as the case may be, on Schedule 1.1, or
such other office or offices of such Lender as such Lender may from time to time
specify in a written notice to the Borrower and the Administrative Agent.
"LETTER OF CREDIT" means any letter of credit issued or to be by the
Issuing Lender pursuant to Article III.
<PAGE> 26
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"LETTER OF CREDIT AMENDMENT APPLICATION" means any application form for
amendment of outstanding standby or commercial documentary letters of credit as
shall from time to time be specified by the Issuing Lender.
"LETTER OF CREDIT APPLICATION" means any application form for issuances
of standby or commercial documentary letters of credit as shall from time to
time be specified by the Issuing Lender.
"LETTER OF CREDIT BORROWING" means any extension of credit (other than
any Revolving Loan) resulting from a drawing under any Letter of Credit which
shall not have been reimbursed by the Borrower on the Disbursement Date when
made.
"LETTER OF CREDIT COMMITMENT" means the commitment of the Issuing
Lender hereunder to issue Letters of Credit. The Letter of Credit Commitment
shall be in the initial amount of $10,000,000, and such amount may be reduced
from time to time pursuant to and in accordance with this Agreement. The Letter
of Credit Obligations shall not exceed in aggregate amount at any time the
LESSER of (a) the Aggregate Revolving Commitment in effect at such time, or (b)
the amount of the Letter of Credit Commitment in effect at such time.
"LETTER OF CREDIT FEES" has the meaning specified in Section 3.8.
"LETTER OF CREDIT OBLIGATIONS" means, at any time of determination, the
SUM of (a) the aggregate undrawn amount of all Letters of Credit then
outstanding, PLUS (b) the aggregate amount of all Letter of Credit Borrowings
then outstanding.
"LETTER OF CREDIT RELATED DOCUMENTS" means, collectively, the Letters
of Credit, the Letter of Credit Applications, the Letter of Credit Amendment
Applications and any other Instruments or documents relating to any Letters of
Credit, including the Issuing Lender's standard form documents for letter of
credit issuances.
"LEVERAGE RATIO CERTIFICATE" means a certificate duly executed by the
chief financial officer of the Borrower, in or substantially in the form of
Exhibit K (with such changes thereto as may be agreed upon from time to time by
the Administrative Agent and the Borrower), and including therein, among other
things, calculations supporting the information contained in such certificate
relating to the Consolidated Leverage Ratio.
"LIEN" means any interest in any real or personal Property or fixture
which secures payment or performance of any obligation or liability, and shall
include any mortgage, lien (statutory, judgment or otherwise), pledge,
encumbrance, charge or other security interest of any kind, whether arising
under a Security Instrument or as a matter of law, judicial process or
otherwise, including the retained security title of a conditional vendor or
lessor.
"LINE OF BUSINESS" means, collectively, the businesses conducted by the
Borrower or by any of its Subsidiaries on and as of the Closing Date, and shall
in any event include (a) the business of publishing and/or distributing books,
magazines and newsletter-type products, including the business of publishing
and/or distributing books, magazines, newsletter-type products and other
information via the internet or in electronic form, (b) the publishing and/or
distribution of software, including software-type products specifically
developed to enhance the use of information on the internet, (c) the development
and/or distribution of products to be used in a training environment, (d) the
offering of training courses, including offering such courses via
<PAGE> 27
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the internet or in electronic form, and (e) all businesses reasonably related,
ancillary or complimentary to any of the businesses described in clause (a),
(b), (c) or (d).
"LOAN" means any extension of credit by any Lender to the Borrower
pursuant to Article II and shall include any Term Loan, Revolving Loan or
Incremental Loan.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, the
Subsidiary Guaranty, the Collateral Documents and all other agreements,
Instruments, certificates or other documents (a) evidencing or securing all or
any part of any of the Obligations or other liabilities of the Borrower or of
any of its Subsidiaries under this Agreement, the Notes, the Collateral
Documents or any of the other Loan Documents, or (b) otherwise executed and/or
delivered by the Borrower or by any of its Subsidiaries pursuant to or in
connection with this Agreement, the Notes, any of the Collateral Documents or
any of the other Loan Documents.
"MACMILLAN" has the meaning specified in the Recitals hereto.
"MACMILLAN ACQUISITION" has the meaning specified in the Recitals
hereto.
"MACMILLAN PURCHASE AGREEMENT" has the meaning specified in the
Recitals hereto.
"MACMILLAN SHARES" has the meaning specified in the Recitals hereto.
"MAJORITY LENDERS" means, at any time, Lenders holding more than 50% of
the Aggregate Commitment in effect at such time; provided, however, that if the
Commitments shall have terminated in full, the term "MAJORITY LENDERS" shall
mean Lenders holding (including as a result of participations pursuant to
Sections 3.3(a) and 3.3(d)) more than 50% of the aggregate amount of the Total
Exposure at such time.
"MARGIN STOCK" means "margin stock" as such term is defined in
Regulation T, U or X of the Federal Reserve Board.
"MATERIAL CONTRACT" means any contract or other arrangement to which
the Borrower or any of its Subsidiaries is a party (other than any of the Loan
Documents) for which breach, nonperformance, cancellation or failure to renew
has had or could reasonably be expected to have a Materially Adverse Effect.
"MATERIAL EVENT OF DEFAULT" means any of the following events occurring
or existing at any time on or after the Effective Date: (a) any Events of
Default of the kind described in any of Sections 9.1.1, 9.1.2, 9.1.5 and 9.1.10
shall occur and shall be continuing for more than fourteen (14) days; or (b) any
Events of Default of the kind described in any of Sections 9.1.6, 9.1.7, 9.1.9,
9.1.11 and 9.1.12 shall at any time occur, arise or (as the case may be)
develop.
"MATERIALLY ADVERSE EFFECT" means, in relation to any event, occurrence
or development of whatsoever nature (including any adverse determination in any
litigation, arbitration or governmental investigation or proceeding):
(a) any materially adverse effect on the business, Property,
results of operations or condition, financial or otherwise, of the Borrower and
its Subsidiaries, taken as a whole;
<PAGE> 28
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(b) any materially adverse effect on the ability of the
Borrower or any of its Subsidiaries to perform any of its payment or other
material Obligations under any of the Loan Documents to which it is a party; or
(c) any material impairment of the validity or enforceability
of any of the Loan Documents or any material impairment of any of the material
rights or remedies available to any of the Agents, the Issuing Lender or the
Lenders under any of the Loan Documents.
"MATURITY DATE" means August 1, 2005.
"MAXIMUM INCREMENTAL AMOUNT" has the meaning specified in Section
2.1(c), as such amount may be reduced from time to time pursuant to this
Agreement.
"MEASUREMENT PERIOD" means any period of four consecutive Fiscal
Quarters of the Borrower.
"MOODY'S" means Moody's Investors Service, Inc., and its successors.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" (within the meaning
of Section 4001(a)(3) of ERISA) and to which the Borrower or any Subsidiary of
the Borrower or any ERISA Affiliate makes, is making, or is obligated to make
contributions or, during the preceding three (3) calendar years, has made, or
has been obligated to make, contributions.
"NET CASH PROCEEDS" means, in connection with any Asset Sale or
Recovery Event, the cash proceeds (including any cash payments received by way
of deferred payment pursuant to a promissory note, receivable or otherwise, but
only as and when received in cash) of such Asset Sale or Recovery Event, net of
(a) reasonable transaction costs (including any underwriting, brokerage or other
selling commissions and reasonable legal, advisory and other fees and expenses,
including title and recording expenses, associated therewith, in each case,
actually incurred and satisfactorily documented), (b) required debt payments
(other than pursuant hereto), (c) taxes reasonably estimated to be payable as a
result of such Asset Sale or Recovery Event, and (d) any portion of such cash
proceeds which the Borrower determines in good faith should be reserved for
post-closing adjustments or liabilities (to the extent the Borrower delivers to
the Administrative Agent a certificate signed by its chief financial officer as
to such determination), it being understood and agreed that on the day all of
such post-closing adjustments and liabilities have been determined, (i) the
amount (if any) by which the reserved amount of the cash proceeds of such Asset
Sale or Recovery Event exceeds the actual post-closing adjustments or
liabilities payable by the Borrower or any of its Subsidiaries shall constitute
Net Cash Proceeds on such date, and (ii) the amount (if any) by which the actual
post-closing adjustments or other liabilities payable by the Borrower or any of
its Subsidiaries exceeds the reserved amount of the cash proceeds of such Asset
Sale or Recovery Event on such date shall be credited against any subsequent Net
Cash Proceeds that the Borrower and its Subsidiaries are required to apply to
prepay the Loans pursuant to Section 2.7(b).
"NET ISSUANCE PROCEEDS" means, with respect to the issuance or Sale by
the Borrower or by any of its Subsidiaries, in each case, for the account of the
Borrower or of any of its Subsidiaries, of any Equity Interests of the Borrower
(otherwise than in connection with employee benefit plans) or of any
Indebtedness of the Borrower or any of its Subsidiaries to any Person or Persons
other than the Borrower or any of its Subsidiaries: (a) the gross cash proceeds
received in connection with such issuance or Sale, as and when received; MINUS
(b) all of the
<PAGE> 29
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reasonable transaction costs (including legal, investment banking and other fees
and disbursements) payable or incurred in connection therewith in favor of any
Person not an Affiliate of the Borrower and the reasonable out-of-pocket
disbursements payable in favor of any such Affiliate.
"NOTES" means, collectively, the Term Notes, the Revolving Credit Notes
and the Incremental Loan Notes.
"NOTICE OF BORROWING" means a written notice given by the Borrower to
the Administrative Agent pursuant to Section 2.3(a), in or substantially in the
form of Exhibit C.
"NOTICE OF CONVERSION/CONTINUATION" means a written notice given by the
Borrower to the Administrative Agent pursuant to Section 2.4(b), in or
substantially in the form of Exhibit D.
"OBLIGATIONS" means, collectively, all Loans, Letter of Credit
Borrowings, reimbursement obligations under Letters of Credit and other
Indebtedness, advances, debts, liabilities, obligations, interest, fees, costs
and expenses (including, without limitation, Attorney Costs), covenants and
duties, of any kind or nature, owing by the Borrower or by any other Credit
Party to any Lender (or any Lender Affiliate (or any Affiliate of such Lender
engaged in capital market transactions generally)), any Agent or the Issuing
Lender pursuant to or in connection with (a) this Agreement, or (b) any of the
other Loan Documents, in each case, whether direct or indirect, absolute or
contingent, due or to become due, now existing or at any time hereafter arising,
and howsoever acquired (including those acquired by assignment) created or
arising, and whether or not for the payment of money or evidenced by any note,
guarantee or other Instrument.
"OECD" means the Organization for Economic Cooperation and Development.
"ORIGINATING LENDER" has the meaning specified in Section 11.7(d).
"OTHER TAXES" has the meaning specified in Section 4.1(b).
"PARENT AFFILIATED COMPANIES" means, at any time of determination,
collectively, (a) the Parent Company, (b) all of the Persons (other than the
Borrower and its Subsidiaries) that are Subsidiaries of the Parent Company at
such time, and (c) the Parent Company's Employee Stock Ownership Plan and all
Affiliates of such Plan (other than the Borrower and its Subsidiaries).
"PARENT COMPANY" means International Data Group, Inc.
"PARTICIPANT" has the meaning specified in Section 11.7(d).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any of its principal functions under ERISA.
"PENSION PLAN" means a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA which the Borrower or any Subsidiary of the
Borrower or any ERISA Affiliate sponsors or maintains, or to which it makes, is
making, or is obligated to make contributions, or in the case of a multiple
employer plan (as described in Section 4064(a) of ERISA) has made contributions
at any time during the immediately preceding five (5) plan years, but excluding
any Multiemployer Plan.
<PAGE> 30
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"PERMITTED ACQUISITION" means any Acquisition by the Borrower or by any
of its Subsidiaries of (a) any business, division or other business unit engaged
primarily in the Line of Business, (b) all or any substantial part of the
Property of any Person engaged primarily in the Line of Business, or (c) the
direct or indirect ownership or control of at least a majority (in number of
votes) of the Voting Interests, or at least a majority of the Equity Interests,
of any Person engaged primarily in the Line of Business; provided, however,
that, with respect to each Acquisition of the kind described in clause (a),
clause (b) or clause (c), each of the applicable Permitted Acquisition
Conditions with respect to such Acquisition shall have been satisfied.
"PERMITTED ACQUISITION CONDITIONS" means, collectively, in relation to
any particular Acquisition, each of the following conditions:
(a) The Borrower shall have furnished to the Administrative
Agent (i) as soon as practicable following the execution of any Acquisition
Documentation and, in any event, not less than fourteen (14) days prior to
completion of such Acquisition, (A) an Acquisition Certificate containing
Acquisition Pro Formas showing the proposed Acquisition and each other
Acquisition for which a definitive agreement has been executed at the time of
delivery of such Acquisition Certificate, (B) in the case of any Acquisition in
the Amount of $10,000,000 or more, a due diligence report for such Acquisition,
and up-dated financial projections of the kind described in Section 6.8(a)
revised to reflect on a pro forma basis the proposed Acquisition, and (ii) on
the closing date for such Acquisition (or as soon prior to such date as
practicable), an Acquisition Certificate containing Acquisition Pro Formas
showing solely the proposed Acquisition. The Borrower shall also have furnished
to the Administrative Agent copies of the Acquisition Documentation for such
Acquisition and all material related documentation as soon as practicable prior
to the consummation of such Acquisition.
(b) The Borrower, a Subsidiary of the Borrower and/or the
entity to be acquired, as appropriate, shall have executed and delivered and
furnished to the Administrative Agent, concurrently with the consummation of
such Acquisition, such Instruments and other documents as shall be required
pursuant to Section 7.12.
(c) After giving effect to such Acquisition, (i) the
Consolidated Leverage Ratio as of the last day of the most recent Measurement
Period for which financial statements have been delivered pursuant to Section
7.1, as determined on a Pro Forma Basis in accordance with the Acquisition Pro
Formas for such Acquisition, shall be .50:1.00 less than the maximum
Consolidated Leverage Ratio permitted as of the last day of such Measurement
Period by Section 8.4(a), and (ii) the Borrower shall not be in violation of any
other financial covenant contained in Section 8.4 as of the last day of and for
such Measurement Period, in each case on a Pro Forma Basis based upon the
Acquisition Pro Formas contained in the Acquisition Certificate in which the
Borrower shall have certified as to satisfaction of the conditions set forth in
this paragraph (c).
(d) Both immediately before and immediately after giving
effect to such Acquisition, no Default shall be continuing or shall result
therefrom.
"PERMITTED ACQUISITION DOCUMENTS" means, collectively, in relation to
any Permitted Acquisition, all of the Acquisition Documentation for such
Permitted Acquisition.
<PAGE> 31
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"PERMITTED DISPOSITION" means:
(a) any Sale by the Borrower or by any of its Subsidiaries of
any of its inventory or other Property in the ordinary course of its business;
(b) any Sale by the Borrower or by any of its Subsidiaries in
the ordinary course of its business of its equipment or other Property that is
obsolete or no longer useful in or necessary to its business;
(c) any Sale by the Borrower or by any of its Subsidiaries in
the ordinary course of its business, and in a manner consistent with its
customary and usual cash management and other similar investment practices, of
its Permitted Investments;
(d) any Sale by any Subsidiary of the Borrower of all or any
part of its Property to the Borrower or to any Wholly-Owned Subsidiary of the
Borrower;
(e) any Sale by the Borrower or by any of its Subsidiaries, in
the ordinary course of its business and in a manner consistent with the
Borrower's or any Subsidiary's usual and customary business practices, of
Property to the Borrower or to any of its Subsidiaries; and
(f) the creation or incurrence by the Borrower or by any of
its Subsidiaries of any Liens expressly permitted by Section 8.3.
"PERMITTED EQUITY INTERESTS" means any Equity Interests of any Person
on account of or with respect to which such Person has no obligation to (a)
declare or pay any dividends or other distributions at any time on or prior to
December 31, 2005, (b) make (except upon liquidation of such Person) any
redemption, repurchase, retirement or acquisition, whether through a Subsidiary
of such Person or otherwise, at any time on or prior to December 31, 2005 (other
than de minimis cash payments in connection with conversion of Indebtedness of
such Person into Equity Interests of such Person), (c) make (except upon
liquidation of such Person) any return of capital to the holder thereof at any
time on or prior to December 31, 2005, or (d) make (except upon liquidation of
such Person) any other distributions of any kind at any time on or prior to
December 31, 2005, EXCEPT, in the case of each of clauses (a), (b), (c) and (d),
in Permitted Equity Interests of such Person.
"PERMITTED INDEBTEDNESS" means any of the following Indebtedness:
(a) Indebtedness of the Borrower or any of its Subsidiaries in
respect of taxes, assessments, levies or other governmental charges, and
Indebtedness of any such Person in respect of accounts payable or other
Indebtedness to trade creditors incurred in the ordinary course of business or
in respect of claims against it for labor, materials or supplies;
(b) Indebtedness of the Borrower or any of its Subsidiaries
secured by Liens of carriers, warehousemen, mechanics, landlords, materialmen,
laborers, suppliers and the like that constitute Permitted Liens under clause
(a) or (d) of the definition thereof;
(c) Indebtedness of the Borrower or any of its Subsidiaries in
respect of judgments or awards which have been in force for less than the
applicable appeal period so long as (i) (in each case) such Person shall at the
time in good faith be prosecuting an appeal or proceedings for review and
execution thereof shall have been effectively stayed pending such
<PAGE> 32
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appeal or review, and (ii) the aggregate principal amount of all such
Indebtedness of the Borrower or any of its Subsidiaries outstanding at any time
(determined on a consolidated basis in accordance with GAAP) shall not exceed
$5,000,000;
(d) Indebtedness under or in respect of Contingent Obligations
of the Borrower or any of its Subsidiaries in respect of letters of credit or
bankers' acceptances or surety or other bonds issued in the ordinary course of
business of such Person in connection with Liens that constitute Permitted Liens
under clause (b) of the definition thereof;
(e) Indebtedness of the Borrower or any of its Subsidiaries
that (i) is existing on the Closing Date, and (ii) is specifically identified in
Schedule 6.10 to the Disclosure Letter; and
(f) any Indebtedness of the Borrower or of any of its
Subsidiaries extending, renewing, refinancing, replacing or refunding any
Indebtedness of the kind described in clause (e) of this definition; provided,
however, that the initial principal amount of any such Indebtedness described in
this clause (f) shall not exceed the principal amount of, plus accrued and
unpaid interest on, the Indebtedness so extended, renewed, refinanced, replaced
or refunded (plus the amount of reasonable fees and expenses incurred in
connection therewith).
"PERMITTED INVESTMENTS" means any of the following Investments by the
Borrower or by any of its Subsidiaries:
(a) Investments that (i) are owned or held by the Borrower or
by any of its Subsidiaries on the Closing Date, and (ii) are identified, unless
immaterial and insubstantial, in Schedule 6.10 to the Disclosure Letter;
(b) Investments in cash or in Cash Equivalents;
(c) Investments in the form of accounts receivable or in the
form of notes receivable arising in the ordinary course of business;
(d) Investments in the form of advances or prepayments to
suppliers or other vendors made in the ordinary course of business and in all
material respects consistent with the Borrower's usual and customary business
practices;
(e) Investments in the form of advances to directors,
managers, officers or employees in the ordinary course of business and in all
material respects consistent with the Borrower's usual and customary business
practices for travel expenses, entertainment expenses, relocation expenses,
drawing accounts or other similar business-related expenses;
(f) subject always to the limitations set forth in Section
8.6(f), investments by the Borrower or any of its Subsidiaries if and to the
extent that all or substantially all of the consideration payable therefor is in
the form of Permitted Equity Interests of the Borrower;
(g) Investments by the Borrower or any of its Subsidiaries
made in the ordinary course of its business in Capital Assets (subject always to
the limitations set forth in Sections 8.2 and 8.3); and
<PAGE> 33
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(h) other Investments (other than Acquisitions) by the
Borrower or by any of its Subsidiaries made in any Person or Persons (other than
the Borrower or any of its Subsidiaries) from time to time after the date hereof
and not otherwise described in any of clauses (a) through (g) of this
definition; provided, however, that the aggregate amount of all of such
Investments so made from time to time during the period from the Effective Date
to the Maturity Date shall not exceed $10,000,000, such aggregate amount to be
determined on a consolidated basis (exclusive of any consideration in the form
of Permitted Equity Interests of the Borrower) and on the basis of the original
cost of each of such Investments and determined before giving any effect to any
write-offs or write-downs of any of such Investments or to any decreases or
losses (whether partial or complete) in the Fair Market Value thereof.
"PERMITTED LIENS" means any of the following Liens:
(a) Liens to secure taxes, assessments, levies or other
governmental charges imposed upon the Borrower or any of its Subsidiaries, and
Liens to secure claims against the Borrower or any of its Subsidiaries for
labor, materials or supplies;
(b) deposits or pledges made by the Borrower or any of its
Subsidiaries in the ordinary course of its business (i) in connection with, or
to secure payment of, (A) workers' compensation, unemployment insurance or other
forms of governmental insurance or benefits, or (B) liability to insurance
carriers under insurance or self-insurance arrangements, (ii) to secure the
performance of bids, tenders, statutory obligations, leases, contracts (other
than contracts relating to borrowed money) or other obligations of like nature,
or (iii) to secure surety, appeal, indemnity or performance bonds, in each case,
in the ordinary course of the business of such Person;
(c) Liens in respect of judgments or awards against the
Borrower or any of its Subsidiaries to the extent that such judgments or awards
constitute Permitted Indebtedness under clause (c) of the definition thereof;
(d) Liens of carriers, warehousemen, mechanics, landlords,
materialmen, laborers, suppliers and the like incurred in the ordinary course of
the business of the Borrower or any of its Subsidiaries, in each case, for sums
not overdue or being contested in good faith by appropriate proceedings, and for
which appropriate reserves with respect thereto have been established and
maintained on the consolidated books of the Borrower and its Subsidiaries in
accordance with GAAP to the extent required by GAAP;
(e) easements, rights-of-way, zoning and other similar
restrictions and covenants and other similar encumbrances or title defects
which, in the aggregate, are not substantial in amount, and which do not in any
case materially detract from the value of the Property subject thereto or
interfere with the ordinary conduct of the business of the Borrower or any of
its Subsidiaries;
(f) Liens that are in existence on the Closing Date and are
disclosed in Schedule 6.10 to the Disclosure Letter;
(g) extensions, renewals and replacements of Liens described
in clause (f) of this definition or of Liens permitted by clause (c) or by
clause (d) of Section 8.3; provided, however, that (i) each such extension,
renewal or replacement Lien is limited to the Property covered by the Lien so
extended, renewed or replaced, and (ii) does not secure any Indebtedness other
than (A) Indebtedness that constitutes Permitted Indebtedness under clause (e)
of the
<PAGE> 34
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definition thereof, or (as the case may be) (B) Indebtedness permitted by clause
(g) or clause (h) of Section 8.2;
(h) Liens arising by virtue of statutory, common law or
contractual provisions relating to bankers' Liens, rights of set-off and similar
remedies as to deposit or similar accounts; and
(i) Liens on assets of Subsidiaries securing extensions of
credit by the Borrower or by another Subsidiary of the Borrower; provided,
however, that all of such Liens shall have been duly and properly assigned to
the Collateral Agent in accordance with terms of the Collateral Documents.
"PERSON" means any natural person, corporation, firm, limited liability
company, partnership, business trust, association, government, Governmental
Authority, or any other entity, whether acting in an individual, fiduciary or
other capacity.
"PLAN" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which the Borrower or any Subsidiary of the Borrower or any ERISA
Affiliate sponsors or maintains or to which the Borrower or any of its
Subsidiaries or any ERISA Affiliate makes, is making, or is obligated to make
contributions and includes any Pension Plan or Multiemployer Plan.
"PLEDGE ACKNOWLEDGMENT" means any Instrument of Acknowledgment in or
substantially in the form of Schedule D to the Pledge Agreement.
"PLEDGE AGREEMENT" means the Pledge and Security Agreement, in or
substantially in the form of Exhibit E.
"PLEDGE NOTICE" means any Pledge Notice in or substantially in the form
of Schedule C to the Pledge Agreement.
"PLEDGED COLLATERAL" has the meaning specified in the Pledge Agreement.
"PLEDGED ENTITY" has the meaning specified in the Pledge Agreement.
"PRINCIPAL PAYMENT DATES" means, collectively, the dates specified (a)
by Section 2.8(a), for the repayment of principal of the Term Loans in
installments, and (b) by Section 2.8(c), for the repayment of principal of the
Incremental Loans in installments.
"PRO FORMA BASIS" means, with respect to compliance with any test or
covenant for any period hereunder, compliance with such test or covenant after
giving effect to any proposed Acquisition, disposition or other action which
requires compliance on a pro forma basis, giving effect to adjustments to
increase Consolidated EBITDA, to account for expected and quantifiable
improvements in operations as a result of such transaction, including the
elimination of non-recurring expenses, non-recurring costs and cost reductions
and the impact of management's operational and organizational changes, and
using, for purposes of determining such compliance, the historical financial
statements of all entities or assets so acquired or to be acquired and the
consolidated financial statements of the Borrower and its Subsidiaries which
shall be reformulated (a) as if such Acquisition, disposition or other action,
and any other such action which has been consummated during such period, and any
Indebtedness or other liabilities incurred in connection with any such actions,
had been consummated at the beginning of such
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period (and assuming that such Indebtedness bears interest during any portion of
the applicable measurement period prior to the relevant action at the weighted
average of the interest rates applicable to outstanding Loans during such
period), and (b) otherwise in conformity with such reasonable procedures as may
be agreed upon between Administrative Agent and the Borrower; provided, however,
that all of the calculations referred to herein shall be in reasonable detail
and shall be in form and substance reasonably satisfactory to Administrative
Agent in all material respects.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
"PURCHASE MONEY LIENS" has the meaning specified in Section 8.2(g).
"REAL PROPERTY" of any Person means all of the right, title and
interest of such Person in and to any land, improvements and fixtures, including
leaseholds.
"RECOVERY EVENT" means the receipt by the Borrower or by any of its
Subsidiaries of any insurance or other cash proceeds payable by reason of theft,
loss, physical destruction, condemnation or damage or any other similar event
with respect to any Property of the Borrower or of any of its Subsidiaries.
"REINVESTMENT ASSETS" means, collectively, (a) any Capital Assets or
other Property to be used as otherwise employed by the Borrower or by any of its
Subsidiaries in the Line of Business, and (b) any Permitted Acquisition.
"REINVESTMENT ELECTION" has the meaning specified in Section 2.7(b)(i).
"REINVESTMENT EVENT" means any Asset Sale or any Recovery Event in
respect of which the Borrower shall have made a Reinvestment Election by
delivering a Reinvestment Notice with respect thereto.
"REINVESTMENT NOTICE" means a written notice duly executed by an
Authorized Officer of the Borrower stating that (a) on and as of the date of
such notice, no Material Event of Default is continuing, and (b) the Borrower
reasonably expects to use or to cause a Subsidiary of the Borrower to use all or
a specified portion of the Net Cash Proceeds of an Asset Sale or Recovery Event
to purchase, construct or otherwise acquire Reinvestment Assets.
"REINVESTMENT PERIOD" means, with respect to any Reinvestment Election
and the related Anticipated Reinvestment Amount, the period commencing on the
date of the Reinvestment Event to which such Reinvestment Election relates and
terminating on the later to occur of (a) the expiration of the period of 270
days commencing on the date of such Reinvestment Event, or (b) if, prior to the
expiration of such 270-day period, the Borrower or any of its Subsidiaries shall
have entered into a binding agreement to reinvest all or any part of such
Anticipated Reinvestment Amount in Reinvestment Assets, then the expiration of
the period of 450 days commencing on the date of such Reinvestment Event.
"REINVESTMENT PREPAYMENT AMOUNT" means, with respect to any
Reinvestment Election, the amount, if any, on any Reinvestment Prepayment Date
relating thereto, by which (a) the Anticipated Reinvestment Amount in respect of
such Reinvestment Election EXCEEDS (b) the aggregate amount thereof expended
prior to such date by the Borrower and its Subsidiaries to
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acquire Reinvestment Assets (including reasonable out-of-pocket disbursements in
connection with any such acquisition).
"REINVESTMENT PREPAYMENT DATE" means, with respect to any Reinvestment
Election, the earliest to occur of (a) the date, if any, upon which the
Administrative Agent, on behalf of the Majority Lenders, shall have delivered a
written termination notice to the Borrower, provided that such notice may only
be given by the Administrative Agent to the Borrower while any Material Event of
Default shall be continuing, (b) the last day of the relevant Reinvestment
Period, or (c) the date on which the Borrower shall have determined not to, or
shall have otherwise ceased to, proceed with the purchase, construction or other
acquisition of Reinvestment Assets with the related Anticipated Reinvestment
Amount.
"RELATED AGREEMENT" means and refers to each of the Macmillan Purchase
Agreement and the other Instruments and other documents from time to time
executed and/or delivered by the Borrower or by any of its Subsidiaries pursuant
thereto or in connection therewith.
"REPORTABLE EVENT" means, any of the events set forth in Section
4043(c) of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
"RESPONSIBLE OFFICER" means, in relation to the Borrower or any
Subsidiary of the Borrower, its chief executive officer, its president, any vice
president, its chief financial officer, treasurer or any other officer having
substantially the same authority and responsibility, in each case, acting solely
in such capacity and without personal liability.
"RESTRICTED PAYMENTS" means, in relation to the Borrower and its
Subsidiaries:
(a) any payment, prepayment, distribution, loan, advance,
Investment or Sale by the Borrower or by any of its Subsidiaries which
constitutes an Affiliate Transaction described in clause (a), (b), (c), (d),
(e), (f) or (g) of the definition "AFFILIATE TRANSACTION"; and
(b) any declaration or payment by the Borrower or by any of
its Subsidiaries of any dividends or other distributions on account of, or any
payment or other distribution by the Borrower or by any of its Subsidiaries on
account of the purchase, repurchase, redemption, retirement or other acquisition
for value of, any Capital Stock of or any other Equity Interests in the
Borrower.
"REVOLVING COMMITMENT" means, for each Lender, the amount set forth
opposite such Lender's name under the caption "REVOLVING COMMITMENT" on Schedule
2.1, as such amount may be reduced from time to time pursuant to and in
accordance with the provisions hereof.
"REVOLVING COMMITMENT FEES" has the meaning specified in Section
2.9(a).
"REVOLVING COMMITMENT PERCENTAGE" means, as to any Lender, the
percentage equivalent of such Lender's Revolving Commitment divided by the
Aggregate Revolving Commitment; provided, however, that if the Revolving
Commitments have terminated in full, the "REVOLVING COMMITMENT PERCENTAGE" of
each Lender shall be determined by dividing such Lender's Revolving Commitment
in effect immediately prior to such termination by the Aggregate Revolving
Commitment in effect immediately prior to such termination.
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"REVOLVING COMMITMENT TERMINATION DATE" means 5:00 p.m. (Boston,
Massachusetts time) on the first Business Day immediately preceding the Maturity
Date.
"REVOLVING CREDIT NOTE" has the meaning specified in Section 2.2(b).
"REVOLVING LOAN" means any Loan by a Lender to the Borrower under
Section 2.1(b), which may be a Eurodollar Loan or a Base Rate Loan.
"S&P" means Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc., and its successors.
"SALE" means any sale, conveyance, exchange, swap, trade, transfer or
other disposition of any Property, including any sale, transfer or other
disposition of copyrights, trademarks and other intellectual Property made by or
through license agreements or other similar arrangements.
"SECURITIES" means any Capital Stock, Equity Interests, bonds,
debentures, promissory notes or other evidences of Indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or, in general, any
Instruments commonly known as "securities".
"SECURITY AGREEMENT" means the Security Agreement, in or substantially
in the form of Exhibit F, pursuant to which each of the Borrower and its
Subsidiaries from time to time party thereto shall grant to the Collateral Agent
security interests in and to tangible and intangible personal Property of such
Person in accordance with the terms thereof.
"SECURITY AGREEMENT COLLATERAL" has the meaning specified in the
Security Agreement.
"SECURITY INSTRUMENT" means any security agreement, chattel mortgage,
assignment, pledge agreement, financing or other similar statement or notice,
continuation statement, other agreement or Instrument, or any amendment or
supplement to any thereof, creating, governing or providing for, evidencing or
perfecting any security interest or Lien.
"SOLVENCY CERTIFICATE" means the solvency certificate in or
substantially in the form of Exhibit N, to be executed by the chief financial
officer of the Borrower and delivered pursuant to Section 5.1.7.
"SUBSIDIARY" means, in relation to any Person (in this paragraph called
the "PARENT") at any time, any corporation, limited liability company,
partnership or other Person (a) of which shares of Capital Stock or other Equity
Interests having ordinary voting power to elect a majority of the board of
directors or other managers of such corporation, limited liability company,
partnership or other Person, or representing a majority of the Equity Interests
in such corporation, limited liability company, partnership or other Person, are
at the time owned, controlled or held, directly or indirectly, by the parent, or
(b) the management of which is otherwise controlled, directly or indirectly, by
the parent.
"SUBSIDIARY GUARANTORS" means, collectively, each of the Domestic
Subsidiaries of the Borrower identified in Schedule 6.12 to the Disclosure
Letter as a "SUBSIDIARY GUARANTOR", and each of the other Subsidiaries of the
Borrower that at any time after the Closing Date shall execute and deliver to
the Administrative Agent a Guarantor Supplement.
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"SUBSIDIARY GUARANTY" means the Subsidiary Guaranty, in or
substantially in the form of Exhibit I, pursuant to which, in accordance with
the terms hereof, certain Subsidiaries of the Borrower shall guaranty the
payment and performance of all of the Obligations.
"SYNDICATION AGENT" means Wells Fargo Bank, National Association, in
its capacity as syndication agent for the Agents, the Issuing Lender and the
Lenders under this Agreement and the other Loan Documents, and any successor to
such syndication agent.
"TAXES" has the meaning specified in Section 4.1(a).
"TERM COMMITMENT" means, for each Lender, the amount set forth opposite
such Lender's name under the caption "TERM COMMITMENT" on Schedule 2.1, as such
amount may be reduced from time to time pursuant to and in accordance with the
provisions hereof.
"TERM COMMITMENT PERCENTAGE" means, as to any Lender, the percentage
equivalent of such Lender's Term Commitment divided by the Aggregate Term
Commitment; provided, however, that if the Term Commitments have terminated in
full, the "TERM COMMITMENT PERCENTAGE" of each Lender shall be determined by
dividing such Lender's Term Commitment in effect immediately prior to such
termination by the Aggregate Term Commitment in effect immediately prior to such
termination.
"TERM LOAN" means any Loan by a Lender to the Borrower under Section
2.1(a), which may be a Eurodollar Loan or a Base Rate Loan.
"TERM NOTE" has the meaning specified in Section 2.2(b).
"TOTAL EXPOSURE" means, at any time of determination, the SUM of (a)
the aggregate principal amount of all of the Loans outstanding at such time,
PLUS (b) the aggregate amount of all of the Letter of Credit Obligations at such
time.
"TOTAL REVOLVER UTILIZATION" means, at any time of determination, the
SUM of (a) the aggregate principal amount of all outstanding Revolving Loans
(other than Revolving Loans made for the purpose of reimbursing the Issuing
Lender for any amounts drawn under any Letters of Credit, but not yet so
applied), PLUS (b) the Letter of Credit Obligations then outstanding.
"TRADEMARK SECURITY AGREEMENT" means a Trademark Security Agreement, in
or substantially in the form of Exhibit H, to be executed and delivered by each
of the Borrower and certain of its Subsidiaries in favor of the Collateral Agent
in compliance with the terms of this Agreement and the Security Agreement.
"TRANSACTIONS" means, collectively, (a) the Macmillan Acquisition, and
(b) the making of the Term Loans on the Closing Date.
"UNFUNDED PENSION LIABILITY" means the excess of a Pension Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the current value
of that Plan's assets, determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.
"UNITED STATES" and "U.S." mean the United States of America.
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"VOTING INTERESTS" means, in relation to any Person at any particular
date, any Capital Stock or other Equity Interests of the class or classes having
general voting power under ordinary circumstances to elect the board of
directors, managers or trustees (or any other Persons performing similar
functions) of such Person (irrespective of whether or not at the time Capital
Stock or other Equity Interests of any other classes shall have or might have
voting power by reason of the happening of any contingency).
"WHOLLY-OWNED SUBSIDIARY" means, in relation to any Person, any
Subsidiary of such Person, all of the Equity Interests in which (other than
directors' qualifying shares) are owned by such Person or by another
Wholly-Owned Subsidiary of such Person.
"YEAR 2000 COMPLIANT" and "YEAR 2000 PROBLEM" have the meanings
specified in Section 6.22.
1.2. USE OF DEFINED TERMS. Terms for which meanings are provided in
this Agreement shall, unless otherwise defined or the context otherwise
requires, have such meanings when used in the Notes, the Schedules and Exhibits,
each of the other Loan Documents, and each notice or other communication
delivered from time to time in connection with this Agreement or any Instrument
executed pursuant hereto.
1.3. CROSS-REFERENCES. Unless otherwise specified, references in this
Agreement or in any of the other Loan Documents to any Schedule, Exhibit,
Article or Section are references to such Schedule, Exhibit, Article or Section
of this Agreement or such other Loan Document, as the case may be, and, unless
otherwise specified, references in any Schedule, Exhibit, Article, Section or
definition to any paragraph or clause are references to such paragraph or clause
of such Schedule, Exhibit, Article, Section or definition.
1.4. ACCOUNTING AND FINANCIAL DETERMINATIONS. Where the character or
amount of any asset or liability or item of income of expense is required to be
determined, or any accounting computation is required to be made, for the
purposes of this Agreement or any of the other Loan Documents, such
determination or calculation shall, to the extent applicable, be made in
accordance with generally accepted accounting principles, as consistently
applied by the Borrower ("GAAP").
1.5. GENERAL PROVISIONS RELATING TO DEFINITIONS. Terms for which
meanings are defined in this Agreement 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 term
"INCLUDING" means including, without limiting the generality of any description
preceding such term. References to any Instrument defined in this Agreement or
any of the other Loan Documents refer to such Instrument as originally executed,
or, if subsequently amended or supplemented from time to time, as so amended or
supplemented and in effect at the relevant time of reference thereto. Each
reference herein to any Person shall include a reference to such Person's
successors and assigns.
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ARTICLE II.
THE CREDIT FACILITIES
2.1. AMOUNTS AND TERMS OF COMMITMENTS.
(a) THE TERM LOANS. Each Lender severally agrees, on the terms and
conditions hereinafter set forth, to make Term Loans (not to exceed its Term
Commitment) to the Borrower on the Closing Date, which shall not exceed for all
Lenders $70,000,000 in aggregate original principal amount. Amounts borrowed as
a Term Loan which are repaid or prepaid by the Borrower may not be reborrowed.
(b) THE REVOLVING LOANS. Each Lender severally agrees, on the terms and
conditions hereinafter set forth, to make Revolving Loans to the Borrower from
time to time on any Business Day during the period from the Closing Date to the
Revolving Commitment Termination Date, in an aggregate amount not to exceed at
any time outstanding the amount of such Lender's Revolving Commitment and in a
combined amount for all Lenders not to exceed at any time outstanding
$40,000,000; provided, however, that, immediately after giving effect to any
Borrowing of Revolving Loans, the SUM of the aggregate principal amount of all
outstanding Revolving Loans, PLUS the aggregate amount of all outstanding Letter
of Credit Obligations shall not exceed the Aggregate Revolving Commitment then
in effect. Within such limits, and subject to the other terms and conditions
hereof, the Borrower may borrow Revolving Loans under this Section 2.1(b),
prepay Revolving Loans pursuant to Section 2.6 or 2.7(a) and reborrow Revolving
Loans pursuant to this Section 2.1(b).
(c) THE INCREMENTAL FACILITY.
(i) At any time prior to the Incremental Commitment
Termination Date, the Borrower may request, pursuant to the procedures
set forth in Section 2.16, one or more of the Lenders (or any other
financial institutions which will become Lenders upon delivery and
acceptance of Incremental Commitments in compliance with the terms
herewith) to provide commitments, in the amount of $5,000,000 or any
integral multiple of $1,000,000 in excess thereof, and in the aggregate
for all such commitments in an amount not in excess of $25,000,000 (the
"MAXIMUM INCREMENTAL AMOUNT"), for an additional revolving credit
facility (an "INCREMENTAL FACILITY") to be provided to the Borrower
hereunder on the terms and conditions for the Incremental Commitments,
the Incremental Loans and the Incremental Facility set forth in this
Agreement and in the other Loan Documents (including, but not limited
to, sharing on a pari passu basis the Subsidiary Guaranty, the
Collateral Documents and the Collateral); provided, however, that, in
any event, the mandatory termination of the Incremental Commitments and
the mandatory repayment of the Incremental Loans shall be as set forth
in Section 2.5(a) and in Section 2.8(c). No Lender, by virtue of its
being a party hereto, shall have any obligations of any kind to provide
commitments for the Incremental Facility, and each Lender may determine
in its sole, absolute and complete discretion whether to provide such
commitments. Within such limits, and subject to the other terms and
conditions hereof, from time to time prior to the Incremental
Commitment Termination Date, the Borrower may borrow Incremental Loans
under this Section 2.1(c), prepay Incremental Loans pursuant to Section
2.6 or Section 2.7(a), and reborrow Incremental Loans pursuant to this
Section 2.1(c).
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(ii) When the Incremental Facility shall become effective in
accordance with the terms of Section 2.16, Schedule 2.1 shall be deemed
amended to reflect each of the Incremental Commitments comprising the
Incremental Facility. In the event that an Incremental Facility shall
have become effective, each Incremental Lender shall be deemed to have
agreed, upon the terms and subject to the conditions contained in this
Agreement, to make from time to time during the period from the date of
such effectiveness through the Incremental Commitment Termination Date
one or more Incremental Loans to the Borrower in an aggregate unpaid
principal amount not exceeding at any time such Incremental Lender's
Incremental Commitment in effect at such time.
2.2. LOAN ACCOUNTS; NOTES.
(a) The Loans made by each Lender shall be evidenced by one or more
loan accounts maintained by such Lender and by the Administrative Agent in the
ordinary course of business. The loan accounts maintained by the Administrative
Agent shall, in the event of any discrepancy between the entries in the
Administrative Agent's books and any Lender's books relating to such loan
accounts, be controlling and, absent manifest error, shall be prima facie
evidence of the amount of the Loans made by the Lenders to the Borrower, the
principal and interest payments thereon and any other amounts owing in respect
of this Agreement or any of the other Loan Documents. Any failure to make a
notation in any such loan account or any error in doing so shall not limit or
otherwise affect the Obligations of the Borrower hereunder to pay any amounts
owing with respect to the Loans.
(b) If requested by any Lender, the Borrower shall execute and deliver
to such Lender (and deliver a copy thereof to the Administrative Agent) one or
more promissory notes evidencing the Loans owing to such Lender pursuant to this
Agreement. Each such note evidencing Term Loans shall be in or substantially in
the form of Exhibit A (as amended, endorsed, replaced or otherwise modified from
time to time, a "TERM NOTE"). Each such note evidencing Revolving Credit Loans
shall be in or substantially in the form of Exhibit B (as amended, endorsed,
replaced or otherwise modified from time to time, a "REVOLVING CREDIT NOTE".
Each such note evidencing Incremental Loans shall be substantially in the form
of Exhibit B with such conforming changes thereto as shall be specified by the
Administrative Agent (as amended, endorsed, replaced or otherwise modified from
time to time, an "INCREMENTAL LOAN NOTE"). All of the Notes shall be entitled to
all of the rights and benefits of this Agreement, the other Loan Documents and
the Collateral.
2.3. PROCEDURE FOR BORROWING.
(a) Each Borrowing of Loans (other than a Borrowing of Revolving Loans
pursuant to Section 3.3(b)) shall be made upon the Borrower's irrevocable
written notice (or telephonic notice immediately confirmed in writing) delivered
to the Administrative Agent in accordance with Section 11.2 in the form of a
Notice of Borrowing, which notice must be received by the Administrative Agent
(i) prior to 12:00 p.m. (Boston, Massachusetts time) not less than three (3)
Business Days prior to the requested Borrowing Date, in the case of Eurodollar
Loans, and (ii) prior to 12:00 p.m. (Boston, Massachusetts time) not less than
one (1) Business Day prior to the requested Borrowing Date, in the case of Base
Rate Loans, specifying:
(A) the amount of the Borrowing, which shall be in a minimum
aggregate principal amount of $1,000,000 or any multiple of $500,000 in
excess thereof;
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(B) the requested Borrowing Date, which shall be a Business
Day;
(C) whether the Borrowing is to be comprised of Eurodollar
Loans or Base Rate Loans; and
(D) in the case of a Eurodollar Loan, the duration of the
Interest Period to be applicable to such Eurodollar Loan. If the Notice
of Borrowing shall fail to specify the duration of the Interest Period
for any Eurodollar Loan which is part of any Borrowing, such Interest
Period shall be of three (3) months' duration.
(b) Upon receipt of the Notice of Borrowing, the Administrative Agent
will promptly notify each Lender thereof and of each such Lender's proportionate
share thereof.
(c) Each Lender will make its proportionate share of each Borrowing
available to the Administrative Agent for the account of the Borrower at the
Administrative Agent's Payment Office by 2:00 p.m. (Boston, Massachusetts time)
on the Borrowing Date requested by the Borrower in funds immediately available
to the Administrative Agent. Unless any applicable condition of Article V has
not been satisfied, the proceeds of all Loans comprising such Borrowing will
then be made available to the Borrower by the Administrative Agent by wire
transfer in accordance with written instructions provided to the Administrative
Agent by the Borrower.
(d) During the continuation of any Default, the Borrower may not elect
to have any Loan made as a Eurodollar Loan.
(e) After giving effect to any Borrowing, there shall not be more than
twelve (12) different Interest Periods in effect in respect of all Loans which
are Eurodollar Loans.
2.4. CONVERSION AND CONTINUATION ELECTIONS FOR ALL BORROWINGS.
(a) The Borrower may upon irrevocable written notice (or telephonic
notice immediately confirmed in writing) to the Administrative Agent in
accordance with paragraph (b):
(i) elect to convert on any Business Day, any Base Rate Loans
(or any part thereof in an amount of not less than $1,000,000 or an
integral multiple of $500,000 in excess thereof) into Eurodollar Loans;
(ii) elect to convert on the last day of any Interest Period
with respect thereto, any Eurodollar Loans (or any part thereof in an
amount of not less than $1,000,000 or an integral multiple of $500,000
in excess thereof) into Base Rate Loans; or
(iii) elect to continue on the last day of any Interest Period
with respect thereto, any Eurodollar Loans (or any part thereof in an
amount of not less than $1,000,000 or an integral multiple of $500,000
in excess thereof) as Eurodollar Loans;
provided, however, that, if any Borrowing comprised of Eurodollar Loans shall
have been reduced, by payment, prepayment or conversion, to an amount that is
less than $1,000,000 then the Eurodollar Loans comprising such Borrowing shall
automatically convert into Base Rate Loans on the last day of the then-current
Interest Period relating thereto.
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(b) The Borrower shall deliver a Notice of Conversion/Continuation in
accordance with Section 11.2 to be received by the Administrative Agent not
later than (i) 12:00 p.m. (Boston, Massachusetts time) not less than three (3)
Business Days in advance of the Conversion Date or Continuation Date, if the
Loans are to be converted into or continued as Eurodollar Loans, and (ii) 12:00
p.m. (Boston, Massachusetts time) not less than one (1) Business Day in advance
of the Conversion Date, if the Loans are to be converted into Base Rate Loans,
specifying:
(A) the proposed Conversion Date or Continuation Date, which
shall in each case be a Business Day;
(B) the aggregate principal amount of all Loans to be
converted or continued;
(C) the nature of the proposed conversion or continuation; and
(D) the duration of the requested Interest Periods, if
applicable.
(c) If, upon the expiration of any Interest Periods applicable to any
Eurodollar Loans, the Borrower shall have failed to select on a timely basis new
Interest Periods to be applicable thereto, such Eurodollar Loans shall
automatically convert into Base Rate Loans upon the expiration of such periods.
(d) Upon receipt of a Notice of Conversion/Continuation, the
Administrative Agent will promptly notify each Lender thereof, or, if no timely
notice is provided by the Borrower, the Administrative Agent will promptly
notify each Lender of the details of any automatic conversion. All conversions
and continuations shall be made pro rata according to the respective outstanding
principal amounts of the Loans with respect to which the notice was given.
(e) During the continuation of any Default, the Borrower may not elect
to have any Loan converted into or continued as a Eurodollar Loan.
(f) Notwithstanding any other provisions contained in this Agreement,
after giving effect to any conversion or continuation of any Loans, there shall
not be more than twelve (12) different Interest Periods in effect in respect of
all Loans which are Eurodollar Loans.
2.5. REDUCTION AND TERMINATION OF COMMITMENTS.
(a)(i) Each of the Revolving Commitments shall in any event
automatically and permanently terminate in full on the Revolving
Commitment Termination Date. The Borrower may, upon not less than five
(5) Business Days' prior written notice to the Administrative Agent,
permanently terminate the Aggregate Revolving Commitment (including the
Letter of Credit Commitment) or permanently reduce the Aggregate
Revolving Commitment (including the Letter of Credit Commitment),
without premium or penalty, by a minimum aggregate amount of $5,000,000
or any multiple of $1,000,000 in excess thereof; provided, however,
that no such reduction or termination shall be permitted if,
immediately after giving effect thereto and to any prepayment of
Revolving Loans made on the effective date thereof, (A) the then
outstanding principal amount of the Revolving Loans, PLUS the then
outstanding Letter of Credit Obligations, will exceed the Aggregate
Revolving Commitment then in effect, or (B) the then outstanding Letter
of Credit Obligations will exceed the Letter of Credit Commitment then
in effect; and,
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provided, further, that once reduced in accordance with
this Section 2.5, the Aggregate Revolving Commitment (including the
Letter of Credit Commitment) may not be increased.
(ii) Each of the Incremental Commitments shall in any event
automatically and permanently terminate in full on the Incremental
Commitment Termination Date. The Borrower may, upon not less than five
(5) Business Days' prior written notice to the Administrative Agent,
permanently terminate the Aggregate Incremental Commitment or
permanently reduce the Aggregate Incremental Commitment by a minimum
aggregate amount of $1,000,000 or any multiple of $500,000 in excess
thereof; provided, however, that no such reduction or termination shall
be permitted if, immediately after giving effect thereto and to any
prepayment of Incremental Loans made on the effective date thereof, the
then outstanding principal amount of the Incremental Loans will exceed
the Aggregate Incremental Commitment then in effect; and, provided,
further, that once reduced in accordance with this Section 2.5, the
Aggregate Incremental Commitment may not be increased.
(iii) The Borrower may, upon not less than five (5) Business
Days' prior written notice to the Administrative Agent, permanently
reduce the Aggregate Term Commitment; provided, however, that once
reduced in accordance with this Section 2.5, the Aggregate Term
Commitment may not be increased.
(b) The Aggregate Term Commitment shall terminate in full on the
Closing Date, upon making of the Term Loans on such date. Each of the Term
Commitments shall in any event automatically and permanently terminate in full
at 5:00 p.m. (Boston, Massachusetts time) on November 1, 1999 if the Term Loans
have not been made to the Borrower on or prior to that date.
(c) The Letter of Credit Commitment shall be automatically and
permanently terminated in full upon termination of the Aggregate Revolving
Commitment. If the Letter of Credit Commitment shall at any time exceed the
Aggregate Revolving Commitment then in effect, then the Letter of Credit
Commitment shall immediately be automatically and permanently reduced to the
amount of the Aggregate Revolving Commitment then in effect.
(d) Any reduction of the Aggregate Term Commitment, the Aggregate
Revolving Commitment or the Aggregate Incremental Commitment pursuant to this
Section 2.5 shall be applied pro rata to each Lender's Term Commitment,
Revolving Commitment or Incremental Commitment, as the case may be, in
accordance with such Lender's applicable Commitment Percentage. The amount of
any such reduction of the Aggregate Revolving Commitment shall not be applied to
the Letter of Credit Commitment unless otherwise specified by the Borrower or
required by the terms of Section 2.5(c). All accrued Fees to the effective date
of any reduction or termination of the Aggregate Revolving Commitment or the
Aggregate Incremental Commitment shall be paid on the effective date of such
reduction or termination. The Administrative Agent shall promptly notify the
Lenders of any reduction or termination of any of the Aggregate Term Commitment,
the Aggregate Revolving Commitment or the Aggregate Incremental Commitment, as
the case may be.
2.6. VOLUNTARY PREPAYMENTS.
(a) The Borrower may, upon at least three (3) Business Days' prior
written notice by the Borrower to the Administrative Agent in the case of
Eurodollar Loans, and upon at least one
<PAGE> 45
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(1) Business Day's prior written notice by the Borrower to the Administrative
Agent in the case of Base Rate Loans, ratably prepay Term Loans, Revolving Loans
or Incremental Loans, as the Borrower may elect, in whole or in part, in amounts
of $1,000,000 or an integral multiple of $500,000 in excess thereof.
(b) Any notice of prepayment delivered pursuant to this Section 2.6
shall be irrevocable and shall specify the date and amount of such prepayment
and the type of Loans to be prepaid, including whether such prepayment is of
Base Rate Loans or Eurodollar Loans or any combination thereof. The
Administrative Agent will promptly notify each Lender thereof and of such
Lender's applicable Commitment Percentage of such prepayment. If any such notice
is given by the Borrower, the Borrower shall be absolutely and unconditionally
obligated to make such prepayment, and the prepayment amount specified in such
notice shall become and be due and payable on the date specified therein,
together with accrued interest to such date on the amount prepaid and the
amounts, if any, required to be paid by the Borrower pursuant to Section 4.4.
(c) Each prepayment of Term Loans, and each prepayment of Incremental
Loans made after the Incremental Commitment Termination Date, pursuant to this
Section 2.6 shall be applied to the remaining scheduled installments of the
Loans of the same type pursuant to Section 2.8(a) in the case of prepayment of
Term Loans, and pursuant to Section 2.8(c) in the case of prepayment of
Incremental Loans, in each case pro rata (based on the principal amount then
remaining unpaid of each of the scheduled installments of the Loans of such
type).
2.7. MANDATORY PREPAYMENTS.
(a)(i) If, on any date, the SUM of (A) the aggregate unpaid
principal amount of all Revolving Loans then outstanding, PLUS (B) all
of the Letter of Credit Obligations then outstanding (to the extent not
Cash Collateralized pursuant to clause (ii) below or as provided for in
Section 3.7) shall exceed the Aggregate Revolving Commitment then in
effect, the Borrower shall immediately prepay principal of the
Revolving Loans in the amount of such excess.
(ii) If, on any date, the aggregate amount of all Letter of
Credit Obligations then outstanding shall exceed the Letter of Credit
Commitment then in effect, the Borrower shall Cash Collateralize on
such date such Letter of Credit Obligations in an amount equal to such
excess.
(iii) If, on any date on or prior to the Incremental
Commitment Termination Date, the aggregate unpaid principal amount of
all Incremental Loans then outstanding shall exceed the Aggregate
Incremental Commitment then in effect, the Borrower shall immediately
prepay principal of the Incremental Loans in the amount of such excess.
(b)(i) If on any date the Borrower or any of its Subsidiaries
shall receive Net Cash Proceeds from any Asset Sale or Recovery Event,
then an amount equal to 100% of the Net Cash Proceeds from such Asset
Sale or Recovery Event shall be applied upon receipt to prepay
principal of the outstanding Term Loans and (if applicable) Incremental
Loans as hereinafter provided; provided, however, that the Borrower and
its Subsidiaries shall be required to apply Net Cash Proceeds received
from any Asset Sale or Recovery Event towards prepayment of principal
as provided above only (A) if any Material Event of Default shall be
continuing at the time of the receipt of such Net Cash Proceeds, or (B)
<PAGE> 46
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if and to the extent that such Net Cash Proceeds, when added to the
aggregate amount of all other Net Cash Proceeds received from Asset
Sales or Recovery Events in the same Fiscal Year, shall exceed
$7,500,000; and provided, further, that the requirements for mandatory
prepayment set forth above in this clause (i) shall be reduced if and
to the extent that the Borrower elects, as hereinafter provided, to
cause all or part of such Net Cash Proceeds to be reinvested by the
Borrower or by one or more of its Subsidiaries in Reinvestment Assets
(a "REINVESTMENT ELECTION"). The Borrower may exercise the Reinvestment
Election with respect to any Asset Sale or Recovery Event only if (1)
no Material Event of Default shall be continuing at the time of such
Asset Sale or Recovery Event, and (2) the Borrower delivers a
Reinvestment Notice with respect to such Asset Sale or Recovery Event
to the Administrative Agent not later than the fifth Business Day
following the date of such Reinvestment Event, with such Reinvestment
Election being effective with respect to Net Cash Proceeds from such
Reinvestment Event equal to the Anticipated Reinvestment Amount
specified in such Reinvestment Notice.
(ii) Nothing in this paragraph (b) shall be construed as a
consent for, or be deemed to permit, any Asset Sale not otherwise
permitted by this Agreement.
(iii) On the Reinvestment Prepayment Date with respect to any
Reinvestment Election, an amount equal to the Reinvestment Prepayment
Amount, if any, for such Reinvestment Election shall be applied as a
mandatory prepayment of principal of the outstanding Term Loans and (if
applicable) Incremental Loans as hereinafter provided.
(c) On each Excess Cash Flow Application Date (commencing with the
Excess Cash Flow Application Date falling on December 31, 2000), an amount equal
to 50% of the Consolidated Excess Cash Flow for the Fiscal Year last ended shall
be applied as a mandatory prepayment of principal of the outstanding Term Loans
and (if applicable) Incremental Loans as hereinafter provided; provided,
however, that if the Consolidated Leverage Ratio as of the last day of such
Fiscal Year is (i) equal to or less than 3.00:1.00, but greater than 2:00:1.00,
then only an amount equal to 25% of the Consolidated Excess Cash Flow for such
Fiscal Year shall be required to be so applied, or (ii) equal to or less than
2.00:1.00, then no payment in respect of the Consolidated Excess Cash Flow for
such Fiscal Year shall be required pursuant to this Section 2.7(c).
(d) If (i) the Borrower or any of its Subsidiaries shall at any time
receive Net Issuance Proceeds from the issuance or Sale of Equity Interests of
the Borrower, and (ii) the Consolidated Leverage Ratio is greater than 2.50:1.00
as of the then most recent Covenant Determination Date prior to such issuance or
Sale of Equity Interests, then, on the first Business Day after the receipt by
the Borrower or by any of its Subsidiaries of such Net Issuance Proceeds, the
Borrower shall prepay principal of the outstanding Term Loans and (if
applicable, as hereinafter provided) Incremental Loans in an amount equal to the
lesser of (A) the amount of such Net Issuance Proceeds, or (B) the amount (if
any) of principal of the outstanding Term Loans and (if applicable) Incremental
Loans that would need to be prepaid on such Business Day in order to cause the
Consolidated Leverage Ratio, determined as of the most recent Covenant
Determination Date on a Pro Forma Basis after giving effect to any such issuance
or Sale of Equity Interests and any such prepayment, to be not greater than
2.50:1.00.
(e) On the date of the receipt thereof by the Borrower or by any of its
Subsidiaries, an amount equal to 100% of the Net Issuance Proceeds from the
issuance or sale of any Indebtedness (other than Indebtedness permitted to be
incurred under Section 8.2) shall be
<PAGE> 47
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applied as a mandatory prepayment of principal of the outstanding Term Loans and
(if applicable) Incremental Loans as hereinafter provided.
(f) Nothing in paragraph (d) or paragraph (e) of this Section 2.7 shall
be construed as a consent for, or be deemed to permit, any issuance or Sale of
Equity Interests or Indebtedness not otherwise permitted by this Agreement.
(g) The Borrower shall pay, together with each principal prepayment
under this Section 2.7, accrued interest on the amount prepaid and any amounts
required pursuant to Section 4.4. Any prepayments pursuant to this Section 2.7
made on any day other than an Interest Payment Date for any Loan shall be
applied: FIRST, to any Base Rate Loans then outstanding; and, THEN, to
Eurodollar Loans with the shortest Interest Periods remaining, provided that, so
long as no Event of Default shall then be continuing, the Administrative Agent
shall, upon the request of the Borrower, apply any such prepayments to
Eurodollar Loans only on the last day of each of the respective Interest Periods
relating thereto, and, until such application of any such prepayments, the
Administrative Agent shall hold the amount thereof as cash Collateral for the
Obligations upon the terms contained in the Collateral Documents.
(h) Each prepayment of Term Loans required pursuant to this Section 2.7
shall be applied to the remaining scheduled installments of Term Loans pursuant
to Section 2.8(a) on a pro rata basis in accordance with the then remaining
unpaid amounts of such remaining installments. Each prepayment of Incremental
Loans required to be made pursuant to this Section 2.7 after the Incremental
Commitment Termination Date shall be applied to the remaining scheduled
installments of the Incremental Loans pursuant to Section 2.8(c) on a pro rata
basis in accordance with the then remaining unpaid amounts of such remaining
installments.
(i) Each prepayment of principal of the outstanding Term Loans and (if
applicable, as hereinafter provided) Incremental Loans required pursuant to
Section 2.7(b), 2.7(c), 2.7(d) or 2.7(e) shall be applied as follows: (A) at any
time prior to the Incremental Commitment Termination Date, to principal of the
Term Loans only, and (B) at any time on or after the Incremental Commitment
Termination Date, to principal of both the Term Loans and the Incremental Loans
on a pro rata basis in accordance with the respective aggregate principal
amounts thereof outstanding at the time of prepayment.
2.8. REPAYMENT OF PRINCIPAL.
(a) THE TERM LOAN. The Borrower shall repay the Term Loans of each
Lender in nineteen (19) installments, payable on the Principal Payment Dates
specified in the table below, in an amount for each such installment equal to
such Lender's Term Commitment Percentage multiplied by the amount set forth
opposite the Principal Payment Date for such installment in the table below:
<TABLE>
<CAPTION>
PRINCIPAL PAYMENT DATE AMOUNT
---------------------- ------
<S> <C>
December 31, 2000 $2,000,000
March 31, 2001 $2,000,000
June 30, 2001 $2,000,000
</TABLE>
<PAGE> 48
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<TABLE>
<S> <C>
September 30, 2001 $2,000,000
December 31, 2001 $3,000,000
March 31, 2002 $3,000,000
June 30, 2002 $3,000,000
September 30, 2002 $3,000,000
December 31, 2002 $3,500,000
March 31, 2003 $3,500,000
June 30, 2003 $3,500,000
September 30, 2003 $3,500,000
December 31, 2003 $4,000,000
March 31, 2004 $4,000,000
June 30, 2004 $4,000,000
September 30, 2004 $4,000,000
December 31, 2004 $5,000,000
March 31, 2005 $5,000,000
July 31, 2005 $10,000,000
</TABLE>
(b) THE REVOLVING LOANS. The Borrower shall repay to the Lenders in
full on the Maturity Date the entire principal amount of each of the Revolving
Loans outstanding on the Maturity Date.
(c) THE INCREMENTAL LOANS. The Borrower shall repay the aggregate
unpaid principal amount of all Incremental Loans outstanding on the Incremental
Commitment Termination Date (the "INCREMENTAL LOAN BALANCE") in eighteen (18)
installments, payable on the Principal Payment Dates specified in the table
below, in an amount for each such installment equal to the Incremental Loan
Balance multiplied by the percentage set forth opposite the Principal Payment
Date for such installment in the table below:
<TABLE>
<CAPTION>
PERCENTAGE OF
INCREMENTAL
PRINCIPAL PAYMENT DATE LOAN BALANCE
---------------------- ------------
<S> <C>
March 31, 2001 3%
June 30, 2001 3%
</TABLE>
<PAGE> 49
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<TABLE>
<S> <C>
September 30, 2001 3%
December 31, 2001 4%
March 31, 2002 4%
June 30, 2002 4%
September 30, 2002 4%
December 31, 2002 5%
March 31, 2003 5%
June 30, 2003 5%
September 30, 2003 5%
December 31, 2003 6%
March 31, 2004 6%
June 30, 2004 6%
September 30, 2004 6%
December 31, 2004 10%
March 31, 2005 10%
July 31, 2005 11%
</TABLE>
(d) MATURITY DATE. Anything herein express or implied to the
contrary notwithstanding, there shall become and be absolutely due and payable
on the Maturity Date, and the Borrower hereby promises to pay on the Maturity
Date, the entire principal of each of the Term Loans, Revolving Loans and
Incremental Loans then remaining unpaid, all of the unpaid interest accrued
thereon, all of the unpaid Fees accrued hereunder and all other unpaid sums
owing under this Agreement or any of the other Loan Documents.
2.2.1. FEES. In addition to the fees described in Section 3.8:
(a) COMMITMENT FEES. (i) The Borrower shall pay to the Administrative
Agent for the ratable account of each Lender with a Revolving Commitment, on the
last day of each March, June, September and December in each year and on the
earlier of the Maturity Date or the date on which the Aggregate Revolving
Commitment shall terminate in full, commitment fees ("REVOLVING COMMITMENT
FEES") equal to the product of (A) the average of the daily excess of the
Aggregate Revolving Commitment from time to time in effect from and after the
Effective Date, minus the Total Revolver Utilization from time to time
outstanding from and after the Effective Date, TIMES (B) the Applicable
Commitment Fee Percentage. The Revolving Commitment Fees shall begin to accrue
on the Effective Date and shall cease to accrue on the
<PAGE> 50
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earlier of the Maturity Date or the date on which the Aggregate Revolving
Commitment shall terminate in full.
(ii) The Borrower shall pay to the Administrative Agent for the ratable
account of each Incremental Lender, on the last day of each March, June,
September and December in each year and on the earlier of the Incremental
Commitment Termination Date or the date on which the Aggregate Incremental
Commitment shall terminate in full, Incremental Commitment Fees based upon the
daily average amount of the unutilized Incremental Commitments. Incremental
Commitment Fees shall begin to accrue on the date on which the Incremental
Facility shall become effective hereunder and shall cease to accrue on the
earlier of the Incremental Commitment Termination Date or the date on which the
Aggregate Incremental Commitment shall terminate in full.
(b) OTHER FEES. The Borrower shall pay to the Agents such other fees,
in such amounts and on such dates as have been agreed or may be agreed between
the Borrower and the Agents from time to time.
2.10. COMPUTATION OF FEES AND INTEREST.
(a) All computations of commitment fees and of interest payable in
respect of Base Rate Loans based upon the Base Rate shall be made on the basis
of a year of 365 or 366 days, as the case may be, and actual days elapsed. All
other computations of fees and interest under this Agreement shall be made on
the basis of a 360-day year and actual days elapsed. Interest and fees shall
accrue during each period during which interest or fees are computed from the
first day thereof to the last day thereof.
(b) The Administrative Agent will promptly notify the Borrower and the
Lenders of each determination of the Eurodollar Rate; provided, however, that
any failure to do so shall not relieve the Borrower of any liability hereunder.
Any change in the interest rate or any fees resulting from a change in the
Applicable Margin or (as the case may be) in the Applicable Commitment Fee
Percentage shall become effective as of the opening of business on the relevant
date of such change. The Administrative Agent will promptly notify the Borrower
and the Lenders of the effective date and the amount of each such change;
provided, however, that any failure to do so shall not relieve the Borrower of
any liability hereunder.
(c) Each determination of interest rates or fees by the Administrative
Agent shall be conclusive and binding on the Borrower and the Lenders in the
absence of manifest error.
2.11. INTEREST.
(a) Except as and to the extent otherwise expressly provided by this
Agreement, each Loan shall bear interest on the unpaid principal amount thereof
from the date made through maturity (whether by acceleration or otherwise)
thereof as follows:
(i) if a Base Rate Loan, at the Alternate Base Rate PLUS the
Applicable Margin for Base Rate Loans; or
(ii) if a Eurodollar Loan, at the Eurodollar Rate PLUS the
Applicable Margin for Eurodollar Loans.
<PAGE> 51
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(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of any prepayment of any
principal of Loans for the principal of such Loans so prepaid. During the
continuation of any Events of Default, interest shall be paid on demand.
(c) If any amount of principal of or interest on any of the Loans, or
any other amount payable hereunder or under any of the other Loan Documents
shall not be paid in full when due and payable (whether at stated maturity, by
acceleration, demand or otherwise), the Borrower shall pay interest (after as
well as before judgment) (i) on the unpaid principal amount of all outstanding
Loans at the applicable rate per annum provided in paragraph (a) of this Section
2.11 PLUS 2%, and (ii) on all other unpaid amounts (including interest) from
time to time overdue, at a rate per annum equal to the Alternate Base Rate PLUS
the Applicable Margin for Base Rate Loans PLUS 2%.
(d) Anything herein to the contrary notwithstanding, the obligations of
the Borrower hereunder shall be subject to the limitation that payments of
interest shall not be required, for any period for which interest is computed
hereunder, to the extent (but only to the extent) that contracting for or
receiving such payment by a particular Lender would be contrary to the
provisions of any law applicable to such Lender limiting the highest rate of
interest which may be lawfully contracted for, charged or received by such
Lender, and in such event the Borrower shall pay such Lender interest at the
highest rate permitted by Applicable Law.
2.12. PAYMENTS BY THE BORROWER; PRO RATA TREATMENT; ETC.
(a) All payments (including prepayments) required to be made by the
Borrower on account of principal, interest, drawings under Letters of Credit,
Fees and other amounts required to be paid under this Agreement or any of the
other Loan Documents shall be made without set-off or counterclaim and shall,
except as otherwise expressly provided with respect to drawings under Letters of
Credit and elsewhere herein, be made to the Administrative Agent for the ratable
account of the Lenders at the Administrative Agent's Payment Office, and shall
be made in Dollars and in immediately available funds, no later than 12:00 p.m.
(Boston, Massachusetts time) on the date specified in this Agreement or (as the
case may be) in any of the other Loan Documents. The Administrative Agent will
promptly distribute to each Lender its pro rata share, if any, of such
principal, interest, Fees or other amounts, in like funds as received. Any
payment which is received by the Administrative Agent later than 12:00 p.m.
(Boston, Massachusetts time) shall be deemed to have been received on the
immediately succeeding Business Day, and any applicable interest or Fees shall
continue to accrue until such payment shall be deemed to have been received.
(b) Whenever any payment hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of interest or Fees, as the case may be (subject to the provisions
set forth in the definition of the term of "INTEREST PERIOD").
(c) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Lenders hereunder
that the Borrower will not make such payment in full, the Administrative Agent
may assume that the Borrower will make such payment in full to the
Administrative Agent as required hereunder on such date in immediately available
funds, and the Administrative Agent may (but shall not be so required), in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an
<PAGE> 52
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amount equal to the amount then due such Lender. If and to the extent the
Borrower shall not have made such payment in full to the Administrative Agent,
each Lender shall repay to the Administrative Agent on demand such amount
distributed to such Lender, together with interest thereon for each day from the
date such amount is distributed to such Lender until the date such Lender repays
such amount to the Administrative Agent, at the Federal Funds Rate as in effect
for each such day.
(d) Each Borrowing by the Borrower from the Lenders hereunder, and any
reduction of the Commitments of the Lenders, shall be made pro rata according to
the respective Term Commitments, Revolving Commitments or Incremental
Commitments (if any), as the case may be, of the relevant Lenders. Each payment
in respect of principal or interest in respect of the Loans, each payment in
respect of Fees payable hereunder and each payment in respect of Letter of
Credit Obligations, shall be applied to the amounts of such Obligations owing to
the Lenders pro rata according to the respective amounts then due and owing to
the Lenders.
(e) Each payment (including each prepayment) on account of principal of
or interest on the Term Loans shall be allocated among the Lenders holding such
Term Loans pro rata based on the principal amount of such Term Loans then held
by such Lenders. Each payment (including each prepayment) on account of
principal of and interest on the Revolving Loans shall be allocated among the
Lenders holding such Revolving Loans pro rata based on the principal amount of
such Revolving Loans then held by such Lenders.
2.13. PAYMENTS BY LENDERS TO THE ADMINISTRATIVE AGENT.
(a) Unless the Administrative Agent shall have received notice from any
Lender, at least one (1) Business Day prior to the date of any proposed
Borrowing, that such Lender will not make available to the Administrative Agent
for the account of the Borrower the amount of such Lender's Term Commitment
Percentage, Revolving Commitment Percentage or Incremental Commitment
Percentage, as the case may be, of the Loans included in such Borrowing, the
Administrative Agent may assume that such Lender has made such amount available
to the Administrative Agent as required hereunder on the Borrowing Date, and the
Administrative Agent may (but shall not be so required), in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that any Lender shall not have made its full amount
available to the Administrative Agent in immediately available funds and the
Administrative Agent in such circumstances has made available to the Borrower
such amount, such Lender shall immediately make such amount available to the
Administrative Agent, together with interest at the Federal Funds Rate from the
date of such Borrowing to the date on which the Administrative Agent recovers
such amount from such Lender or the Borrower. A notice from the Administrative
Agent submitted to any Lender with respect to amounts owing under this Section
2.13(a) shall be conclusive, absent manifest error. If such amount is so made
available, such payment to the Administrative Agent shall constitute such
Lender's Loan on the Borrowing Date for all purposes of this Agreement. If such
amount is not made available to the Administrative Agent on the next Business
Day following such Borrowing Date, the Administrative Agent shall notify the
Borrower of such failure to fund and, upon demand by the Administrative Agent,
the Borrower shall pay such amount to the Administrative Agent for the
Administrative Agent's account, together with interest thereon for each day
elapsed since such Borrowing Date, at a rate per annum equal to the interest
rate applicable at the time to the Loans comprising such Borrowing.
<PAGE> 53
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(b) The failure of any Lender to make any Loan on any Borrowing Date
shall not relieve any other Lender of any obligation hereunder to make a Loan on
such Borrowing Date, but no Lender shall be responsible for the failure of any
other Lender to make the Loan to be made by such other Lender on any Borrowing
Date.
2.14. SHARING OF PAYMENTS, ETC.
(a) If, except as and to the extent otherwise expressly provided
elsewhere in this Agreement or in any of the other Loan Documents, any Lender
shall obtain on account of any of the Obligations owing to it any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) in excess of its relevant Commitment Percentage of any payments on
account of Obligations of the same kind obtained by Lenders, such Lender shall
forthwith (i) notify the Administrative Agent of such fact, and (ii) purchase
from other affected Lenders such participations in such Obligations held by them
as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; provided, however, that if all or any portion
of such excess payment is thereafter recovered from the purchasing Lender, such
purchase shall to that extent be rescinded and each other affected Lender shall
repay to the purchasing Lender the purchase price paid therefor, together with
an amount equal to such paying Lender's pro rata share (according to the
proportion of (x) the amount of such paying Lender's required repayment, to (y)
the total amount so recovered from the purchasing Lender) of any interest or
other amount paid or payable by the purchasing Lender in respect of the total
amount so recovered. The Administrative Agent will keep records (which shall be
conclusive and binding in the absence of manifest error) of participations
purchased pursuant to this Section 2.14 and will, in each case, notify the
Lenders following any such purchases.
(b) The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 2.14 may, to the fullest extent
permitted by Applicable Law, exercise all of its rights of payment (including
all rights of set-off) with respect to such participation as fully as if such
Lender were the direct creditor of the Borrower in the amount of such
participation.
2.15. COLLATERAL AND SUBSIDIARY GUARANTY.
(a) The Obligations of the Borrower to repay principal of the Loans,
Letter of Credit Borrowings and other Obligations upon the terms contained
herein, and the payment and performance of all of the other Obligations of each
of the Borrower and the other Creditor Parties under this Agreement and all of
the other Loan Documents shall be secured by security interests and Liens in and
to certain of the tangible and intangible personal Property of the Borrower and
of its Domestic Subsidiaries, all as provided by and in accordance with (i) the
terms and conditions contained in the Collateral Documents, and (ii) the terms
and provisions contained in Sections 7.12 and 7.13 hereof.
(b) The payment and performance of all of the Obligations of the
Borrower and of each of the other Credit Parties under this Agreement and all of
the other Loan Documents shall at all times be unconditionally and irrevocably
guaranteed by each of the Domestic Subsidiaries of the Borrower pursuant to the
Subsidiary Guaranty.
<PAGE> 54
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2.16. PROCEDURE FOR INCREMENTAL COMMITMENT REQUESTS.
(a) When the Borrower wishes to request one or more Lenders or one or
more other financial institutions approved by the Administrative Agent (which
approval shall not be unreasonably withheld) to provide proposals for the
provision of an Incremental Facility to the Borrower, the Borrower may solicit
from any such Lenders or financial institutions proposals and commitments for
(i) the provision of an Incremental Facility, and (ii) as applicable to such
Incremental Facility, (A) the upfront fees to be charged by such Lenders or
financial institutions in connection with the provision of such Incremental
Facility ("INCREMENTAL UPFRONT FEES"), (B) the commitment fees to be charged by
such Lenders or financial institutions with respect to such Incremental Facility
("INCREMENTAL COMMITMENT FEES"), and (c) if desired by the Borrower, the margins
("ALTERNATIVE INCREMENTAL MARGINS") to be applicable to Base Rate Loans and
Eurodollar Loans made or to be made in connection with such Incremental
Facility. Upon the receipt by the Borrower of written commitments for an
Incremental Facility, the Borrower shall promptly notify the Administrative
Agent of (1) the Lenders or financial institutions which have issued written
commitments for such Incremental Facility, and (2) all of the material terms and
conditions of such commitments, including the amount of each of such commitments
and the amount of each of the Incremental Upfront Fees, Incremental Commitment
Fees and, if applicable, Alternative Incremental Margins. The Borrower shall
furnish such other information to the Administrative Agent regarding such
Incremental Facility as the Administrative Agent may from time to time
reasonably request. Upon receipt of such information regarding the provision of
an Incremental Facility, the Administrative Agent shall furnish all of such
information promptly to each of the Lenders and, on behalf of the Borrower,
request the written consent of the Lenders for such Incremental Facility. If the
Borrower shall receive the written consent of the Majority Lenders for the
Incremental Facility, the Agents will make the final allocations of the
Incremental Commitments among the Lenders and the other financial institutions
which have issued written commitments therefor, and the Administrative Agent
shall take all such other action on behalf of the Lenders as shall be then
necessary or appropriate to implement the Incremental Facility.
(b) Anything in Section 2.1(c) or in this Section 2.16 express or
implied to the contrary notwithstanding, (i) no Incremental Facility shall
become effective hereunder without the prior written consent of the Majority
Lenders, (ii) the Agents shall have the exclusive rights to allocate Incremental
Commitments among the Lenders and other financial institutions providing the
Incremental Facility, (iii) no Incremental Facility and no Incremental
Commitments may become effective on or after the Incremental Commitment
Termination Date, and no Incremental Loans may be made on or after such date,
and (iv) the Aggregate Incremental Commitment shall not exceed $25,000,000, and
the aggregate principal amount of all Incremental Loans from time to time
outstanding shall not at any time exceed $25,000,000.
ARTICLE III.
THE LETTERS OF CREDIT
3.1. LETTER OF CREDIT SUBFACILITY.
(a) On the terms and conditions set forth herein (i) the Issuing Lender
agrees (A) from time to time, on any Business Day during the period from the
Closing Date to the date which is thirty (30) days prior to the Maturity Date to
issue Letters of Credit for the account of the Borrower, and to amend or renew
Letters of Credit previously issued by it, in accordance with
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Sections 3.2(b) and Section 3.2(d), and (B) to honor drafts under the Letters of
Credit; and (ii) the Lenders severally agree to participate in Letters of Credit
issued for the account of the Borrower; provided, however, that the Issuing
Lender shall not issue any Letter of Credit if as of the date of, and
immediately after giving effect to, the issuance of such Letter of Credit, the
aggregate amount of all Letter of Credit Obligations, PLUS the aggregate
principal amount of all Revolving Loans, shall exceed the Aggregate Revolving
Commitment then in effect, or the Letter of Credit Obligations shall exceed the
Letter of Credit Commitment then in effect.
(b) The Issuing Lender shall be under no obligation to issue any Letter
of Credit if:
(i) any order, judgment or decree of any Governmental
Authority shall by its terms purport to enjoin or restrain the Issuing
Lender from issuing such Letter of Credit, or any Applicable Law or any
request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing Lender shall
prohibit, or request that the Issuing Lender refrain from, the issuance
of letters of credit generally or such Letter of Credit in particular
or shall impose upon such Issuing Lender with respect to such Letter of
Credit any restriction, reserve or capital requirement (for which the
Issuing Lender is not otherwise compensated hereunder) not in effect on
the Effective Date or shall impose upon the Issuing Lender any
unreimbursed loss, cost or expense which was not applicable on the
Effective Date and which the Issuing Lender reasonably deems material
to it;
(ii) the Issuing Lender shall have received written notice
from any Lender or from the Borrower, on or prior to the requested date
of issuance of such Letter of Credit, that one or more of the
applicable conditions precedent contained in Article V is not then
satisfied;
(iii) the expiry date of any requested Letter of Credit (A) is
more than one (1) year after the date of issuance, unless the Majority
Lenders and the Issuing Lender have approved such expiry date in
writing, or (B) is later than the Maturity Date;
(iv) any requested Letter of Credit is not in form and
substance reasonably acceptable to the Issuing Lender, or the issuance
of a Letter of Credit shall violate any applicable policies of the
Issuing Lender; or
(v) such Letter of Credit is in a face amount less than
$100,000 or to be denominated in a currency other than Dollars.
3.2. ISSUANCE, AMENDMENT AND RENEWAL OF LETTERS OF CREDIT.
(a) Each Letter of Credit shall be issued upon (x) the irrevocable
written request of the Borrower received by the Issuing Lender (with a copy sent
by the Borrower to the Administrative Agent) at least four (4) Business Days (or
such shorter time as the Issuing Lender may agree in a particular instance in
its sole discretion) prior to the proposed date of issuance, and (y) approval by
the Administrative Agent of such request. Each request by the Borrower for
issuance of a Letter of Credit shall be by facsimile, confirmed promptly in an
original writing, in the form of a Letter of Credit Application, and shall
specify in form and detail reasonably satisfactory to the Issuing Lender: (i)
the proposed date of issuance of the Letter of Credit (which shall be a Business
Day); (ii) the face amount of the Letter of Credit; (iii) the expiry date of the
Letter of Credit; (iv) the name and address of the beneficiary thereof; (v) the
documents to be
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presented by the beneficiary of the Letter of Credit in case of any drawing
thereunder; (vi) the full text of any certificate to be presented by the
beneficiary in case of any drawing thereunder; and (vii) such other matters as
the Issuing Lender may reasonably require.
(b) From time to time while a Letter of Credit is outstanding and prior
to the Maturity Date, the Issuing Lender will, upon the written request of the
Borrower received by the Issuing Lender (with a copy sent by the Borrower to the
Administrative Agent) at least four (4) Business Days (or such shorter time as
the Issuing Lender may agree in a particular instance in its sole discretion)
prior to the proposed date of amendment, upon approval by the Administrative
Agent of such request, amend any Letter of Credit issued by it. Each such
request by the Borrower for amendment of a Letter of Credit shall be made by
facsimile, confirmed promptly in an original writing, in the form of a Letter of
Credit Amendment Application and shall specify in form and detail reasonably
satisfactory to the Issuing Lender: (i) the Letter of Credit to be amended; (ii)
the proposed date of amendment of the Letter of Credit (which shall be a
Business Day); (iii) the nature of the proposed amendment; and (iv) such other
matters as the Issuing Lender may reasonably require. The Issuing Lender shall
be under no obligation to amend any Letter of Credit if (A) the Issuing Lender
would have no obligation at such time to issue such Letter of Credit in its
amended form under the terms of this Agreement; or (B) the beneficiary of any
such Letter of Credit does not accept the proposed amendment to the Letter of
Credit.
(c) The Administrative Agent will promptly notify the Lenders of the
receipt by it of any Letter of Credit Application or Letter of Credit Amendment
Application.
(d) The Issuing Lender and the Lenders agree that, while a Letter of
Credit is outstanding and prior to the Maturity Date, at the option of the
Borrower and upon the written request of the Borrower received by the Issuing
Lender (with a copy sent by the Borrower to the Administrative Agent) at least
four (4) Business Days (or such shorter time as the Issuing Lender may agree in
a particular instance in its sole discretion) prior to the proposed date of
notification of renewal, the Issuing Lender shall be entitled to authorize the
automatic renewal of any Letter of Credit issued by it. Each such request for
renewal of a Letter of Credit shall be made by facsimile, confirmed promptly in
an original writing, in the form of a Letter of Credit Amendment Application,
and shall specify in form and detail reasonably satisfactory to the Issuing
Lender: (i) the Letter of Credit to be renewed; (ii) the proposed date of
notification of renewal of the Letter of Credit (which shall be a Business Day);
(iii) the revised expiry date of the Letter of Credit; and (iv) such other
matters as the Issuing Lender may reasonably require. The Issuing Lender shall
be under no obligation to renew any Letter of Credit if the Issuing Lender would
have no obligation at such time to issue or amend such Letter of Credit in its
renewed form under the terms of this Agreement. If any outstanding Letter of
Credit shall provide that it shall be automatically renewed unless the
beneficiary thereof receives notice from the Issuing Lender that such Letter of
Credit shall not be renewed, and if at the time of renewal the Issuing Lender
would be entitled to authorize the automatic renewal of such Letter of Credit in
accordance with this Section 3.2(d) upon the request of the Borrower but the
Issuing Lender shall not have received any Letter of Credit Amendment
Application from the Borrower with respect to such renewal or other written
direction from the Borrower with respect thereto, the Issuing Lender shall
nonetheless be permitted to allow such Letter of Credit to be renewed, and the
Borrower and the Lenders hereby authorize such renewal, and, accordingly, the
Issuing Lender shall be deemed to have received a Letter of Credit Amendment
Application from the Borrower requesting such renewal.
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(e) This Agreement shall control in the event of any conflict with any
Letter of Credit Related Document (other than any Letter of Credit, the
provisions of which shall control in any event). The Issuing Lender will also
deliver to the Administrative Agent, concurrently or promptly following its
delivery of a Letter of Credit, or any amendment to or renewal of a Letter of
Credit, to a beneficiary, a true and complete copy of each such Letter of Credit
or amendment to or renewal of a Letter of Credit.
3.3. PARTICIPATIONS, DRAWINGS AND REIMBURSEMENT.
(a) Immediately upon the issuance of each Letter of Credit, each Lender
shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the Issuing Lender a participation in such Letter of Credit and
each drawing thereunder in an amount equal to the PRODUCT of (i) the Revolving
Commitment Percentage of such Lender, TIMES (ii) the maximum amount available to
be drawn under such Letter of Credit and the amount of such drawing,
respectively.
(b) In the event of any request for a drawing under a Letter of Credit
by the beneficiary or transferee thereof, the Issuing Lender will promptly
notify the Borrower. The Borrower shall reimburse the Issuing Lender prior to
12:00 p.m. (Boston, Massachusetts time), on each date that any amount is paid by
the Issuing Lender under any Letter of Credit (each such date, a "DISBURSEMENT
DATE"), in an amount equal to the amount so paid by the Issuing Lender, provided
that if such drawing occurs after 12:00 p.m. (Boston, Massachusetts time), the
Disbursement Date shall be deemed to be the day following the date of such
drawing. In the event that the Borrower shall fail to reimburse the Issuing
Lender for the full amount of any drawing under any Letter of Credit by 12:00
p.m. (Boston, Massachusetts time) on the Disbursement Date, the Issuing Lender
will promptly notify the Administrative Agent and the Administrative Agent will
promptly notify each Lender thereof, and the Borrower shall be deemed to have
requested that Revolving Loans consisting of Base Rate Loans be made by the
Lenders (and the Borrower hereby irrevocably consents to such deemed request)
pursuant to Section 2.1(b) to be disbursed on the Disbursement Date under such
Letter of Credit, SUBJECT ALWAYS to the satisfaction of the conditions set forth
in Section 5.2. Any notice given by the Issuing Lender or the Administrative
Agent pursuant to this Section 3.3(b) may be oral if immediately confirmed in
writing (including by facsimile); provided, however, that the lack of such an
immediate confirmation shall not affect the conclusiveness or binding effect of
such notice.
(c) Each Lender shall upon receipt of any notice pursuant to Section
3.3(b) make available to the Administrative Agent for the account of the Issuing
Lender an amount in Dollars and in immediately available funds equal to its
Revolving Commitment Percentage of the amount of the drawing, whereupon the
participating Lenders shall (subject to Section 3.3(d)) each be deemed to have
made a Revolving Loan consisting of a Base Rate Loan to the Borrower in that
amount. If any Lender so notified shall fail to make available to the
Administrative Agent for the account of the Issuing Lender the amount of such
Lender's Revolving Commitment Percentage of the amount of the drawing by no
later than 1:00 p.m. (Boston, Massachusetts time) on the Disbursement Date, then
interest shall accrue on such Lender's obligation to make such payment, from the
Disbursement Date to the date such Lender makes such payment, at a rate per
annum equal to (i) the Federal Funds Rate in effect from time to time during the
period commencing on the Disbursement Date and ending on the date three (3)
Business Days thereafter, and (ii) thereafter, at the Alternate Base Rate as in
effect from time to time. The Administrative Agent will promptly give notice of
the occurrence of the Disbursement Date, but failure of the Administrative Agent
to give any such notice on the Disbursement Date or in sufficient time to
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enable any Lender to effect such payment on such date shall not relieve such
Lender from its obligations under this Section 3.3.
(d) With respect to any unreimbursed drawing which is not converted
into Revolving Loans consisting of Base Rate Loans because the conditions
precedent set forth in Section 5.2.1 or Section 5.2.3 cannot be satisfied, the
Borrower shall be deemed to have obtained from the Issuing Lender a Letter of
Credit Borrowing in the amount of such drawing, which Letter of Credit Borrowing
shall be due and payable on demand (together with interest) and shall bear
interest at a rate per annum equal to the Alternate Base Rate, PLUS the
Applicable Margin for Base Rate Loans, PLUS, in the case of any Letter of Credit
Borrowing outstanding after the Disbursement Date, 2% per annum, and each
Lender's payment to the Issuing Lender pursuant to Section 3.3(c) shall be
deemed a payment in respect of its participation in such Letter of Credit
Borrowing.
(e) Each Lender's obligation in accordance with this Agreement to make
Revolving Loans or to fund its participation in Letter of Credit Borrowings, as
contemplated by this Section 3.3, as a result of any drawing under a Letter of
Credit shall be absolute, unconditional irrevocable and without recourse to the
Issuing Lender and shall not be affected by any circumstance, including: (i) any
set-off, counterclaim, defense or other right which such Lender may have against
the Issuing Lender, the Borrower or any other Person for any reason whatsoever;
(ii) the occurrence or continuation of any Default or any Materially Adverse
Effect; or (iii) any other circumstance, happening or event whatsoever, whether
or not similar to any of the foregoing.
3.4. REPAYMENT OF PARTICIPATION.
(a) Upon (and only upon) receipt by the Administrative Agent for the
account of the Issuing Lender of funds from the Borrower (i) in reimbursement of
any payment made by the Issuing Lender under the Letter of Credit with respect
to which any Lender has paid the Administrative Agent for the account of the
Issuing Lender for such Lender's participation in the Letter of Credit pursuant
to Section 3.3, or (ii) in payment of interest on amounts described in clause
(i), the Administrative Agent will pay to each Lender, in the same funds as
those received by the Administrative Agent for the account of the Issuing
Lender, the amount of such Lender's Revolving Commitment Percentage of such
funds, and the Issuing Lender shall receive the amount of the Revolving
Commitment Percentage of such funds of any Lender that did not so pay the
Administrative Agent for the account of the Issuing Lender.
(b) If the Administrative Agent or the Issuing Lender is required at
any time to return to the Borrower, or to any trustee, receiver, liquidator,
custodian or any other similar official in any Insolvency Proceeding, any
portion of the payments made by the Borrower to the Administrative Agent for the
account of the Issuing Lender pursuant to Section 3.4(a) in reimbursement of a
payment made under the Letter of Credit or interest or fees thereon, each Lender
shall, on demand of the Administrative Agent, forthwith return to the
Administrative Agent or such Issuing Lender the amount of its Revolving
Commitment Percentage of any amounts so returned by the Administrative Agent or
the Issuing Lender plus interest thereon, from the date such demand is made to
the date such amounts are returned by such Lender to the Administrative Agent or
the Issuing Lender, at a rate per annum equal to the Federal Funds Rate in
effect from time to time.
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3.5. ROLE OF ISSUING LENDER.
(a) Each Lender and the Borrower agree that, in paying any drawing
under a Letter of Credit, the Issuing Lender shall not have any responsibility
to obtain any document (other than any sight draft and certificates expressly
required by the Letter of Credit) or to ascertain or inquire as to the validity
or accuracy of any such document or the authority of the Person executing or
delivering any such document.
(b) Neither the Issuing Lender nor any of the respective
correspondents, participants or assignees of the Issuing Lender shall be liable
to any Lender or the Borrower for: (i) any action taken or omitted in connection
herewith at the request or with the approval of the Majority Lenders; (ii) any
action taken or omitted in the absence of gross negligence or willful
misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any Letter of Credit Related Document.
(c) The Borrower hereby irrevocably assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any Letter
of Credit. Neither the Issuing Lender nor any of the respective correspondents,
participants or assignees of the Issuing Lender shall be liable or responsible
for any of the matters described in clauses (a) through (g) of Section 3.6;
provided, however, that the Borrower may have a claim against the Issuing
Lender, and the Issuing Lender may be liable to the Borrower, to the extent, but
only to the extent, of any direct, as opposed to consequential or exemplary,
damages suffered by the Borrower which the Borrower shall prove were caused by
the Issuing Lender's willful misconduct or gross negligence or the Issuing
Lender's willful failure to pay under any Letter of Credit after the
presentation to it by the beneficiary of a sight draft and certificate(s)
strictly complying with the terms and conditions of such Letter of Credit. In
furtherance and not in limitation of the foregoing: (i) the Issuing Lender may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) the Issuing Lender shall not be
responsible for the validity or sufficiency of any Instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason.
3.6. OBLIGATIONS ABSOLUTE. The Obligations of the Borrower under this
Agreement and any Letter of Credit Related Document to reimburse the Issuing
Lender for each drawing under each Letter of Credit, to repay each Letter of
Credit Borrowing and to repay each drawing under a Letter of Credit converted
into Revolving Loans, shall be absolute, unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this Agreement and each
such other Letter of Credit Related Document under all circumstances, including
the following:
(a) any lack of validity or enforceability of this Agreement or any
Letter of Credit Related Document;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Borrower in respect of any
Letter of Credit or any other amendment or waiver of or any consent to departure
from all or any of the Letter of Credit Related Documents;
(c) the existence of any claim, set-off, defense or other right that
the Borrower may have at any time against any beneficiary or any transferee of
any Letter of Credit (or any Person
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for whom any such beneficiary or any such transferee may be acting), the Issuing
Lender or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the Letter of Credit Related Documents or
any unrelated transactions;
(d) any draft, demand, certificate or other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect; or any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any Letter of Credit;
(e) any payment by the Issuing Lender under any Letter of Credit
against presentation of a draft or certificate that does not strictly comply
with the terms of such Letter of Credit; or any payment made by the Issuing
Lender under any Letter of Credit to any Person purporting to be a trustee in
bankruptcy, debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any beneficiary
or any transferee of any Letter of Credit;
(f) any exchange, release or non-perfection of any Collateral, or any
release or amendment or waiver of or consent to departure from any guaranty, for
all or any of the Obligations of the Borrower in respect of any Letter of
Credit; or
(g) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the Borrower or
any guarantor.
3.7. CASH COLLATERAL PLEDGE. Upon (a) the request of the Administrative
Agent, (i) if the Issuing Lender has honored any full or partial drawing request
on any Letter of Credit and such drawing has resulted in a Letter of Credit
Borrowing hereunder, or (ii) if, as of the Maturity Date, any Letters of Credit
shall for any reason remain outstanding and partially or wholly undrawn, or (b)
the occurrence of any of circumstances described in Section 2.7(a) requiring the
Borrower to Cash Collateralize Letters of Credit, then the Borrower shall
immediately Cash Collateralize the Letter of Credit Obligations in an amount
equal to such Letter of Credit Obligations (or in the case of clause (ii) above,
the excess amount required pursuant to Section 2.7(a)), and such cash will be
held as security for all Obligations of the Borrower to the Agents, the Issuing
Lender and the Lenders hereunder in a cash collateral account to be established
by the Administrative Agent, and, during the continuation of any Event of
Default, the Administrative Agent may, and upon the request of the Majority
Lenders shall, apply such amounts so held to the payment of such outstanding
Obligations; provided, however, that on a date upon which no Letter of Credit
Obligations remain outstanding, and so long as no Defaults are then continuing
the Administrative Agent, at the request and expense of the Borrower, will duly
release the cash held as Cash Collateral pursuant to this Section 3.7 and shall
assign, transfer and deliver to the Borrower (without recourse and without any
representation or warranty) such cash as is then being released and has not
theretofore been applied or released pursuant to this Agreement.
3.8. LETTER OF CREDIT FEES.
(a) The Borrower shall pay to the Administrative Agent, for the ratable
account of each Lender with a Revolving Commitment, letter of credit fees
("LETTER OF CREDIT FEES") with respect to all Letters of Credit equal to (i) the
Applicable Margin for Revolving Loans that are Eurodollar Loans, TIMES (ii) the
average daily Letter of Credit Obligations outstanding
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(determined as of the close of business on any date of determination), and such
Letter of Credit Fees shall be due and payable in arrears on each Interest
Payment Date for Base Rate Loans.
(b) The Borrower shall pay directly to the Issuing Lender, for the
Issuing Lender's own account, Letter of Credit fronting fees for all Letters of
Credit issued by the Issuing Lender equal to 0.125% per annum TIMES the
aggregate daily amount available to be drawn under all Letters of Credit from
time to time outstanding (determined as of the close of business on any date of
determination). Such Letter of Credit fronting fees shall be due and payable in
arrears on each Interest Payment Date for Base Rate Loans.
(c) The Borrower shall also pay directly to the Issuing Lender from
time to time, on demand by the Issuing Lender and for its own account, such
issuance, presentation, payment, amendment, transfer and other processing fees,
and other standard charges, of the Issuing Lender relating to letters of credit
as are in accordance with the Issuing Lender's standard schedule for such fees
and charges in effect from time to time.
3.9. UNIFORM CUSTOMS AND PRACTICE. The Uniform Customs and Practice for
Documentary Credits as most recently published by the International Chamber of
Commerce shall in all respects be deemed a part of this Article III as if
incorporated herein and (unless otherwise expressly provided in the Letters of
Credit) shall apply to the Letters of Credit.
ARTICLE IV.
TAXES, YIELD PROTECTION AND ILLEGALITY
4.1. TAXES.
(a) Any and all payments by the Borrower to any of the Lenders, the
Issuing Lender or the Agents under this Agreement or any of the other Loan
Documents shall be made free and clear of, and without any deduction or
withholding for or on account of, any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each of the Lender, the Issuing Lender and
the Agents, as the case may be, such taxes (including income taxes or franchise
taxes) as are imposed on or measured by such Person's net income by the
jurisdiction under the laws of which such Person is organized or has its
principal office or maintains a Lending Office or by any political subdivision
thereof (all such nonexcluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being herein called, collectively, "TAXES").
(b) In addition, the Borrower shall pay any and all present or future
stamp or documentary taxes and any other excise or Property taxes, charges or
similar levies which arise from any payment made under any of the Loan Documents
or from the execution, delivery, registration or recording of, or otherwise with
respect to, this Agreement or any of the other Loan Documents (herein called,
collectively, "OTHER TAXES").
(c) The Borrower shall indemnify and hold harmless each of the Lenders,
the Issuing Lender and the Agents for the full amount of Taxes or Other Taxes
(including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under Section 4.1(d)) payable by such Person and any liability
(including penalties, interest, additions to tax and expenses) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted.
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(d) If the Borrower shall be required by Applicable Law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable under
this Agreement or any of the other Loan Documents to any of the Lenders, the
Issuing Lender or the Agents, 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 4.1(d)) such Lender,
Issuing Lender or Agent, as the case may be, shall receive an amount
equal to the sum it would have received had no such deductions or
withholdings been made;
(ii) the Borrower shall make such deductions; and
(iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other Governmental Authority in
accordance with Applicable Law.
(e) Within thirty (30) days after the date of any payment by the
Borrower of Taxes or Other Taxes, the Borrower shall furnish to the
Administrative Agent, at its address referred to in Section 11.2, the original
or a certified copy of a receipt evidencing payment thereof or other evidence of
payment reasonably satisfactory to the Administrative Agent.
(f) Each Lender which is organized under the laws of a jurisdiction
outside of the United States agrees that:
(i) it shall, no later than the Effective Date (or, in the
case of a Lender which becomes a party hereto pursuant to Section 11.7
after the Effective Date, the date upon which such Lender becomes a
party hereto) deliver to the Borrower through the Administrative Agent
two accurate and complete signed originals of Internal Revenue Service
Form W-8BEN or any successor thereto ("FORM W-8BEN"), or two accurate
and complete signed originals of Internal Revenue Service Form W-8ECI
or any successor thereto ("FORM W-8ECI"), as appropriate, in each case
indicating that such Lender is on the date of delivery thereof entitled
to receive all payments under this Agreement and the other Loan
Documents free from withholding of United States Federal income tax;
(ii) if at any time such Lender makes any changes, including a
change of a Lending Office or its principal office, place of
incorporation or fiscal residence, necessitating a new Form W-8BEN or
Form W-8ECI, it shall, to the extent it is legally entitled to do so,
promptly deliver to the Borrower through the Administrative Agent in
replacement for, or in addition to, the forms previously delivered by
it hereunder, two accurate and complete signed originals of Form W-8BEN
or Form W-8ECI, as appropriate, in each case indicating that such
Lender is on the date of delivery thereof entitled to receive all
payments under this Agreement and the other Loan Documents free from
any withholding of any United States Federal income tax;
(iii) it shall, to the extent it is legally entitled to do so,
before or promptly after the occurrence of any event (including the
passing of time but excluding any event mentioned in clause (ii) above)
requiring a change in or renewal of the most recent Form W-8BEN or Form
W-8ECI previously delivered by such Lender, deliver to the Borrower
through the Administrative Agent two accurate and complete signed
originals of Form W-8BEN or Form W-8ECI in replacement for the forms
previously delivered by such
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Lender indicating that such Lender continues to be entitled to receive
all payments under this Agreement and the other Loan Documents free
from any withholding of any United States Federal income tax;
(iv) it shall, to the extent it is legally entitled to do so,
promptly upon the reasonable request of the Borrower or the
Administrative Agent to that effect, deliver to the Borrower or the
Administrative Agent (as the case may be) such other forms or similar
documentation as may be required from time to time by any Applicable
Law, in order to establish such Lender's complete exemption from
withholding on all payments under this Agreement or any of the other
Loan Documents;
(v) if such Lender claims or is entitled to claim exemption
from withholding tax under a United States tax treaty by providing a
Form W-8ECI and such Lender sells or grants a participation in all or
part of its rights under this Agreement, such Lender shall notify the
Administrative Agent of the percentage amount in which it is no longer
the beneficial owner under this Agreement. To the extent of such
percentage amount, the Administrative Agent shall treat such Lender's
Form W-8ECI as no longer in compliance with this Section 4.1(f). In the
event a Lender claiming exemption from United States withholding tax by
filing Form W-8BEN with the Administrative Agent sells or grants a
participation in its rights under this Agreement, such Lender agrees to
undertake sole responsibility for complying with the withholding tax
requirements imposed by Sections 1441 and 1442 of the Code; and
(vi) without limiting or restricting any Lender's right to
increased amounts under Section 4.1(d) from the Borrower upon
satisfaction of such Lender's obligations under the provisions of this
Section 4.1(f), if such Lender is entitled to a reduction in the
applicable withholding tax, the Administrative Agent may (but shall not
be obligated to) withhold from any interest to such Lender an amount
equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other administrative documentation
required by clause (i) are not delivered to the Administrative Agent,
then the Administrative Agent shall withhold from any interest payment
to a Lender not providing such forms or other documentation, an amount
equivalent to the applicable withholding tax and, in addition, the
Administrative Agent shall also withhold against periodic payments
other than interest payments to the extent United States withholding
tax is not eliminated by obtaining Form W-8BEN or Form W-8ECI. The
Borrower shall indemnify and hold harmless the Administrative Agent and
each of its officers, directors, employees, counsel, agents and
attorneys-in-fact from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, charges, expenses or disbursements (including Attorney Costs) of
any kind whatsoever from time to time incurred as a result of or in
connection with the Administrative Agent's failure to withhold as
provided pursuant to the preceding sentence, unless such failure
constitutes gross negligence or willful misconduct of the
Administrative Agent itself as the same is determined by a final
judgment of a court of competent jurisdiction, and the Obligations of
the Borrower under this sentence shall survive payment of all other
Obligations.
(g) The Borrower will not be required to pay any additional amounts in
respect of Taxes imposed by any United States Federal Governmental Authority
pursuant to Sections 4.1(a) or 4.1(d) to any Lender:
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(i) if and to the extent the obligation to pay such additional
amounts would not have arisen but for a failure by such Lender to
comply with its obligations under Section 4.1(f) in respect of its
Lending Office;
(ii) if such Lender shall have delivered to the Borrower a
Form W-8BEN in respect of its Lending Office pursuant to Section
4.1(f)(i)-(iii) or such other forms or other similar documentation
pursuant to Section 4.1(f)(iv), to the extent such Lender shall not at
any time be entitled to exemption from all deductions or withholding of
United States Federal income tax in respect of payments by the Borrower
under this Agreement or any of the other Loan Documents for the account
of such Lending Office for any reason other than a change in United
States Applicable Law or in the official interpretation of any such
Applicable Law by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the
force of law) after the date of delivery of such Form W-8BEN or such
other forms or other similar documentation; or
(iii) if such Lender shall have delivered to the Borrower a
Form W-8ECI in respect of its Lending Office pursuant to Section
4.1(f)(i)-(iii) or such other forms or similar documentation pursuant
to Section 4.1(f)(iv), to the extent such Lender shall not at any time
be entitled to exemption from all deductions or withholding of United
States Federal income tax in respect of payments by the Borrower under
this Agreement or any of the other Loan Documents for the account of
such Lending Office for any reason other than a change in United States
Applicable Law or in the official interpretation of any such Applicable
Law by any Governmental Authority charged with the interpretation or
administration thereof (whether or not having the force of law) after
the date of delivery of such Form W-8ECI or such other forms or other
similar documentation.
(h) Each Lender agrees that it shall, at any time upon reasonable
advance request in writing by the Borrower or the Administrative Agent, promptly
deliver such certification or other documentation as may be required under
Applicable Law in any applicable jurisdiction and which such Lender is entitled
to submit to avoid or reduce withholding taxes on amounts to be paid by the
Borrower and received by such Lender pursuant to this Agreement or any of the
other Loan Documents.
(i) The Borrower shall indemnify each Lender, Issuing Lender and Agent,
to the extent required by this Section 4.1, within thirty (30) days after
receipt of written request from such Person therefor accompanied by a written
statement describing in reasonable detail the Taxes or Other Taxes that are the
subject of the basis for such indemnity and the computation of the amount
payable.
(j) If any Lender, Issuing Lender or Agent shall become aware that it
is entitled to claim a refund of any withholding Taxes or Other Taxes paid by
the Borrower under this Section 4.1 from the taxing or other Governmental
authority imposing such Taxes or Other Taxes, such Lender, Issuing Lender or
Agent, as the case may be, shall, at the expense of the Borrower, use reasonable
efforts to obtain such refund and, upon actual receipt thereof, shall promptly
pay to the Borrower the amount so received.
(k) If the Borrower is required to pay additional amounts to any
Lender, Issuing Lender or Agent pursuant to Section 4.1(d), then such Lender,
Issuing Lender or Agent shall, upon the Borrower's request, use its reasonable
best efforts (consistent with policy considerations
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of such Lender, Issuing Lender or Agent) to change the jurisdiction of its
Lending Office or other office so as to reduce or eliminate any such additional
payment which may thereafter accrue if such change, in the reasonable judgment
of such Lender, Issuing Lender or Agent is not otherwise disadvantageous to such
Person.
(l) Each of the Lenders, the Issuing Lender and the Agents agrees that
it will (i) take all reasonable actions reasonably requested by the Borrower
(consistent with policy considerations of such Person) to maintain all
exemptions, if any, available to it from withholding taxes (whether available by
treaty or existing administrative waiver), and (ii) to the extent reasonable,
otherwise cooperate with the Borrower to minimize any amounts payable by the
Borrower under this Section 4.1, in any case described in the preceding clauses
(i) and (ii), however, only if such action or cooperation is not disadvantageous
to such Person in the reasonable judgment of such Person.
4.2. ILLEGALITY.
(a) If any Lender shall determine that (i) the introduction of any
Applicable Law, or any change in any Applicable Law, or in the interpretation or
administration thereof, has made it unlawful, or (ii) any central bank or other
Governmental Authority has asserted that it is unlawful, for such Lender or its
Lending Office to make a Eurodollar Loan or to convert any Base Rate Loan to a
Eurodollar Loan, then, on notice thereof by such Lender to the Borrower through
the Administrative Agent, the obligation of such Lender to make or convert any
such Loan shall be suspended, and any such Loan to be made or converted by such
Lender shall instead be made or converted as a Base Rate Loan, until such Lender
shall have notified the Administrative Agent and the Borrower that the
circumstances giving rise to such determination no longer exist.
(b) If any Lender shall determine that it is unlawful for such Lender
to maintain any Eurodollar Loan, all Eurodollar Loans of such Lender then
outstanding shall be automatically converted to Base Rate Loans, either on the
last day of each of the Interest Periods applicable thereto if such Lender may
lawfully continue to maintain such Eurodollar Loans to such day, or immediately,
if such Lender may not lawfully continue to maintain such Eurodollar Loans, and
the Borrower shall pay any amounts required to be paid in connection therewith
pursuant to Section 4.4.
(c) Before giving any notice to the Administrative Agent pursuant to
this Section 4.2, the affected Lender shall designate a different Lending Office
with respect to its Eurodollar Loans if such designation will avoid the need for
giving such notice or making such demand and will not, in the reasonable
judgment of such Lender, be illegal, inconsistent with the policies of such
Lender or otherwise disadvantageous to such Lender.
4.3. INCREASED COSTS AND REDUCTIONS OF RETURN.
(a) If any Lender or the Issuing Lender shall determine that, due to
either (i) the introduction of or any change in or in the interpretation or
administration of any Applicable Law (other than any Applicable Law relating to
taxes, including those relating to Taxes or Other Taxes) after the Effective
Date, or (ii) the compliance with any guideline or request from any central bank
or other Governmental Authority (whether or not having the force of law) made
after the Effective Date, there shall be any increase in the cost to such Lender
of agreeing to make or making, funding or maintaining any Eurodollar Loans or
participating in any Letter of Credit Obligations, or any increase in the cost
to the Issuing Lender of agreeing to issue, issuing or
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maintaining any Letter of Credit or of agreeing to make or making, funding or
maintaining any unpaid drawing under any Letter of Credit, then the Borrower
shall be liable for, and shall from time to time, within thirty (30) days after
receipt of any written request therefor from such Lender or the Issuing Lender,
as the case may be (accompanied by a written statement describing such increased
costs in reasonable detail) (with a copy of such request to the Administrative
Agent), pay to the Administrative Agent, for the account of such Lender or the
Issuing Lender, all such additional amounts as are sufficient to compensate such
Lender or such Issuing Lender for such increased costs.
(b) If any Lender or the Issuing Lender shall determine that (i) the
introduction of any Capital Adequacy Regulation after the Effective Date, (ii)
any change in any Capital Adequacy Regulation after the Effective Date, (iii)
any change in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority charged with the
interpretation or administration thereof after the Effective Date, or (iv)
compliance by Lender (or its Lending Office) or the Issuing Lender, as the case
may be, or any corporation controlling such Lender or the Issuing Lender, as the
case may be, with any Capital Adequacy Regulation adopted after the Effective
Date, affects or would affect the amount of capital required or expected to be
maintained by such Lender or the Issuing Lender or any corporation controlling
such Lender or the Issuing Lender and (taking into consideration such Lender's,
the Issuing Lender's or such corporation's policies with respect to capital
adequacy and the Lender's, such Issuing Lender's or such corporation's desired
return on capital) determines that the amount of such capital is (or is required
to be) increased as a consequence of its Commitments, Loans, participations in
Letters of Credit, or obligations under this Agreement, then, within thirty (30)
days after receipt of any written request therefor from such Lender or the
Issuing Lender (accompanied by a written statement describing such increase)
(with a copy of such request to the Administrative Agent), the Borrower shall be
liable for and shall immediately pay to such Lender or the Issuing Lender, from
time to time as specified by such Lender or the Issuing Lender, additional
amounts sufficient to compensate such Lender or the Issuing Lender for such
increase.
4.4. FUNDING LOSSES. The Borrower shall reimburse each Lender for, and
shall hold each Lender harmless from, each loss, cost or expense which such
Lender shall sustain or incur as a consequence of:
(a) any failure by the Borrower to make any payment of principal of or
interest on any Eurodollar Loan punctually when such principal shall become due
and payable in accordance with the terms hereof (whether at maturity, upon
acceleration, or otherwise);
(b) any failure by the Borrower to borrow a Eurodollar Loan, continue a
Eurodollar Loan or convert a Base Rate Loan to a Eurodollar Loan after the
Borrower has given a Notice of Borrowing or a Notice of Conversion/Continuation,
as the case may be;
(c) any failure by the Borrower to make any payment of principal of or
interest on any Eurodollar Loan punctually when such principal and interest
shall become subject to prepayment in accordance with any notice of prepayment
given by the Borrower in accordance with the terms hereof; or
(d) any payment or prepayment of principal of any Eurodollar Loan for
any reason whatsoever (whether pursuant to Section 2.6 or Section 2.7 or upon
acceleration, or otherwise) on a day which is not the last day of the Interest
Period, applicable thereto;
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including any such loss, cost or expense arising from the liquidation or
reemployment of funds obtained by such Lender to maintain any Eurodollar Loan
hereunder or arising from fees payable by such Lender to terminate deposits from
which such funds were obtained.
4.5. INABILITY TO DETERMINE RATES. Notwithstanding any provisions
herein to the contrary, if, in relation to any Eurodollar Loan, (a) the
Administrative Agent shall determine (which determination shall be conclusive
and binding upon all parties hereto) that by reason of circumstances affecting
the interbank markets adequate and fair means do not exist for ascertaining the
Eurodollar Rate to be applicable to such Eurodollar Loan, or (b) the
Administrative Agent shall receive notice from the Majority Lenders that the
Eurodollar Rate determined or to be determined for any Interest Period
applicable to any Eurodollar Loans will not adequately and fairly reflect the
cost to the Lenders of making or maintaining the affected Eurodollar Loans
during such affected Interest Period, then, the obligation of the Lenders to
make, continue or maintain Eurodollar Loans or to convert Base Rate Loans into
Eurodollar Loans shall be suspended until the Administrative Agent, upon the
instruction of the Majority Lenders, as applicable, revokes such notice in
writing. If, notwithstanding the provisions of this Section 4.5, any Lender has
made available to the Borrower its pro rata share of any such proposed
Eurodollar Loan, then the Borrower shall immediately repay the amount so made
available to it by such Lender, together with accrued interest thereon, if any,
or shall convert such proposed Eurodollar Loan to a Base Rate Loan.
4.6. RESERVES ON EURODOLLAR LOANS. The Borrower shall pay to each
Lender, if and so long as such Lender shall be required under regulations of the
Federal Reserve Board to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency funds or deposits (currently known as
"EUROCURRENCY LIABILITIES"), additional costs on the unpaid principal amount of
each Eurodollar Loan equal to costs of such reserves allocated to such Loan by
such Lender (as determined by such Lender, which determination shall be
conclusive absent manifest error), payable on each date on which interest is
payable on such Loan.
4.7. CERTIFICATES OF LENDERS. Any Lender or the Issuing Lender claiming
reimbursement or compensation pursuant to this Article IV shall deliver to the
Borrower (with a copy to the Administrative Agent) a certificate setting forth
in reasonable detail the amount payable to such Person hereunder and such
certificate shall be conclusive and binding on the Borrower in the absence of
manifest error.
4.6. CHANGE OF LENDING OFFICE. Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of Section 4.2 or Section
4.3 with respect to such Lender, it will, if so requested by the Borrower, use
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Lending Office for any Loans affected by
such event with the object of avoiding the consequence of the event giving rise
to the operation of such Section; provided, however, that such designation would
not, in the sole judgment of such Lender, be otherwise disadvantageous to such
Lender. Nothing in this Section 4.8(a) shall operate so as to affect, diminish
or postpone any of the Obligations of the Borrower or any of the rights of any
Lender provided in Section 4.2 or Section 4.3.
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ARTICLE V.
CONDITIONS PRECEDENT
5.1. CONDITIONS TO MAKING FIRST CREDIT EXTENSIONS. The obligations of
each of the Lenders and the Issuing Lender to make its first Credit Extensions
hereunder on the Closing Date are subject to the fulfillment of each of the
following conditions precedent prior to or simultaneously with the making of the
first Credit Extensions on the Closing Date:
5.1.1. EXECUTION AND DELIVERY OF THIS AGREEMENT AND NOTES. The
Administrative Agent shall have received (a) counterparts of this Agreement,
dated as of the Effective Date, duly executed and delivered by each of the
Borrower, the Agents, the Issuing Lender and the Lenders (or, in the case of any
party from which an executed counterpart shall not have been received, the
Administrative Agent shall have received in form reasonably satisfactory to it a
facsimile or other written confirmation from such party of the execution and
delivery of a counterpart hereof by such party), and (b) for the account of each
Lender that has made a request therefor, such Lender's Revolving Credit Note and
Term Note, each dated as of the Closing Date, duly executed and delivered by the
Borrower and containing appropriate insertions and conforming to the
requirements of Section 2.2.
5.1.2. PLEDGE AGREEMENT. The Administrative Agent shall have received
counterparts of the Pledge Agreement, dated as of the Closing Date, duly
executed and delivered by each of the Credit Parties and the Collateral Agent,
together with:
(a) all certificates and other Instruments representing Pledged
Collateral then to be pledged thereunder;
(b) an undated stock power for each such certificate or other such
Instrument duly executed in blank by a Responsible Officer of the pledgor
thereof;
(c) with respect to Pledged Collateral, if any, consisting of
book-entry shares, evidence that all actions described in the Pledge Agreement
which are necessary to create and perfect the security interests and Liens
therein pursuant to the Pledge Agreement in accordance with Article 8 of the
Uniform Commercial Code have been taken;
(d) executed copies of Pledge Notices delivered to any relevant Pledged
Entity and executed copies of Pledge Acknowledgments executed by such Pledged
Entity, together with evidence that all such other actions have been taken as
may be necessary or, in the reasonable opinion of the Collateral Agent,
desirable to perfect the security interests and Liens purported to be created by
the Pledge Agreement (including evidence that such Pledged Entity has duly
recorded the security interests and Liens created by the Pledge Agreement in the
partnership or limited liability company books and records of such Pledged
Entity); and
(e) each of the promissory notes required to be pledged thereunder,
endorsed (without recourse) in blank (or accompanied by an executed transfer
form in blank reasonably satisfactory to the Administrative Agent) by the
pledgor thereof.
5.1.3. SECURITY AGREEMENT; UCC FILINGS; ETC. The Administrative Agent
shall have received counterparts of the Security Agreement, dated as of the
Closing Date, duly executed and delivered by each of the Credit Parties and the
Collateral Agent, together with:
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(a) executed copies of financing statements (Form UCC-1) in appropriate
form for filing under the Uniform Commercial Code of each jurisdiction as may be
necessary to perfect the security interests and Liens purported to be created by
the Security Agreement;
(b) certified copies of requests for information or copies (Form
UCC-11), or equivalent reports, each of recent date, listing all effective
financing statements that name each Credit Party as debtor and that are filed in
the jurisdictions referred to in clause (a), together with copies of such
financing statements (none of which shall cover the Collateral, EXCEPT (i) those
with respect to which appropriate termination statements executed by the secured
party thereunder have been delivered to the Administrative Agent, and (ii) to
the extent evidencing Liens permitted pursuant to Section 8.3);
(c) evidence that all other action necessary or, in the reasonable
opinion of the Collateral Agent, desirable to perfect and protect the security
interests and Liens purported to be created by the Pledge Agreement and the
Security Agreement have been properly taken by the Credit Parties, EXCEPT (in
any case) as and to the extent otherwise provided by Section 7.12(c).
Any other action, including the taking of possession of specific Collateral by
the Collateral Agent, reasonably required by the Collateral Agent to create a
perfected security interest and Lien in the Collateral described in the
Collateral Documents and other Security Instruments referred to in Section 5.1.2
or in this Section 5.1.3 shall have been properly taken in order to create such
a perfected security interest and Lien.
5.1.4. OTHER LOAN DOCUMENTS AND RELATED DOCUMENTS.
(a) Each of the other Loan Documents shall have been duly and properly
authorized, executed and delivered by the respective party or parties thereto
and shall be in full force and effect.
(b) The Administrative Agent shall have received original counterparts
of each Loan Document (other than the Notes) in sufficient number for
distribution to each Lender. Each such Loan Document shall, where applicable, be
substantially in the form of an Exhibit attached hereto, and all of such other
Loan Documents shall be in form and substance reasonably satisfactory to the
Majority Lenders and the Administrative Agent. All exhibits, schedules or other
attachments to any of the Collateral Documents or other Loan Documents shall be
in form and substance reasonably satisfactory to the Administrative Agent.
(c) The Administrative Agent shall have received a fully executed or
conformed copy of each Related Agreement, certified to be true and complete by
each Credit Party party thereto, together with copies of each of the opinions of
counsel delivered to the parties under each such Related Agreement. The material
terms and conditions of each Related Agreement shall be in all material respects
the same as and consistent with the terms and conditions contained in the form
of such Related Agreement previously delivered to the Administrative Agent and
shall continue to be in full force and effect on and as of the Closing Date, and
no material provision of any Related Agreement shall have been modified or
waived in any respect reasonably determined by the Administrative Agent to be
material, in each case, without the prior written consent of the Administrative
Agent (which consent shall not be unreasonably withheld).
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5.1.5. COMPLETION OF MACMILLAN ACQUISITION, ETC.
(a) All material conditions to the Macmillan Acquisition set forth in
Section 8.02 of the Macmillan Purchase Agreement shall have been satisfied in
all material respects or the satisfaction of any such conditions shall have been
waived by the Borrower with (in each case) the prior written consent of the
Administrative Agent (which consent shall not be unreasonably withheld). The
Administrative Agent shall have received evidence reasonably satisfactory to it
that the Macmillan Acquisition has been completed or will be completed on the
Closing Date in all material respects in accordance with the material terms of
the Macmillan Purchase Agreement. The aggregate Amount paid by the Borrower for
the Macmillan Shares in connection with the Macmillan Acquisition shall not
exceed $90,000,000.
(b) Each Credit Party shall have obtained all governmental
authorizations and all consents of other Persons that are necessary or advisable
in connection with the Transactions, and each of the foregoing shall be in full
force and effect and in form and substance reasonably satisfactory to the
Administrative Agent. All applicable waiting periods shall have expired without
any action being taken or threatened by any Governmental Authority which would
restrain, prevent or otherwise impose materially adverse conditions on the
Transactions, and no action, request for stay, petition for review or rehearing,
reconsideration or appeal with respect to any of the foregoing shall be pending.
(c) Immediately following completion of the Macmillan Acquisition, and
immediately after giving effect thereto and to each of the Borrowings made on
the Closing Date, the Aggregate Revolving Commitment then in effect shall exceed
the Total Revolver Utilization then outstanding by at least $20,000,000.
5.1.6. COMPLIANCE CERTIFICATE, ETC. The Administrative Agent shall have
received (with copies for each Lender) (a) a duly executed and completed
Compliance Certificate, dated as of the Closing Date, in or substantially in the
form of Exhibit L, duly executed on behalf of the Borrower by its chief
financial officer, and (b) a duly executed and completed certificate of the
Borrower, dated as of the Closing Date, duly executed on behalf of the Borrower
by its chief financial officer, demonstrating that, immediately after giving
effect on a Pro Forma Basis to the completion of the Transactions on and as of
the Closing Date, (a) the Consolidated Leverage Ratio shall not be greater than
3.50:1.00, and (b) the Consolidated EBITDA of the Borrower and its Subsidiaries
for the twelve-month period ending June 30, 1999 shall not be less than
$26,000,000.
5.1.7. SOLVENCY CERTIFICATE. The Administrative Agent shall have
received a duly executed and completed Solvency Certificate, dated as of the
Closing Date, in or substantially in the form of Exhibit N, duly executed on
behalf of the Borrower by its chief financial officer.
5.1.8. CERTIFICATES OF INSURANCE. The Administrative Agent shall have
received certificates of insurance from the Borrower's insurance brokers, or
other evidence reasonably satisfactory to the Administrative Agent, dated as of
a recent date, identifying insurers, types of insurance, insurance limits and
policy terms, and otherwise describing all of the insurance required to be
maintained by the Borrower and its Subsidiaries in accordance with the terms the
Loan Documents, and certifying that the Administrative Agent has been named as
additional insured or (as the case may be) loss payee under all of such
insurance.
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5.1.9. RESOLUTIONS, ETC. The Administrative Agent shall have received:
(a) from each of the Credit Parties, a certificate, dated as of the
Closing Date, of its secretary or any assistant secretary as to:
(i) resolutions of its board of directors or (as the case may
be) managers or general partners then in full force and effect
authorizing the execution, delivery and performance of, in each case,
to the extent such Credit Party is a party thereto, this Agreement and
each of the other Loan Documents;
(ii) the incumbency and signatures of the Responsible Officers
of each such Credit Party (the "AUTHORIZED OFFICERS") authorized to act
with respect to (in each case, to the extent such Credit Party is a
party thereto) this Agreement and each of the other Loan Documents,
(upon which certificate each of the Agents, the Issuing Lender and the
Lenders may conclusively rely until the Administrative Agent shall have
received a further certificate of such Credit Party canceling or
amending such prior certificate, which further certificate shall be
reasonably satisfactory to the Administrative Agent);
(iii) each Governing Document of such Credit Party; and
(iv) each shareholder agreement, stock subscription agreement,
voting agreement, voting trust agreement, securities purchase agreement
and other similar agreement to which each Subsidiary Guarantor is a
party, and each shareholder agreement, voting agreement and voting
trust agreement to which the Borrower is a party; and
(b) such other similar documents (certified as of the Closing Date) as
the Administrative Agent may reasonably request with respect to any matter
relevant to this Agreement, the other Loan Documents, the Ancillary Documents or
the transactions contemplated hereby or thereby.
Each of such documents shall be in form and substance reasonably satisfactory to
the Administrative Agent and the Majority Lenders.
5.1.10. CERTIFICATES OF GOOD STANDING, ETC. The Administrative Agent
shall have received (a) the Governing Documents and other organizational
documents of each Credit Party as in effect on the Closing Date, certified as of
a recent date by the Secretary of State (or other similar applicable
Governmental Authority) of the jurisdiction of incorporation or organization of
such Credit Party, and (b) a good standing certificate as of a recent date for
each Credit Party from the Secretary of State of the jurisdiction of
incorporation or organization of such Credit Party and each State or other
jurisdiction where the failure of such Credit Party to be qualified to do
business as a foreign corporation or other entity could reasonably be expected
to have a Materially Adverse Effect, together with (by telephonic or facsimile
transmission) a bring-down certificate, dated on or as of the Closing Date, from
the Secretary of State of the jurisdiction of incorporation or organization of
such Credit Party.
5.1.11. FINANCIAL STATEMENTS. The Borrower shall have furnished to
each of the Agents, the Issuing Lender and the Lenders (a) the unaudited
consolidated financial statements of the Borrower and its Subsidiaries for the
second Fiscal Quarter of the Borrower's 1999 Fiscal Year, which shall have been
prepared in accordance with GAAP (except for the absence of footnotes
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and subject to normal year-end adjustments), (b) the projections identified in
Section 6.8(b), and (c) pro forma consolidated and consolidating balance sheets
of the Borrower and its Subsidiaries as at March 31, 1999, together with the
related pro forma consolidated and consolidating statements of income and of
cash flows for the twelve fiscal months then ended, prepared on a Pro Forma
Basis to reflect the consummation of the Macmillan Acquisition and the other
Transactions on or prior to the Closing Date, which pro forma financial
statements shall be in form and substance reasonably satisfactory to the
Majority Lenders and the Administrative Agent.
5.1.12. NO MATERIALLY ADVERSE EFFECT. No events or developments shall
have occurred since March 31, 1999 which, individually or in the aggregate, have
had or could reasonably be expected to have a Materially Adverse Effect.
5.1.13. AFFILIATE TRANSACTIONS; OTHER CORPORATE TRANSACTIONS.
(a) AFFILIATE TRANSACTIONS. Since March 31, 1999, no Credit Party shall
have made any Restricted Payments or entered into, performed or completed any
Affiliate Transactions, EXCEPT the payments and transactions described in
Schedule 5.1 to the Disclosure Letter.
(b) OTHER CORPORATE TRANSACTIONS. Since March 31, 1999, neither the
Borrower nor any of its Subsidiaries shall have (i) merged or consolidated with
any other Person, or (ii) sold, transferred or otherwise disposed of all or any
substantial part of its Property otherwise than in the ordinary course of
business, EXCEPT the mergers, Sales and other dispositions described in Schedule
5.1 to the Disclosure Letter.
(c) CHANGE OF CONTROL. No Change of Control shall have occurred since
March 31, 1999.
5.1.14. FEES AND EXPENSES. The Administrative Agent shall have received
from the Borrower on the Effective Date payment in full of all of the Fees
required to be paid on or prior to the Effective Date in accordance with Section
2.9, and the Administrative Agent shall have received from the Borrower payment
in full of all of its reasonable out-of-pocket costs and expenses (including
Attorney Costs) payable in accordance with Section 11.4 for which invoices shall
have been submitted at least one (1) Business Day prior to the Effective Date.
5.1.15. OPINIONS OF COUNSEL. The Administrative Agent shall have
received opinions, dated the Closing Date addressed to each of the Agents, the
Issuing Lender and the Lenders, from (a) Wilson Sonsini Goodrich & Rosati,
special counsel to the Credit Parties, in or substantially in the form of
Exhibit O, and otherwise in form and substance reasonably satisfactory to the
Administrative Agent, and (b) Bingham Dana LLP, special counsel to the
Administrative Agent, in or substantially in the form of Exhibit P, and
otherwise in form and substance reasonably satisfactory to the Administrative
Agent.
5.2. ALL CREDIT EXTENSIONS. The obligations of each of the Lenders and
the Issuing Lender to make each of its Credit Extensions hereunder (including
its first Credit Extensions to be made on the Closing Date) shall also be
subject to the satisfaction of each of the additional following conditions
precedent set forth in this Section 5.2.
5.2.1. COMPLIANCE WITH WARRANTIES; NO DEFAULT; ETC. The representations
and warranties of the Borrower and the other Credit Parties set forth in Article
VI, in the Collateral
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Documents and in the other Loan Documents shall have been true and correct in
all material respects on and as of each of the respective dates made; and, both
immediately before and immediately after giving effect to each of such Credit
Extensions:
(a) such representations and warranties shall be true and correct in
all material respects with the same full force and effect as if then made
(except for any such representation or warranty that relates solely to a prior
date); and
(b) no Default shall have occurred and then be continuing.
5.2.2. NOTICE OF BORROWING; CONTINUATION/CONVERSION NOTICE. The
Administrative Agent shall have received a Notice of Borrowing in compliance
with Section 2.3 or a Notice of Continuation/Conversion, as the case may be, for
such Credit Extension. The delivery of such Notice of Borrowing or such Notice
of Continuation/Conversion shall constitute a representation and warranty by the
Borrower that, on and as of the requested Borrowing Date of such Credit
Extension, and both immediately before and immediately after giving effect to
such Credit Extension, all representations and warranties required by Section
5.2.1 are true and correct.
5.2.3. LEGALITY OF TRANSACTIONS. It shall not be unlawful (a) for the
Administrative Agent, the Issuing Lender or any Lender to perform any of its
obligations under any of the Loan Documents, or (b) for any Credit Party to pay
or perform any of its Obligations under any of the Loan Documents.
5.2.4. SATISFACTORY LEGAL FORM, ETC. All Instruments and other
documents executed and delivered or submitted pursuant hereto by or on behalf of
any of the Credit Parties shall be reasonably satisfactory in form and substance
to the Administrative Agent and its special counsel; the Administrative Agent
and its special counsel shall have received all such information, and such
counterpart originals or such certified or other copies of all such other
materials, as the Administrative Agent or its special counsel shall have
reasonably requested; and all legal matters incident to the transactions
contemplated by this Agreement shall be reasonably satisfactory to special
counsel to the Administrative Agent.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to each of the Lenders, the
Issuing Lender and the Agents as set forth below in this Article VI:
6.1. CORPORATE EXISTENCE AND POWER, ETC. Each of the Borrower and its
Subsidiaries:
(a) is a duly organized and validly existing corporation, partnership
or limited liability company, as the case may be, and is in good standing under
the laws of the jurisdiction of its organization;
(b) has the power and authority, and the legal right, to own or hold
under lease its Property, conduct its business and execute, deliver and perform
its Obligations under each of the Loan Documents to which it is or is to become
a party as contemplated hereby;
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(c) is duly qualified to do business as a foreign entity, and licensed
and in good standing, under the Applicable Law of each jurisdiction where its
ownership, lease or operation of Property or the nature or conduct of its
business requires such qualification or license, EXCEPT (in each case) where the
failure so to be qualified or licensed has not had and could not reasonably be
expected to have a Materially Adverse Effect; and
(d) is in compliance with all Applicable Law, EXCEPT (in each case) to
the extent that the failure to comply therewith has not had and could not
reasonably be expected to have a Materially Adverse Effect.
6.2. CORPORATE AUTHORIZATION; ETC. The execution, delivery and
performance by each of the Borrower and its Subsidiaries of each of the Loan
Documents to which it is or is to become a party as contemplated hereby, and, in
the case of the Borrower, to make the Borrowings contemplated hereby, have been
duly authorized by all necessary corporate, limited liability company or
partnership action, as the case may be, and do not and will not:
(a) contravene in any material respect any of the terms or other
provisions of any of the Governing Documents of any such Person;
(b) conflict in any material respect with or result in any material
breach or contravention of, or the creation of any Liens under, any Instrument
or other document creating, governing or evidencing any material Contractual
Obligation to which such Person is a party or by which such Person or any of its
Property is bound or any order, injunction, writ or decree of any Governmental
Authority to which such Person or any of its Property is subject; or
(c) violate any Applicable Law.
6.3. GOVERNMENTAL AUTHORIZATION. No approval, consent, exemption,
authorization or other action by, or notice to, or filing with, any Governmental
Authority is necessary or required in connection with the execution, delivery or
performance by, or enforcement against, the Borrower or any of its Subsidiaries
of any of the Loan Documents to which such Person is or is to become a party as
contemplated hereby, EXCEPT such filings of financing statements under the
Uniform Commercial Code and such other filings and notices as are specified in
and required by the Collateral Documents.
6.4. BINDING EFFECT. The Borrower has duly executed and delivered this
Agreement, the Security Agreement, the Pledge Agreement and each of the other
Loan Documents required to be executed and delivered by the Borrower in
accordance with the terms hereof. Each of the Borrower's Domestic Subsidiaries
will, by the Closing Date, have duly executed and delivered the Security
Agreement, the Pledge Agreement and each of the other Loan Documents required to
be executed and delivered by it in accordance with the terms hereof. Each of the
Loan Documents to which the Borrower or any of its Subsidiaries is a party
constitutes, and each of the other Loan Documents upon execution and delivery
thereof by any Credit Party, will constitute, the legal, valid and binding
Obligation of each Credit Party thereto, enforceable against each such Credit
Party in accordance with its terms, EXCEPT (in each case) as enforceability may
be limited by applicable bankruptcy, insolvency or other similar Applicable Law
affecting the enforcement of creditors' rights generally or by equitable
principles of general applicability.
6.5. COLLATERAL DOCUMENTS. The provisions of the Collateral Documents
will, from and after the execution and delivery thereof by each Credit Party
party thereto, be effective to create
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in favor of the Collateral Agent, for the benefit of each of the Lenders, the
Issuing Lender and the Agents, legal, valid and enforceable security interests
in and Liens upon the Property of such Credit Party constituting Collateral
described therein and in the proceeds thereof. The representations and
warranties made by each of the Credit Parties in the Collateral Documents,
including representations and warranties relating to the perfection of security
interests in and Liens upon the Collateral described therein and representations
and warranties relating to the priority of such security interests and Liens,
will, from the date on which such representations and warranties are made, be
true and correct in all material respects with the same full force and effect as
if set forth in full herein.
6.6. NO DEFAULT. No Default is continuing, and no Default will result
from the making of any Credit Extensions to the Borrower. Neither the Borrower
nor any of its Subsidiaries is in default under or with respect to any
Contractual Obligation in any respect which, individually or together with all
such defaults, has had or could reasonably be expected to have a Materially
Adverse Effect.
6.7. USE OF PROCEEDS; MARGIN REGULATIONS. The proceeds of each of the
Credit Extensions are intended to be and shall be used solely for the purposes
set forth in and permitted by Section 7.10, and are intended to be and shall be
used in compliance with Section 8.14. Neither the Borrower nor any of its
Subsidiaries shall purchase Margin Stock other than purchases made in compliance
with Regulations T, U and X of the Federal Reserve Board.
6.8. FINANCIAL STATEMENTS, ETC.
(a) All balance sheets, statements of income and other financial data
which have been or shall from time to time hereafter be furnished by the
Borrower or any of its Subsidiaries to any of the Agents or Lenders for the
purposes of or in connection with this Agreement or any of the transactions
contemplated hereby do and will present fairly, in all material respects, the
financial condition of the Persons involved as of the dates thereof and the
results of their operations for the periods covered thereby.
(b) The projected consolidated statements of income and of cash flows
of the Borrower and its Subsidiaries for each of Fiscal Years 2000 through 2005,
all of which have been delivered to each of the Lenders and the Agents prior to
the date of this Agreement, have been prepared on the basis of the reasonable
assumptions accompanying them and reflect, as of the date of preparation, the
good faith estimates made on a reasonable basis by the Borrower of the
performance of the Borrower and its Subsidiaries for the periods covered thereby
based on such assumptions. Nothing in this paragraph (b) shall be deemed a
representation or assurance that such projections will, in fact, be achieved.
6.9. MATERIALLY ADVERSE EFFECT.
(a) For purposes of the Credit Extensions to be made on the Closing
Date, no events or developments have occurred since March 31, 1999 which,
individually or in the aggregate, have had or could reasonably be expected to
have any Materially Adverse Effect.
(b) For purposes of each Credit Extension requested to be made after
the Closing Date, no events or developments have occurred since the Closing Date
which, individually or in the aggregate, have had or could reasonably be
expected to have any Materially Adverse Effect.
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6.10. EXISTING INDEBTEDNESS; ABSENCE OF DEFAULTS; ETC.
(a) The Indebtedness of each of the Borrower and its Subsidiaries in
existence on the Closing Date is identified in Schedule 6.10 to the Disclosure
Letter. With respect to each item of Indebtedness identified in Schedule 6.10 to
the Disclosure Letter, the outstanding principal amount of which is $5,000,000
or more on or as of the Closing Date, the Borrower has delivered or otherwise
made available to the Administrative Agent a true and complete copy of each
Instrument evidencing such Indebtedness or pursuant to which such Indebtedness
was issued or secured (including each amendment, consent, waiver or other
Instrument executed and/or delivered in respect thereof), as the same is in
effect on or as of the Closing Date. Except as otherwise disclosed in Schedule
6.10 to the Disclosure Letter, neither the Borrower nor any of its Subsidiaries
is in default in the payment of any Indebtedness, which payments, in the
aggregate, exceed $5,000,000, or in default or breach, in any material respect,
in the performance of any other material obligation under any Instrument
evidencing or governing any Indebtedness (in an aggregate amount exceeding
$5,000,000) or pursuant to which any such Indebtedness (in an aggregate amount
exceeding $5,000,000) was issued or secured.
(b) Schedule 6.10 to the Disclosure Letter identifies all of the Liens
upon Property of the Borrower or any of its Subsidiaries that secure
Indebtedness of the Borrower or of any of its Subsidiaries and that are in
existence on the Closing Date and either (i) are known to the Borrower or to any
of its Subsidiaries on or as of the Closing Date, or (ii) are of record on and
as of the Closing Date.
(c) Schedule 6.10 to the Disclosure Letter also identifies each
Investment of the Borrower or of any of its Subsidiaries that is owned or held
or is outstanding or in effect on the Closing Date, other than insubstantial and
immaterial Investments and other than Investments of the kind described in any
of clauses (b) through (e) or in clause (g) of the definition of the term
"PERMITTED INVESTMENTS".
6.11. TRANSACTIONS WITH AFFILIATES. Schedule 6.11 to the Disclosure
Letter identifies (a) all (if any) Indebtedness of the Borrower or of any of its
Subsidiaries to any Affiliate of the Borrower on or as of the Closing Date,
material Contractual Obligations of the Borrower or of any of its Subsidiaries
to any Affiliate of the Borrower on or as of the Closing Date, and Investments
in the Borrower or in any of its Subsidiaries owned, held or controlled by any
Affiliate of the Borrower on or as of the Closing Date, and (b) all (if any)
Indebtedness of any Affiliate of the Borrower to the Borrower or to any of its
Subsidiaries on or as of the Closing Date, material Contractual Obligations of
any Affiliate of the Borrower to the Borrower or to any of its Subsidiaries on
or as of the Closing Date, and Investments in any Affiliate of the Borrower
owned, held or controlled by the Borrower or by any of its Subsidiaries on or as
of the Closing Date.
6.12. CORPORATE STRUCTURE, ETC. Schedule 6.12 to the Disclosure Letter
identifies, as of the Closing Date immediately after giving effect to the
Macmillan Acquisition, each Subsidiary of the Borrower and each Subsidiary
Guarantor. Schedule 6.12 to the Disclosure Letter identifies, with respect to
each of the Borrower and its Subsidiaries identified in Schedule 6.12 to the
Disclosure Letter, as of the Closing Date immediately after giving effect to the
Macmillan Acquisition, (a) the State or other jurisdiction of organization of
each such Person, (b) the number of authorized and outstanding shares of each
class of Capital Stock and all other Equity Interests of each such Person, and
(c) with respect to each Subsidiary of the Borrower, (i) each Person which owns
or controls (whether legally or beneficially) any of the Capital Stock or other
Equity
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Interests of each such Subsidiary, and (ii) the number of shares or units of
each class or kind of Capital Stock or other Equity Interests so owned or
controlled by each such Person.
6.13. TITLE TO PROPERTIES. All Real Property owned or leased by the
Borrower or by any of its Subsidiaries as of the Closing Date, and the nature of
the interest therein, is identified in Schedule 6.13 to the Disclosure Letter.
Each of the Borrower and its Subsidiaries has good record and marketable title
in fee simple to, or valid leasehold interests in, all Real Property necessary
or used in the ordinary conduct of its businesses, including all Real Property
identified in Schedule 6.13 to the Disclosure Letter or in the financial
statements referred to in Section 6.8. None of such Real Property is subject to
any Liens, EXCEPT for Permitted Liens, other Liens permitted by Section 8.3, and
such defects in title as, individually or in the aggregate, have not had and
could not reasonably be expected to have a Materially Adverse Effect.
6.14. TRADEMARKS, ETC. Each of the Borrower and its Subsidiaries owns
(or is licensed to use) and possesses all trademarks, trademark rights,
tradenames, tradename rights, servicemarks, servicemark rights, copyrights,
patents and patent rights necessary or used in the ordinary conduct of its
businesses without any infringement upon any rights of any other Persons, EXCEPT
for such infringements as, individually or in the aggregate, have not had and
could not reasonably be expected to have a Materially Adverse Affect.
6.15. LITIGATION. There are no actions, suits, proceedings, claims or
disputes pending or, to the knowledge of the Borrower, threatened at law, in
equity, in arbitration or before any Governmental Authority, against the
Borrower, any of its Subsidiaries or any of their Properties which:
(a) purport to affect or pertain to this Agreement or any of the other
Loan Documents or any of the transactions contemplated hereby or thereby; or
(b) have had or could reasonably be expected to have a Materially
Adverse Effect.
No injunction, writ, temporary restraining order or any other order of any
nature has been issued by any Governmental Authority purporting to enjoin or
restrain the execution, delivery or performance of this Agreement or any of the
other Loan Documents, or directing that any transaction provided for herein not
be consummated as herein provided.
6.16. COMPLIANCE WITH APPLICABLE LAW, ETC. All transactions
contemplated by this Agreement and the other Loan Documents comply in all
material respects with (a) Regulations T, U and X of the Federal Reserve Board,
and (b) all other Applicable Law, EXCEPT where any failure to comply, in the
case of this clause (b), has not had and could not reasonably be expected to
have a Materially Adverse Effect.
6.17. GOVERNMENTAL REGULATION. Neither the Borrower nor any of its
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company of a holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
6.18. TAXES. Each of the Borrower and its Subsidiaries has filed or
caused to be filed all Federal and other tax returns and reports required to be
filed by it and has paid the tax thereon shown to be due, and has paid all other
material taxes, assessments, fees or other charges levied
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or imposed upon it or its Properties or income, EXCEPT (in each case) those
which are being contested in good faith by appropriate proceedings and for which
adequate reserves have been provided in accordance with GAAP. To the best
knowledge of the Borrower or of any of its Subsidiaries, no claim is being
asserted by any Governmental Authority with respect to any tax, fee or other
charge, and there is no proposed tax assessment, against the Borrower or any of
its Subsidiaries which, individually or in the aggregate, has had or could
reasonably be expected to have a Materially Adverse Effect.
6.19. ERISA COMPLIANCE.
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Applicable Law. There are no
pending or, to the best knowledge of the Borrower or of any of its Subsidiaries,
threatened claims, actions or lawsuits, or actions by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Materially Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in a
Materially Adverse Effect. No ERISA Event has occurred or could reasonably be
expected to occur with respect to any Pension Plan or Multiemployer Plan. No
Pension Plan has an Unfunded Pension Liability. Neither the Borrower nor any of
its Subsidiaries nor any ERISA Affiliate has incurred, nor reasonably expects to
incur, any material liability under Title IV of ERISA with respect to any
Pension Plan.
(b) Neither the Borrower nor any of its Subsidiaries nor any ERISA
Affiliate has incurred, nor reasonably expects to incur, any material liability
(and no event has occurred which, with the giving of notice under Section 4219
of ERISA, would result in such material liability) under Section 4201 or 4243 of
ERISA with respect to a Multiemployer Plan.
(c) Neither the Borrower nor any of its Subsidiaries nor any ERISA
Affiliate has transferred any Unfunded Pension Liability to any Person or
otherwise engaged in a transaction that could be subject to Section 4069 or
4212(c) of ERISA.
6.20. HAZARDOUS MATERIALS. Neither the Borrower nor any of its
Subsidiaries has caused or permitted any Hazardous Material to be disposed of or
otherwise released, to the knowledge of the Borrower, either from, on or under
any Property currently or formerly legally or beneficially owned or operated by,
or otherwise used by, the Borrower or any of its Subsidiaries, in any manner
which, individually or in the aggregate, has had or could reasonably be expected
to have a Materially Adverse Effect. To the knowledge of the Borrower, no such
Property has ever been used as a dump site or storage site for any Hazardous
Materials or otherwise contains or contained Hazardous Materials, the effect of
any of which, individually or in the aggregate, has had or could reasonably be
expected to have a Materially Adverse Effect. The failure, if any, of the
Borrower or of any of its Subsidiaries, in connection with its current and
former Properties or its businesses, to be in compliance with any Environmental
Law or to obtain any permit, certificate, license, approval or other
authorization under any Environmental Law has not had, and could not reasonably
be expected to have, a Materially Adverse Effect. Neither the Borrower nor any
of its Subsidiaries has entered into, has agreed to or is subject to any
judgment, decree or order or other similar requirement of any Governmental
Authority under any Environmental Law, including relating to compliance or to
investigation, cleanup, remediation or removal of Hazardous Materials, the
effect of any of which, individually or in the aggregate, has had or could
reasonably be expected to have a Materially Adverse Effect. Neither the Borrower
nor any of its Subsidiaries has contractually assumed any material liabilities
or obligations under any
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Environmental Law which, individually or in the aggregate, have had or could
reasonably be expected to have a Materially Adverse Effect. There are no facts
or circumstances known to the Borrower that could give rise to material
liabilities with respect to Hazardous Materials or any Environmental Law which,
individually or in the aggregate, have had or could reasonably be expected to
have a Materially Adverse Effect.
6.21. LABOR CONTROVERSIES. There are no labor controversies pending or,
to the knowledge of the Borrower, threatened against the Borrower or any of its
Subsidiaries which, individually or in the aggregate, have had or could
reasonably be expected to have a Materially Adverse Affect.
6.22. YEAR 2000 COMPLIANCE. Each of the Borrower and its Subsidiaries
has (a) undertaken and completed a review and assessment of all areas within its
business and operations that could be materially adversely affected by the "YEAR
2000 PROBLEM" (that is, the risk that computer applications used by such Person
(or its suppliers and vendors) may be unable to recognize and perform properly
date-sensitive functions involving certain dates before and after January 1,
2000), and (b) to the extent appropriate in light of the results of such review
and assessment, developed a plan and timeline for addressing the Year 2000
Problem by November 30, 1999. To the knowledge of the Borrower, all computer
applications that are material to its businesses and operations are reasonably
expected on a timely basis to be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000 (that is, be "YEAR 2000
COMPLIANT"), EXCEPT (in any case) to the extent that any failure to be Year 2000
Compliant has not had and could not reasonably be expected to have a Materially
Adverse Effect.
6.23. ACCURACY OF INFORMATION. All factual information (excluding, in
any event, financial projections) heretofore or contemporaneously herewith
furnished by the Borrower or any of its Subsidiaries in writing to any of the
Agents or Lenders for purposes of or in connection with this Agreement or any of
the transactions contemplated hereby, and all other such factual information
from time to time hereafter furnished by or on behalf of the Borrower or any of
its Subsidiaries to any of the Agents or Lenders in connection with this
Agreement or any of the transactions contemplated hereby will be, true and
accurate in every material respect on the date as of which such information is
dated or certified and not incomplete in any material respect by omitting to
state any material fact necessary to make such information, in the light of the
circumstances existing at the time such information is furnished, not misleading
in any material respect.
ARTICLE VII.
AFFIRMATIVE COVENANTS
The Borrower agrees with each of the Lenders and the Agents and
warrants that, from and after the date of this Agreement and until all of the
Commitments, the Letter of Credit Commitment and the Letters of Credit shall
have terminated and all of the Obligations shall have been paid and performed in
full, the Borrower will, and will cause each of its Subsidiaries to:
7.1. FINANCIAL INFORMATION, ETC. Deliver to the Administrative Agent,
in form and detail reasonably satisfactory to the Administrative Agent and the
Majority Lenders, with sufficient copies for each Lender:
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(a) as soon as available, but not later than 90 days after the end of
each Fiscal Year: (i) a copy of the audited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at the end of such year and the
related consolidated statements of income, shareholders' equity and cash flows
for such Fiscal Year, setting forth in each case in comparative form the figures
for the previous Fiscal Year, and accompanied by the opinion of the Independent
Public Accountant, which opinion shall state that such consolidated financial
statements present fairly, in all material respects, the financial position and
the results of operations for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years (except for changes agreed upon
by the Borrower and such auditors which are disclosed and described in such
statements). Such opinion shall be issued by the Independent Public Accountant
without Impermissible Qualification; and (ii) copies of consolidating balance
sheets as at the end of such Fiscal Year, and related consolidating statements
of income for such Fiscal Year of the Borrower and its Subsidiaries (with
comparable information as at the end of and for the previous Fiscal Year)
certified as to fairness of presentation by the chief financial officer of the
Borrower;
(b) as soon as available, but not later than 45 days after the end of
each of the first three Fiscal Quarters of each Fiscal Year: (i) a copy of the
unaudited consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such quarter and the related consolidated
statements of income shareholders' equity and cash flows for such quarter and
for the portion of the Fiscal Year then ended, and certified by the chief
financial officer of the Borrower as being complete and correct in all material
respects and fairly presenting in all material respects, in accordance with GAAP
(except for the absence of footnotes and subject to normal year-end
adjustments), the financial position and the results of operations of the
Borrower and its consolidated Subsidiaries; and (ii) copies of consolidating
balance sheets as at the end of such Fiscal Quarter, and related consolidating
statements of income for such Fiscal Quarter and for the portion of the Fiscal
Year then ended of the Borrower and its Subsidiaries (with comparable
information as at the end of and for the corresponding Fiscal Quarter of the
prior Fiscal Year and for the corresponding portion of such prior Fiscal Year)
certified as to fairness of presentation by the chief financial officer of the
Borrower; and
(c) not later than September 30 of each Fiscal Year of the Borrower, a
copy of the annual business plan and budget for such Fiscal Year for the
Borrower and its Subsidiaries, including, in each case, budgeted results for
each Fiscal Quarter and for the Fiscal Year as a whole, together with an
explanation of any differences between the sum of the individual budgets and the
consolidated totals, and upon the delivery of any financial statements relating
to any period included in such budget, a summary comparing the actual financial
performance of the Borrower and its Subsidiaries during such period to that
provided for in such budget.
7.2. CERTIFICATES; OTHER INFORMATION. Furnish to the Administrative
Agent, in form and detail reasonably satisfactory to the Administrative Agent
and the Majority Lenders, with sufficient copies for each Lender:
(a) concurrently with the delivery of the financial statements referred
to in Section 7.1(a) and Section 7.1(b), a Compliance Certificate properly
completed in compliance with the terms hereof and duly executed by the chief
financial officer of the Borrower;
(b) concurrently with the delivery of the financial statements referred
to in Section 7.1(a) and Section 7.1(b), a Leverage Ratio Certificate properly
completed in compliance with the terms hereof and duly executed by the chief
financial officer of the Borrower;
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(c) promptly after the same are first sent, true and complete copies of
all financial statements and other reports which the Borrower shall send to its
shareholders; and, promptly after the same are first filed, copies of all
financial statements and regular, periodic or special reports which the Borrower
shall make to, or file with, the Securities and Exchange Commission; and
(d) promptly, such additional business, financial and other
information, including information respecting the Year 2000 Problem, with
respect to the Borrower or any of its Subsidiaries as the Administrative Agent,
at the request of any Lender, may from time to time reasonably request.
7.3. NOTICES. Upon any Responsible Officer of the Borrower first
obtaining knowledge thereof, give written notice (accompanied by a reasonably
detailed written explanation with respect thereto) promptly to the
Administrative Agent and to each Lender of:
(a) the occurrence of any Default;
(b) any litigation, arbitration or governmental investigation or
proceeding not previously disclosed by the Borrower to the Administrative Agent
and to each of the Lenders which has been instituted or, to the best knowledge
of the Borrower, has been threatened against the Borrower or any of its
Subsidiaries or to which any of their Properties is subject and (i) which has
had or could reasonably be expected to have a Materially Adverse Effect, or (ii)
which seeks to enjoin, limit or restrict the performance by any of the Credit
Parties of any of its Obligations under, or challenges the validity, binding
effect or enforceability of, this Agreement, any of the other Loan Documents or
any of the transactions contemplated hereby or thereby;
(c) any development which shall have occurred in any litigation,
arbitration or governmental investigation or proceeding previously disclosed by
the Borrower to the Administrative Agent and to each of the Lenders and which
has had or could reasonably be expected to have a Materially Adverse Effect;
(d) any of the following events affecting the Borrower or any ERISA
Affiliate, together with a copy of any notice with respect to any such event
that may be required to be filed with any Governmental Authority and any notice
delivered by any Governmental Authority to the Borrower, any of its Subsidiaries
or any ERISA Affiliate with respect to such event: (i) an ERISA Event; or (ii)
if any of the representations and warranties in Section 6.19 shall cease to be
true and correct in any material respect; or
(e) the occurrence of any Change of Control.
7.4. MAINTENANCE OF CORPORATE EXISTENCE, ETC. Cause to be done at all
times all things necessary to maintain and preserve its separate existence as a
corporation, limited liability company or partnership, as the case may be,
EXCEPT, in each case, as and to the extent otherwise expressly permitted by
Section 8.5.
7.5. FOREIGN QUALIFICATION, ETC. Cause to be done at all times all
things necessary to maintain and preserve its material rights and franchises and
to be duly qualified to do business and to be in good standing as a foreign
corporation or (as the case may be) foreign limited liability company, foreign
partnership or other foreign entity in each jurisdiction where the nature of
such business makes such qualification necessary and where the failure so to
maintain and
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preserve its material rights and franchises or so to qualify will have or could
reasonably be expected to have a Materially Adverse Effect.
7.6. PAYMENT OF TAXES; ETC. Pay and discharge, as the same become due
and payable or before the same become delinquent, as the case may be, all
material federal, state and local taxes, assessments and other governmental
charges or levies against or on any of its income, profits or Property, as well
as all material claims of any kind, which, if unpaid, might become a Lien upon
any of its Properties, and pay (before they become delinquent) all other
material obligations and liabilities; provided, however, that the foregoing
shall not require the Borrower or any of its Subsidiaries to pay or discharge
any such tax, assessment, charge, levy, Lien, obligation or liability (a) so
long as it shall contest the validity thereof in good faith by appropriate
proceedings and shall have set aside on its books adequate reserves in
accordance with GAAP with respect thereto, or (b) if the failure to make such
payment or to effect such discharge will not have and could not reasonably be
expected to have a Materially Adverse Effect.
7.7. MAINTENANCE OF PROPERTY; INSURANCE. Keep all of its material
tangible Property, systems and facilities that are useful and necessary in its
business in such condition as is sufficient for the operation of its business in
the ordinary course, ordinary wear and tear and obsolescence excepted, and
maintain with financially sound and reputable insurance companies insurance on
all of its Property in at least such amounts and against at least such risks as
are usually insured against by companies engaged in the same or similar
businesses.
7.8. COMPLIANCE WITH LAWS, ETC.
(a) Obtain all such material approvals and take all such other action
with respect to any Governmental Authority as shall from time to time be
required for the execution, delivery or performance by the Borrower or by any of
its Subsidiaries of this Agreement or any of the other Loan Documents, and duly
perform and comply in all material respects with all of the material terms and
conditions of all approvals so obtained.
(b) Comply in all material respects with all Applicable Laws, including
all Environmental Laws and all material provisions of ERISA, EXCEPT to the
extent that any failures so to comply will not have and could not reasonably be
expected to have a Materially Adverse Effect.
7.9. BOOKS AND RECORDS. Keep proper books and records reflecting all of
its material business affairs and transactions in accordance with GAAP and
Applicable Law, and permit the Administrative Agent or any of its
representatives, and, during the continuation of any Event of Default, each of
the Lenders and their representatives, upon reasonable notice at reasonable
times and intervals during ordinary business hours, to visit and inspect any of
its offices and Properties, discuss financial matters relating to the Borrower
or to any of its Subsidiaries with any of their officers and the Independent
Public Accountant (and the Borrower hereby irrevocably authorizes the
Independent Public Accountant to discuss the Borrower's financial matters with
the Administrative Agent or any of the Administrative Agent's representatives),
and examine and make abstracts or photocopies from any of its books or other
corporate records. Except as otherwise provided by the last sentence of this
Section 7.9, all costs and expenses incurred by the Administrative Agent or any
of its representatives or by the Lenders or their representatives shall be for
the account of the Person incurring such cost or expense unless any Material
Event of Default shall be continuing, in which event all of such costs and
expenses shall be for the account of the Borrower. The Administrative Agent
shall have the right to perform a collateral audit at
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the offices and at the business and Property locations of the Borrower and of
each of its Subsidiaries once during each Fiscal Year so long as no Events of
Default shall be continuing, and, if any Events of Default shall be continuing,
at such additional time or times during each Fiscal Year as the Administrative
Agent shall in its sole discretion determine to be necessary or appropriate. All
of the reasonable out-of-pocket costs and expenses incurred or sustained by the
Administrative Agent in connection with the conduct of such collateral audits
shall be for the account of the Borrower; provided, however, that the Borrower
shall not be responsible for the costs and expenses of more than one (1) such
collateral audit per Fiscal Year conducted by the Administrative Agent while no
Events of Default are continuing.
7.10. USE OF PROCEEDS. Use the proceeds of (a) the Term Loans and
Revolving Loans to (i) finance, in part, the Macmillan Acquisition, (ii) to pay
fees and expenses incurred in connection with the Macmillan Acquisition, and
(iii) for working capital and general corporate requirements of the Borrower and
its Subsidiaries, and (b) the Incremental Loans to finance acquisitions and
purchases and to pay fees and expenses incurred in connection therewith, in each
case, if and to the extent permitted hereunder.
7.11. INTEREST RATE PROTECTION. In the case of the Borrower, within
ninety (90) days after the Closing Date, enter into and maintain in effect at
all times, for a period of not less than two (2) consecutive years, one or more
Interest Rate Protection Agreements providing interest rate protection
reasonably satisfactory to the Administrative Agent with respect to an aggregate
notional amount of principal that shall at no time during such two (2) year
period be less than the EXCESS of fifty percent (50%) of the aggregate principal
amount of all of the Loans from time to time outstanding OVER $15,000,000. Each
of the Interest Rate Protection Agreements entered into by the Borrower from
time to time pursuant to this Section 7.11 shall contain terms and conditions
reasonably satisfactory to the Administrative Agent.
7.12. IDENTIFICATION OF SUBSIDIARIES; PROVISION OF COLLATERAL.
(a) If and whenever any direct or indirect Subsidiary of the Borrower
(whether a Domestic Subsidiary or a Foreign Subsidiary) shall be created, formed
or acquired by the Borrower or by any of its Subsidiaries at any time after the
date hereof:
(i) furnish promptly to the Administrative Agent a written notice
identifying such Subsidiary and setting forth with respect to such Subsidiary
the information required by Section 6.12 with respect to the Borrower's
Subsidiaries as of the Closing Date; and
(ii) promptly comply with, and cause such Subsidiary to comply with,
the applicable terms of paragraph (b).
(b) Subject always to paragraph (c) of this Section 7.12, promptly
after the consummation of any Acquisition or the creation, formation or
acquisition of any new Subsidiary of the Borrower:
(i) in the case of any acquisition of Equity Interests of any
new Subsidiary by the Borrower or by any of its Subsidiaries, whether
in connection with the creation, formation or acquisition of a new
Subsidiary or otherwise: (A) deliver or cause to be delivered to the
Collateral Agent in pledge all of the certificates representing such
Equity Interests, such Equity Interests to be held by the Collateral
Agent in pledge in accordance with the terms of the Pledge Agreement,
or (as the case may be) otherwise comply with
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the terms of the Pledge Agreement applicable to the creation and
perfection of security interests in such Equity Interests; and (B)
cause such new Subsidiary to execute and deliver to the Administrative
Agent (1) accession agreements in form and substance reasonably
satisfactory to the Administrative Agent upon the terms of which such
Subsidiary shall become a party to and bound by each of the Subsidiary
Guaranty, the Security Agreement and the Pledge Agreement, the effect
of which shall be that, as of the date set forth in such accession
agreements, such new Subsidiary shall become a party to each such
Instrument and be bound by the terms thereof, (2) if such Subsidiary
owns any U.S. registered trademarks, a Trademark Security Agreement
covering such trademarks, (3) if such Subsidiary owns any U.S.
registered copyrights, a Copyright Security Agreement covering such
copyrights, and (4) such Uniform Commercial Code financing statements
as shall be required to perfect the security interests and Liens in
Collateral being pledged and assigned by such new Subsidiary pursuant
to the Security Agreement and the Pledge Agreement;
(ii) in the case of any Acquisition of tangible or intangible
personal Property by the Borrower or by any of its Subsidiaries,
deliver or cause to be delivered to the Administrative Agent, duly
executed by the Persons acquiring such Property (A) such Uniform
Commercial Code financing statements as shall be required to perfect
the security interest and Liens in the Property so acquired, (B) if
such Property includes any U.S. registered trademarks, a Trademark
Security Agreement covering such trademarks, and (C) if such Property
includes any U.S. registered copyrights, a Copyright Security Agreement
covering such copyrights; and
(iii) in each such case, comply with all of the other
applicable provisions of Section 7.13 and provide to the Administrative
Agent all such other documentation, including, without limitation, one
or more opinions of counsel reasonably satisfactory to the
Administrative Agent, Governing Documents, and resolutions, as the
Administrative Agent shall reasonably deem necessary or advisable in
connection with such Acquisition of Property or the creation, formation
or acquisition of such new Subsidiary.
(c) Anything express or implied to the contrary in paragraphs (a) and
(b) of this Section 7.12 or in paragraphs (a) and (b) of Section 7.13 or in any
other provisions of any of the Collateral Documents or other Loan Documents, but
SUBJECT ALWAYS in any event to the provisions contained in Section 7.13(c):
(i) no Foreign Subsidiary of the Borrower shall be required to
become a party to the Subsidiary Guaranty, the Pledge Agreement, the
Security Agreement or any of the other Collateral Documents or
otherwise to guaranty any of the Obligations or to grant to the
Collateral Agent or any other Persons any security interests in or
other Liens upon any of its Property of any kind in order to secure the
payment or performance of any of the Obligations;
(ii) neither the Borrower nor any Subsidiary of the Borrower
shall be required to pledge or assign to the Collateral Agent or any
other Persons, in order to secure the payment or performance of any of
the Obligations, any Equity Interests in any Foreign Subsidiary of the
Borrower; and
(iii) neither the Borrower nor any Domestic Subsidiary of the
Borrower shall be required to record or file in any foreign country any
Instruments or other documents
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required to be recorded or filed in such foreign country in order to
establish, perfect, preserve or protect Liens in either trademarks or
copyrights registered by the Borrower or by any such Domestic
Subsidiary in such foreign country.
(d) The Borrower understands and agrees that time is of the essence of
the covenants of the Borrower under paragraphs (a) and (b) of this Section 7.12,
and, accordingly, the Borrower covenants that it will, and will cause its
Subsidiaries to, comply in all material respects with each reasonable request or
requirement of the Administrative Agent, Collateral Agent or (as the case may
be) Majority Lenders made pursuant to such paragraphs of this Section 7.12, each
such request or requirement to be complied with promptly but, in any event,
within sixty (60) days after the date on which the Borrower shall have first
received from the Administrative Agent written notice of such request or
requirement.
7.13. ADDITIONAL SECURITY; FURTHER ASSURANCES.
(a) SUBJECT ALWAYS in any event to paragraph (c) of Section 7.12, grant
to the Collateral Agent, for the benefit of each of the Lenders, the Issuing
Lender and the Agents, security interests and Liens in such personal Properties
of the Borrower and its Subsidiaries as are not covered by the Collateral
Documents and as may be requested from time to time by the Administrative Agent
or by the Majority Lenders. All such security interests and Liens shall be
granted pursuant to documentation reasonably satisfactory in form and substance
to the Administrative Agent (collectively, "ADDITIONAL SECURITY DOCUMENTS"), and
shall be effective to create in favor of the Collateral Agent, for the benefit
of each of the Lenders, the Issuing Lender and the Agents, legal, valid and
enforceable security interests in and Liens upon the Collateral described
therein and in the proceeds thereof. The Additional Security Documents or
Instruments related thereto shall be duly recorded or filed in such manner and
in such places as are required by Applicable Law in order to establish, perfect,
preserve and protect the Liens in favor of the Collateral Agent required to be
granted pursuant to the Additional Security Documents, and all taxes, fees and
other charges payable in connection therewith shall be punctually paid in full
by the Borrower.
(b) Make, execute, endorse, acknowledge, file and/or deliver to the
Collateral Agent from time to time such vouchers, invoices, schedules,
confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, reports and other assurances or
Instruments and take such further steps relating to the Collateral covered by
any of the Collateral Documents as the Collateral Agent may from time to time
reasonably require. Furthermore, the Borrower shall cause to be delivered to the
Collateral Agent such opinions of counsel and other related documents as may be
reasonably requested from time to time by the Collateral Agent.
(c) Anything in paragraph (c) of Section 7.12 to the contrary
notwithstanding, if any Material Event of Default shall at any time occur, then,
while any such Event of Default shall be continuing, the Administrative Agent
shall at the request of, or may with the consent of, the Majority Lenders:
(i) require each of the Borrower and its Domestic Subsidiaries
to pledge and assign to the Collateral Agent, and to create in favor of
the Collateral Agent security interests in, all upon the terms
contained in the Pledge Agreement, certain of the Equity Interests of
each of the Foreign Subsidiaries of the Borrower directly owned by the
Borrower or by its Domestic Subsidiaries; provided, however, that the
Borrower and its
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Domestic Subsidiaries shall not in any event be required to pledge more
than sixty-five percent (65%) of the total combined voting power of all
classes of Capital Stock of any foreign corporation entitled to vote;
(ii) require each of the Borrower and its Domestic
Subsidiaries to record or file in any foreign country any Instruments
or other documents required to be recorded or filed in such foreign
country in order to establish, perfect, preserve or protect Liens in
trademarks and copyrights registered by the Borrower or by such
Domestic Subsidiary in such foreign country; and
(iii) require the Borrower and its Domestic Subsidiaries to
take all such steps relating to Property described in clause (i) or
clause (ii) as the Administrative Agent, the Collateral Agent or the
Majority Lenders may from time to time reasonably require pursuant to
paragraphs (a) and (b) of this Section 7.13.
(d) The Borrower understands and agrees that time is of the essence of
the covenants of the Borrower under paragraphs (a), (b) and (c) of this Section
7.13, and, accordingly, the Borrower covenants that it will, and will cause its
Subsidiaries to, comply in all material respects with each reasonable request or
requirement of the Administrative Agent, Collateral Agent or (as the case may
be) Majority Lenders made pursuant to such paragraphs of this Section 7.13, each
such request or requirement to be complied with promptly but, in any event,
within sixty (60) days after the date on which the Borrower shall have first
received from the Administrative Agent written notice of such request or
requirement.
(e) The Borrower understands and agrees that the rights and remedies
available to each of the Lenders, the Issuing Lender and the Agents under
paragraph (c) of this Section 7.13 during the continuation of any Material Event
of Default are cumulative and in addition to and independent of all other rights
and remedies available to such Persons under Section 9.2 or under any other
provisions of any of the Loan Documents or under Applicable Law during the
continuation of any Event of Default.
7.14. YEAR 2000 COMPLIANCE. Perform all acts necessary to ensure that
each of the Borrower and its Subsidiaries shall become Year 2000 Compliant in a
timely manner and use all commercially reasonable efforts to ensure that it
shall not be materially adversely affected as a consequence of the failure by
any material supplier, vendor or customer of the Borrower or its Subsidiaries to
become Year 2000 Compliant in a timely manner, EXCEPT (in each case) to the
extent that any failure to be Year 2000 Compliant will not have and could not
reasonably be expected to have any Materially Adverse Effect. Such acts will
include, as and to the extent determined by the Borrower on a reasonable basis
to be reasonably necessary and appropriate considering the nature of the
business and operations conducted by the Borrower and its Subsidiaries,
performing and completing a comprehensive review and assessment of all material
systems of the Borrower and its Subsidiaries and, if and as reasonably necessary
or appropriate, adopting a plan, with itemized budget, if appropriate, for the
remediation, monitoring and testing of such systems. The Borrower will, promptly
upon request by the Administrative Agent, provide to the Administrative Agent
such evidence of compliance by the Borrower and its Subsidiaries with the terms
of this Section 7.14 as the Administrative Agent may from time to time
reasonably require.
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ARTICLE VIII.
NEGATIVE COVENANTS
The Borrower agrees with each of the Lenders, the Issuing Lender and
the Agents and warrants that, from and after the date of this Agreement and
until all of the Commitments, the Letter of Credit Commitment and Letters of
Credit shall have terminated and all of the Obligations shall have been paid and
performed in full, the Borrower will not, and will not cause or permit any of
its Subsidiaries to:
8.1. LIMITATIONS ON LINES OF BUSINESS. At any time undertake, conduct
or transact, directly or indirectly, any businesses EXCEPT businesses which are
primarily in the Line of Business.
8.2. INDEBTEDNESS. Incur or permit to exist, or otherwise become or be
liable in respect of or be responsible for, any Indebtedness; EXCEPT:
(a) Indebtedness of the Borrower or of any of its Subsidiaries under
any of the Loan Documents or in respect of any of the Credit Extensions or any
of the other Obligations;
(b) Permitted Indebtedness of the Borrower or of any of its
Subsidiaries;
(c) Indebtedness of the Borrower consisting of dividends or other
distributions declared but yet not paid, but only if and to the extent that such
dividends or other distributions are, at the time of declaration, expressly
permitted by Section 8.7;
(d) Indebtedness of any of the Subsidiaries of the Borrower to the
Borrower or to any of its other Subsidiaries;
(e) Indebtedness of the Borrower to any of its Subsidiaries;
(f) Interest Rate Protection Agreements entered into by the Borrower
pursuant to Section 7.11;
(g) Indebtedness (including Capital Lease Obligations) created or
incurred by the Borrower or by any of its Subsidiaries from time to time after
the date hereof in connection with the acquisition, lease, construction or
improvement by such Person from time to time after the date hereof and in the
ordinary course of business of Property used or to be used in the ordinary
course of the business of the Borrower or of any of its Subsidiaries; provided,
however, that (i) any Liens on such Property securing any such Indebtedness of
any such Person constitute Liens permitted by clause (c) of Section 8.3; and
(ii) in the case of Indebtedness described in this clause (g), the aggregate
amount of all of such Indebtedness of the Borrower and its Subsidiaries
(determined on a consolidated basis) shall not at any time exceed (A)
$15,000,000, so long as the Consolidated Leverage Ratio, determined as of the
then most recent Covenant Determination Date is greater than 2.50:1.00, or (B)
if the Consolidated Leverage Ratio so determined is 2.50:1.00 or less, then
$25,000,000; and
(h) other Indebtedness of the Borrower or of any of its Subsidiaries
not otherwise permitted by any of the other clauses of this Section 8.2;
provided, however, that the aggregate
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amount of all of such other Indebtedness of the Borrower and its Subsidiaries
(determined on a consolidated basis) incurred pursuant to this clause (h) shall
not at any time exceed $5,000,000.
8.3. LIENS. Create, incur or assume, or permit to exist, any Liens upon
any of its Property (including any Equity Interests of any of its Subsidiaries),
whether now owned or hereafter created, arising or acquired; EXCEPT:
(a) Liens created by any of the Collateral Documents or other Loan
Documents and securing the payment or performance of any of the Credit
Extensions or any of the other Obligations;
(b) Permitted Liens;
(c) Liens created or incurred by the Borrower or by any of its
Subsidiaries from time to time after the date hereof to secure the payment of
the cost of Property acquired, leased, constructed or improved by such Person
from time to time after the date hereof and in the ordinary course of business,
and which Liens are created or incurred substantially contemporaneously with or
within 360 days after the acquisition, lease, construction or improvement of the
Property subject thereto (all Liens of the type described in this clause (c)
being hereinafter called "PURCHASE MONEY LIENS"); provided, however, that:
(i) any Property subject to any such Purchase Money Lien
created or incurred by any such Person shall be used in the ordinary
course of business of the Borrower or of any of its Subsidiaries; and
(ii) no such Purchase Money Lien on any such Property shall
extend to or cover any other Property of the Person creating such Lien
or any Property of any other Person except as and only to the extent
usual and customary in such financing arrangements;
provided, further, however, that, in the case of the Liens described in this
clause (c) the aggregate amount of all of the Indebtedness (including Capital
Lease Obligations) from time to time secured by any of such Liens (determined on
a consolidated basis) shall at no time exceed the amounts permitted by clause
(g) of Section 8.2; and
(d) other Liens; provided, however, that, in the case of the Liens
described in this clause (d) of Section 8.3, the aggregate amount of all of the
Indebtedness (including Capital Lease Obligations) of the Borrower and its
Subsidiaries (determined on a consolidated basis) from time to time secured by
any of such Liens shall not at any time exceed $5,000,000.
8.4. FINANCIAL COVENANTS.
(a) MAXIMUM LEVERAGE. Permit the Consolidated Leverage Ratio as of the
last day of any Fiscal Quarter during any period below to exceed the ratio set
forth opposite such period below:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
Effective Date through June 30, 2000 4.00:1.00
July 1, 2000 through June 30, 2001 3.50:1.00
</TABLE>
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<TABLE>
<S> <C>
July 1, 2001 through June 30, 2002 3.00:1.00
July 1, 2002 and thereafter 2.50:1.00
(b) MINIMUM INTEREST COVERAGE. Permit the Consolidated Interest
Coverage Ratio as of the last day of any Fiscal Quarter during any period below
to be less than the ratio set forth opposite such period below:
</TABLE>
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
Effective Date through the Maturity Date 2.50:1.00
</TABLE>
(c) MINIMUM FIXED CHARGE COVERAGE. Permit the Consolidated Fixed Charge
Coverage Ratio as of the last day of any Fiscal Quarter during any period below
to be less than the ratio set forth opposite such period below:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
Effective Date through the Maturity Date 1.10:1.00
</TABLE>
8.5. CONSOLIDATIONS, MERGERS, SALES, ETC. Wind up, liquidate or
dissolve, or consolidate or amalgamate with or merge into or with any other
Person, or engage in any Sale of all or any part of its Property (whether in one
transaction or in a series of related transactions); EXCEPT:
(a) any Subsidiary of the Borrower may merge with and into, or may be
dissolved or liquidated into the Borrower, so long as (i) the Borrower is the
surviving Person of any such merger, dissolution or liquidation, and (ii) the
security interests granted to the Collateral Agent pursuant to the Collateral
Documents in the Property of such Subsidiary shall remain in full force and
effect and perfected (to at least the same extent as in effect immediately prior
to such merger, dissolution or liquidation);
(b) any Subsidiary of the Borrower may merge with and into, or may be
dissolved or liquidated into, any Subsidiary of the Borrower, so long as (i)
such Subsidiary of the Borrower is the surviving Person of any such merger,
dissolution or liquidation and, immediately after giving effect thereto, the
Borrower continues to own the same percentage of all of the Equity Interests of
the surviving Subsidiary as the percentage owned by the Borrower immediately
prior to completion of such merger, dissolution or liquidation, and (ii) the
security interests granted to the Collateral Agent pursuant to the Collateral
Documents in the Property of such Subsidiary shall remain in full force and
effect and perfected (to at least the same extent as in effect immediately prior
to such merger, dissolution or liquidation);
(c) any Subsidiary of the Borrower may merge into another Person in
connection with the completion of a Permitted Acquisition of such Person so long
as the security interests granted to the Collateral Agent pursuant to the
Collateral Documents in the Property of such Subsidiary shall remain in full
force and effect and perfected (to at least the same extent as in effect
immediately prior to such merger);
(d) any Permitted Dispositions; and
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(e) Asset Sales; provided, however, that (i) the aggregate Fair Market
Value (determined on a consolidated basis) of all of the Property of the
Borrower or of any of its Subsidiaries (including Equity Interests of
Subsidiaries) sold pursuant to this clause (e) (A) in any Fiscal Year shall not
exceed $20,000,000, and (B) during the period from the Effective Date through
the Maturity Date, shall not exceed $40,000,000, (ii) at least ten (10) Business
Days prior to the date of any such proposed Sale, the Borrower shall have
delivered to the Administrative Agent an officer's certificate duly executed by
a Responsible Officer of the Borrower, which certificate shall contain (A)
projections determined on a Pro Forma Basis for the period from the end of the
immediately preceding Fiscal Quarter to the Maturity Date demonstrating
compliance for such period with Section 8.4(a), (b) and (c), and (B) a statement
that all representations and warranties of the Borrower and its Subsidiaries set
forth in this Agreement or in any of the other Loan Documents will be true and
correct in all material respects immediately after giving effect to such Asset
Sale (except for any such representation or warranty that relates solely to a
prior date), and that no Default will be continuing immediately after giving
effect to such Asset Sale, and (iii) both immediately before and immediately
after giving effect thereto, no Defaults shall then be continuing or shall
result therefrom.
8.6. INVESTMENTS AND ACQUISITIONS. Make, incur or assume, or permit to
exist, or make any offer or commitment to make, or enter into any agreement to
make, any Investments in any other Person or any Acquisitions; EXCEPT:
(a) Permitted Investments;
(b) Investments by any Subsidiary of the Borrower in the Borrower or in
any other Subsidiary of the Borrower;
(c) Investments by the Borrower in any Subsidiary of the Borrower;
(d) Permitted Acquisitions; provided, however, that (i) prior to
completing any such Permitted Acquisition, the Borrower shall have furnished to
the Administrative Agent true and complete copies of all Permitted Acquisition
Documents relating to such Permitted Acquisition, and (ii) both immediately
before and immediately after giving effect to any such Permitted Acquisition, no
Material Events of Default shall then be continuing or shall result therefrom;
(e) Acquisitions of Property (including Equity Interests), in a single
transaction or in a series of related transactions, for total consideration paid
(exclusive of consideration paid in the form of Permitted Equity Interests of
the Borrower) in an Amount not exceeding $10,000,000 in the aggregate for any
such single transaction or series of related transactions; provided, however,
that: (i) the aggregate Amount of all of the consideration paid (exclusive of
consideration paid in the form of Permitted Equity Interests of the Borrower) by
the Borrower or by any of its Subsidiaries for all of such Acquisitions pursuant
to this clause (e) (determined on a consolidated basis) during any Fiscal Year
shall not exceed $20,000,000; and (ii) both immediately before and immediately
after giving effect to any such Acquisition, no Defaults shall then be
continuing or shall result therefrom;
(f) Acquisitions by the Borrower or by any of its Subsidiaries, if and
to the extent that all or substantially all of the consideration payable
therefore is in the form of Permitted Equity Interests of the Borrower;
provided, however, that (i) prior to completing any such Acquisition, the
Borrower shall have furnished to the Administrative Agent true and complete
copies of all Acquisition Documentation relating to such Acquisition, and (ii)
both immediately
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before and immediately after giving effect to any such Acquisition, no Defaults
shall then be continuing or shall result therefrom; and
(g) the Acquisition by the Borrower or by any of its Wholly-Owned
Subsidiaries of the Macmillan Shares pursuant to the Macmillan Acquisition
Documents.
8.7. RESTRICTED PAYMENTS. Make, extend or enter into any offer or
commitment to make, or enter into any agreement to make, any Restricted
Payments; EXCEPT:
(a) the declaration and payment by the Borrower of dividends or other
distributions on its Equity Interests in the form of Permitted Equity Interests
of the Borrower;
(b) Restricted Payments in the form of cash dividends declared or paid
by the Borrower on its Equity Interests; provided, however, that: (i) at the
time of the declaration of any such cash dividends, the Consolidated Leverage
Ratio as of the then most recent Covenant Determination Date shall be less than
2.00:1.00; (ii) the aggregate amount of all such cash dividends so paid by the
Borrower on its Equity Interests in any Fiscal Year shall not exceed $5,000,000
in the aggregate; and (iii) no Default shall be continuing at the time of the
declaration of any such cash dividends or shall result therefrom;
(c) payments by the Borrower or by any of its Subsidiaries to any then
present or former director, manager, officer or employee of the Borrower or of
any of its Subsidiaries in connection with the repurchase of Equity Interests of
the Borrower or of any of its Subsidiaries from any such Person made in the
ordinary course of business and on terms and conditions that are in all material
respects consistent with the Borrower's usual and customary business practices;
provided, however, that the aggregate amount of all of such payments made in any
Fiscal Year shall not exceed $5,000,000; and
(d) payments, not otherwise permitted by any of the other clauses of
this Section 8.7 and not otherwise expressly prohibited by any of the other
covenants in this Article VIII or by any of the other provisions contained in
this Agreement, by the Borrower or any of its Subsidiaries to any Affiliates of
the Borrower, but, in each case, only to the extent permitted by Section 8.10.
8.8. LIMITATIONS ON NEGATIVE PLEDGE CLAUSES. Enter into or cause or
permit to exist or become effective any Instrument which prohibits or limits the
ability of the Borrower or of any of its Subsidiaries to create, incur, assume
or permit to exist any Liens in favor of the Administrative Agent or the
Collateral Agent in connection with this Agreement or the Collateral Documents
upon any of its Property or revenues, whether now owned or from time to time
hereafter created, arising or acquired, EXCEPT for (a) this Agreement and the
other Loan Documents, and (b) any agreements governing any Purchase Money Liens
(as defined in the definition of the term "PERMITTED LIENS") or Capital Lease
Obligations otherwise permitted hereby (in which case, any such prohibition or
limitation shall only be permitted hereunder to the extent it affects the
Property financed thereby).
8.9. LIMITATION ON RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS. Enter into
or cause or permit to exist or become effective any consensual encumb2(c)rance
or restriction on the ability of any Subsidiary of the Borrower to (a) make any
dividends or other distributions in respect of any Equity Interests of such
Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any of its
Subsidiaries, (b) make Investments in the Borrower or any of its Subsidiaries,
or (c)
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transfer any of its Property to the Borrower or any of its Subsidiaries, EXCEPT
for such encumbrances or restrictions existing under or by reason of: (i) any
restrictions under the Loan Documents; (ii) any restrictions with respect to any
Subsidiary of the Borrower imposed pursuant to an agreement which has been
entered into in connection with the Sale of all or substantially all of the
Equity Interests or Property of such Subsidiary; (iii) any restrictions with
respect to any Subsidiary of the Borrower imposed pursuant to an agreement which
has been entered into in connection with a joint venture involving such
Subsidiary, provided that any such restrictions, together with all other similar
restrictions applicable to Subsidiaries of the Borrower, shall not have, and
could not reasonably be expected to have, a Materially Adverse Effect; and (iv)
any restrictions on the ability of the Borrower or any of its Subsidiaries to
transfer any such Property imposed by the provisions of the documentation
pursuant to which there shall have been created a Lien on such Property
expressly permitted by Section 8.3.
8.10. TRANSACTIONS WITH AFFILIATES. Enter into, engage in or perform
any Affiliate Transaction, make any offer or commitment to do so, or enter into
any agreement to do so; EXCEPT:
(a) Restricted Payments by the Borrower, if and only to the extent
expressly permitted by Section 8.7;
(b) loans or advances to any director, manager, officer or employee of
the Borrower or of any of its Subsidiaries made in the ordinary course of
business and on terms and conditions that are in all material respects
consistent with the Borrower's usual and customary business practices; provided,
however, that the aggregate principal amount of all of such loans or advances
from time to time outstanding shall not exceed $2,000,000 at any time;
(c) any arrangements or contracts between the Borrower or any of its
Subsidiaries, on the one hand, and any of the Parent Affiliated Companies, on
the other hand, which are of a nature customarily entered into by Persons that
are Affiliates of each other (including management or similar contracts or
arrangements relating to the allocation of revenues, taxes and expenses or
otherwise) requiring any payments to be made by the Borrower or by any of its
Subsidiaries to any of the Parent Affiliated Companies; provided, however, that
the aggregate amount of all of such payments so made pursuant to this clause (c)
in any Fiscal Year shall not exceed $2,500,000;
(d) Permitted Investments of the kind described in paragraph (f) of the
definition of the term "PERMITTED INVESTMENTS";
(e) each of the Affiliate Transactions described in Schedule 5.1 of the
Disclosure Letter or in Schedule 6.11 of the Disclosure Letter; and
(f) any other Affiliate Transaction not otherwise permitted by any of
the other provisions of this Section 8.10; provided, however, that (i) such
Affiliate Transaction is not otherwise expressly prohibited by the terms of this
Agreement or any of the other Loan Documents; (ii) such Affiliate Transaction is
made or undertaken in the ordinary course of business by the Borrower or by any
of its Subsidiaries and on terms and conditions that are in all material
respects consistent with the Borrower's usual and customary business practices;
(iii) the terms of such Affiliate Transaction, taken as a whole, are no less
favorable to the Borrower or to any of its Subsidiaries than would be the case
if such Affiliate Transaction had been entered into on an arm's length basis
with a Person that is not an Affiliate of the Borrower; and (iv) both
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immediately before and immediately after giving effect thereto, no Defaults
shall then be continuing or shall result therefrom.
8.11. SALE OF CAPITAL STOCK, ETC. Issue, sell, transfer or otherwise
dispose of any shares of any Capital Stock or other Equity Interests of the
Borrower or of any of its Subsidiaries; EXCEPT:
(a) the pledge from time to time, in accordance with the terms of this
Agreement and the Collateral Documents, of Capital Stock and other Equity
Interests now owned or from time to time hereafter acquired by the Borrower or
by any of its Subsidiaries;
(b) the issuance and Sale by the Borrower or by any of its Subsidiaries
of Permitted Equity Interests of the Borrower as consideration in, or in
connection with the formation of any acquisition vehicle to be used in, any
Acquisition permitted by paragraph (f) of Section 8.6;
(c) the issuance and Sale by any Subsidiary of any of its Permitted
Equity Interests in connection with the implementation of any Asset Sale then
permitted pursuant to Section 8.5(e); and
(d) the issuance and Sale by the Borrower of its Permitted Equity
Interests; provided, however, that (i) no breach of Section 8.12 shall occur as
a result of such Sale, and (ii) no Event of Default under Section 9.1.10 shall
result therefrom.
8.12. CHANGE OF CONTROL. Enter into or undertake any transaction,
arrangement or agreement (whether a consolidation, merger, issue or Sale of
Capital Stock or other Securities, reorganization, voting agreement or
otherwise) that will result or could reasonably be expected to result in an
Event of Default under Section 9.1.10.
8.13. USE OF CREDITS; COMPLIANCE WITH MARGIN REGULATIONS. Use all or
any portion of the proceeds of any of the Loans, other Credit Extensions or
Letters of Credit, directly or indirectly, to purchase or carry Margin Stock
other than in compliance with Regulations T, U and X of the Federal Reserve
Board. At no time shall the value of the Margin Stock owned by the Borrower and
its Subsidiaries (as determined in accordance with Regulation U of the Federal
Reserve Board) exceed 25% of the aggregate value (as determined in accordance
with Section 221.2(g)(2) of Regulation U of the Federal Reserve Board) of all of
the Property of the Borrower and its Subsidiaries.
8.14. ENVIRONMENTAL LIABILITIES. Violate any Environmental Law, dispose
of any Hazardous Material into or onto, or (except in accordance with Applicable
Law) from, any real Property owned, operated or otherwise used by the Borrower
or any of its Subsidiaries, or allow any Lien imposed pursuant to any
Environmental. Law to be imposed or to remain on such real Property, in each
case, if any Materially Adverse Effect shall, or could reasonably be expected
to, result therefrom.
ARTICLE IX.
EVENTS OF DEFAULT
9.1. EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" shall mean any of
the following events set forth in this Section 9.1 occurring or existing at any
time on or after the Effective Date:
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9.2. NON-PAYMENT OF OBLIGATIONS. The Borrower or any of its
Subsidiaries shall default:
(a) in the payment or prepayment when due under this Agreement or the
Notes of any principal of any of the Loans, Letter of Credit Obligations or
other Obligations, and any such default shall continue unremedied for a period
of more than one (1) Business Day;
(b) in the payment or prepayment when due under this Agreement, the
Notes or any of the other Loan Documents of (i) any interest on any of the
Loans, Letter of Credit Obligations or other Obligations, or (ii) any Fees
payable under Section 2.9 or Section 3.8; and any such default under subclause
(i) or (ii) of this clause (b) shall continue unremedied for a period of more
than three (3) Business Days; or
(c) in the payment when due under this Agreement or any of the other
Loan Documents of any other sum (other than any sum referred to in clause (a) or
(b)), and any such default shall continue unremedied for a period of more than
five (5) Business Days.
9.1.2. NON-PERFORMANCE OF CERTAIN OBLIGATIONS. The Borrower shall
default in the due performance or observance of any of its Obligations under any
of the following Sections: Section 7.3(a), Section 7.12, Section 7.13 or Article
VIII (including Sections 8.1 through 8.14, inclusive).
9.1.3. NON-PERFORMANCE OF OTHER OBLIGATIONS. The Borrower or any of its
Subsidiaries shall default in the due performance or observance of any of its
Obligations under any of the Loan Documents (other than any of the Obligations
specified in Section 9.1.1 or 9.1.2), and any such default shall continue
unremedied for more than thirty (30) days after written notice thereof shall
have been given to the Borrower by the Administrative Agent or by any Lender.
9.1.4. BREACH OF REPRESENTATION OR WARRANTY. Any representation or
warranty by the Borrower or by any of its Subsidiaries at any time made or
deemed to be made in any Loan Document, or which is contained in any
certificate, document or financial or other statement furnished by or on behalf
of the Borrower or any of its Subsidiaries at any time pursuant to any of the
Loan Documents or in connection with any of the Credit Extensions, shall prove
to have been untrue or incorrect in any material respect on or as of the date
made or deemed made.
9.1.5. CROSS-DEFAULT. The Borrower or any of its Subsidiaries (a) shall
fail to make any payment when due under with respect to any Indebtedness having
an aggregate outstanding principal amount of $5,000,000 or more (whether such
payment is due by reason of scheduled maturity, required prepayment,
acceleration, demand, or otherwise), and any such failure shall continue after
the applicable grace or notice period, if any, specified in the Instrument
relating thereto on the date of such failure; or (b) shall fail to perform or
observe any other condition or covenant, or any other event shall occur or
condition shall exist, under any Instrument relating to any Indebtedness having
an aggregate outstanding principal amount of $5,000,000 or more, and (i) such
failure shall continue after the applicable grace or notice period, if any,
specified in the Instrument relating thereto on the date of such failure, and
(ii) the effect of such failure, event or condition shall be to cause, or to
permit the holder or holders of such Indebtedness or the beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause, such Indebtedness
to be declared to be due and payable prior to its stated maturity.
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9.1.6. INSOLVENCY; VOLUNTARY PROCEEDINGS. The Borrower or any of its
Subsidiaries: (a) shall commence any Insolvency Proceeding with respect to
itself or any of its Subsidiaries; or (b) shall take any action to effectuate or
authorize any of the foregoing.
9.1.7. INVOLUNTARY PROCEEDINGS. (a) Any involuntary Insolvency
Proceeding shall be commenced or filed against the Borrower or any of its
Subsidiaries, or any writ, judgment, warrant of attachment, execution or other
similar process shall be issued or levied against any substantial part of the
Properties of the Borrower or any of its Subsidiaries, and any such Insolvency
Proceeding shall not be dismissed, or any such writ, judgment, warrant of
attachment, execution or other similar process shall not be released, vacated or
fully bonded, within sixty (60) days after commencement, filing, issuance or
levy; (b) the Borrower or any of its Subsidiaries shall admit the material
allegations of a petition against it in any Insolvency Proceeding, or an order
for relief (or any similar order under non-U.S. law) shall be ordered in any
Insolvency Proceeding; or (c) the Borrower or any of its Subsidiaries shall
acquiesce in the appointment of any receiver, trustee, custodian, conservator,
liquidator, mortgagee in possession (or agent therefor) or any other similar
Person for itself or for any substantial portion of its Property or business.
9.1.8. ERISA. (a) Any ERISA Event shall occur with respect to a Pension
Plan or Multiemployer Plan which shall result or could reasonably be expected to
result in liability of the Borrower, any of its Subsidiaries or any ERISA
Affiliate under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the
PBGC in an aggregate amount in excess of $10,000,000; (b) the commencement or
increase of contributions to, or the adoption of or the amendment of, a Pension
Plan by the Borrower, any of its Subsidiaries or any ERISA Affiliate which shall
result or could reasonably be expected to result in an increase in Unfunded
Pension Liability among all Pension Plans with Unfunded Pension Liabilities in
an aggregate amount in excess of $10,000,000; (c) any of the representations and
warranties contained in Section 6.19 shall cease to be true and correct in any
material respect, and such breach shall result or could reasonably be expected
to result in a Materially Adverse Effect; or (d) the Borrower, any of its
Subsidiaries or any ERISA Affiliate shall fail to pay when due, after the
expiration of any applicable grace period, any installment payment with respect
to its withdrawal liability under Section 4201 of ERISA under a Multiemployer
Plan, and such failure shall result or could reasonably be expected to result in
a Materially Adverse Effect.
9.1.9. JUDGMENTS. One or more non-interlocutory judgments, orders or
decrees shall be entered against the Borrower or any of its Subsidiaries
involving in the aggregate liabilities (not covered by independent third-party
insurance) as to any single or related series of transactions, incidents or
conditions of $5,000,000 or more, and the same shall remain unsatisfied,
unvacated or unstayed pending appeal for a period of more than sixty (60) days
after the entry thereof.
9.1.10. CHANGE OF CONTROL. Any Change of Control shall occur.
9.1.11. SUBSIDIARY GUARANTY. Except as otherwise provided or permitted
by or pursuant to the terms of this Agreement or the Subsidiary Guaranty, the
Subsidiary Guaranty or any material provision thereof shall for any reason cease
to be in full force and effect or valid and binding on and enforceable against
any Subsidiary Guarantor, or any Subsidiary Guarantor shall so state in writing
to the Administrative Agent or any Lender, or any Subsidiary Guarantor shall
bring an action to limit its Obligations or liabilities thereunder.
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9.1.12. SECURITY DOCUMENTS. Otherwise (in any case) than in accordance
with the terms of this Agreement or any of the other Loan Documents, any
Collateral Documents or any material provisions of any of the Collateral
Documents shall cease to be in full force and effect or shall cease to create
valid security interests in and Liens upon the Collateral (other than in an
insubstantial or immaterial portion of the Collateral) purported to be covered
thereby, or such security interests and Liens shall cease to be a valid and
perfected security interests and Liens (subject only to Permitted Liens) as
required from time to time by the Collateral Documents.
9.2. REMEDIES. If any Event of Default shall at any time occur and
shall be continuing, the Administrative Agent shall at the request of, or may
with the consent of, the Majority Lenders:
(a) declare the Commitment of each Lender and the Letter of Credit
Commitment of the Issuing Lender to be terminated in full, whereupon all of such
Commitments and such Letter of Credit Commitment shall forthwith be terminated
in full;
(b) declare the unpaid principal amount of all outstanding Loans,
Letter of Credit Obligations and other Obligations, all interest accrued and
unpaid thereon, and all of the other Obligations owing or payable under any of
the Loan Documents to be immediately due and payable in full, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly and irrevocably waived by the Borrower;
(c) demand that the Borrower immediately Cash Collateralize all of the
Letter of Credit Obligations to the extent of outstanding and wholly or
partially undrawn Letters of Credit, whereupon the Borrower shall so Cash
Collateralize all of such Letters of Credit to that extent;
(d) exercise on behalf of itself, the other Agents, the Issuing Lender
and the Lenders all or any of the rights and remedies available to it, the other
Agents, the Issuing Lender and the Lenders under the Loan Documents or
Applicable Law or with respect to all or any part of the Collateral;
(e) apply cash collateral to the payment of outstanding Obligations,
all as provided by Section 3.7; and/or
(f) take any action to enforce all or any of the rights and remedies of
the Collateral Agent under the Collateral Documents and other Loan Documents and
with respect to all or any part of the Collateral;
provided, however, that, upon the occurrence of any Event of Default specified
above in Section 9.1.6 or in Section 9.1.7, the obligation of each Lender to
make Loans and the obligation of the Issuing Lender to issue Letters of Credit
shall in any event automatically terminate, and the unpaid principal amount of
all outstanding Loans, Letter of Credit Obligations and other Obligations and
all interest and other amounts as aforesaid shall automatically become and be
immediately due and payable in full without any further act or notice by the
Administrative Agent, the Issuing Lender or any Lender, all of which are hereby
expressly and irrevocably waived by the Borrower.
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ARTICLE X.
THE ADMINISTRATIVE AGENT AND OTHER AGENTS
10.1. APPOINTMENT AND AUTHORIZATION.
(a) Each of the Lenders and the Issuing Lender hereby irrevocably
appoints, designates and authorizes the Administrative Agent to take such action
on its behalf under the provisions of this Agreement and each other Loan
Document, and to exercise such powers and perform such duties, as are expressly
delegated to it by the terms of this Agreement or any other Loan Document, and
to exercise such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Administrative Agent shall not have
any duties or responsibilities, except those expressly set forth herein or
therein, nor shall the Administrative Agent have or be deemed to have any
fiduciary relationship with any Lender or the Issuing Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against the Administrative Agent.
(b) The Issuing Lender shall have all of the benefits and immunities
(i) provided to the Administrative Agent in this Article X with respect to any
acts taken or omissions suffered by the Issuing Lender in connection with
Letters of Credit issued by it or proposed to be issued by it and the Letter of
Credit Applications pertaining to such Letters of Credit, in each case, as fully
as if the term "ADMINISTRATIVE AGENT" as used in this Article X, included the
Issuing Lender with respect to such acts or omissions, and (ii) as additionally
provided in this Agreement with respect to the Issuing Lender.
10.2. DELEGATION OF DUTIES. The Administrative Agent may execute any of
its duties under this Agreement or any other Loan Document or any of the
Collateral by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Administrative Agent shall not be responsible for the negligence or
misconduct of any agent or attorney-in-fact that it selects with reasonable
care.
10.3. LIABILITY OF ADMINISTRATIVE AGENT. None of the Administrative
Agent, its Affiliates or any of their officers, directors, employees, agents or
attorneys-in-fact (collectively, "ADMINISTRATIVE AGENT-RELATED PERSONS") shall
(a) be liable for any action taken or omitted to be taken by any of them under
or in connection with this Agreement, any of the other Loan Documents or the
Collateral (except for their own gross negligence or willful misconduct), or (b)
be responsible in any manner to any of the Lenders or the Issuing Lender for any
recital, statement, representation or warranty made by the Borrower or any
Subsidiary or Affiliate thereof, or any officer thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Agreement or any other
Loan Document or any of the Collateral, or for the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or any of the Collateral, or for any failure of the Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Administrative Agent-Related Person shall be under any obligation
to any Lender, the Issuing Lender or any of the other Agents to ascertain or to
inquire as to the observance or performance of any of the Obligations or any of
the other agreements contained in, or conditions of, this Agreement or any other
Loan Document, or to inspect any of the Collateral or any of the Properties,
books or records of the Borrower or any of its Subsidiaries or Affiliates.
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10.4. RELIANCE BY ADMINISTRATIVE AGENT.
(a) Each of the Lenders, the Issuing Lender and the other Agents agree
that the Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Borrower), independent accountants and other experts selected by the
Administrative Agent. Each of the Lenders, the Issuing Lender and the other
Agents agree that the Administrative Agent shall be fully justified in failing
or refusing to take any action under this Agreement or any other Loan Document
or with respect to any Collateral unless it shall first receive all such advice
or concurrence of the Majority Lenders or, as required by Section 11.1, all of
the Lenders as the Administrative Agent deems appropriate and, if it so
requests, the Administrative Agent shall first be indemnified to its
satisfaction by each of the Lenders and the Issuing Lender against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
or any other Loan Document or with respect to any Collateral in accordance with
a request or consent of the Majority Lenders or, as required by Section 11.1,
all of the Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders, the Issuing Lender
and the other Agents.
(b) For purposes of determining compliance with the conditions
specified in Section 5.1 as it relates to the initial Borrowing and issuances of
Letters of Credit on the Closing Date, each Lender that has executed this
Agreement shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter either sent by the Administrative
Agent to such Lender for consent, approval, acceptance or satisfaction, or
required thereunder to be consented to or approved by or to be acceptable or
satisfactory to such Lender, unless an officer of the Administrative Agent
responsible for the transactions contemplated by the Loan Documents shall have
received written notice from such Lender prior to the initial Borrowing and
issuances of Letters of Credit on the Closing Date specifying in reasonable
detail its objection thereto and either such objection shall not have been
withdrawn by written notice to the Administrative Agent to that effect or such
Lender shall not have made available to the Administrative Agent such Lender's
ratable portion of such Borrowing.
10.5. NOTICE OF DEFAULT. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to Defaults in the payment of principal, interest
and fees required to be paid to the Administrative Agent for the account of the
Lenders or the Issuing Lender, unless the Administrative Agent shall have
received written notice from a Lender or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Administrative Agent
receives such a written notice, the Administrative Agent shall give notice
thereof to the Lenders and the Issuing Lender. The Administrative Agent shall
take such action with respect to such Default or Event of Default as shall be
requested by the Majority Lenders in accordance with Article IX; provided,
however, that, unless and until the Administrative Agent shall have received any
such request, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as the Administrative Agent shall deem advisable or in the best
interests of the Lenders and the Issuing Lender.
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10.6. CREDIT DECISIONS. Each of the Lenders, the Issuing Lender and the
other Agents expressly acknowledges that none of the Administrative
Agent-Related Persons has made any representation or warranty to it and that no
act by the Administrative Agent hereinafter taken, including any review of the
affairs of the Borrower or of any of its Subsidiaries, shall be deemed to
constitute any representation or warranty by the Administrative Agent to any of
the Lenders, the Issuing Lender or the other Agents. Each of the Lenders, the
Issuing Lender and the other Agents represents to the Administrative Agent that
it has, independently and without reliance upon the Administrative Agent, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the Collateral and the business,
prospects, operations, Property, financial and other condition and
creditworthiness of the Borrower and its Subsidiaries, and all Applicable Laws
relating to the transactions contemplated thereby, and made its own decision to
enter into this Agreement and extend credit to the Borrower hereunder. Each of
the Lenders, the Issuing Lender and the other Agents also represents that it
will, independently and without reliance upon the Administrative Agent, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents or
with respect to any of the Collateral, and to make such investigations as it
deems necessary to inform itself as to the business, prospects, operations,
Property, financial and other condition and creditworthiness of the Borrower and
its Subsidiaries and the Collateral. Except for notices, reports and other
documents expressly herein required to be furnished to the Lenders, the Issuing
Lender or the other Agents by the Administrative Agent, the Administrative Agent
shall not have any duty or responsibility to provide any of the Lenders, the
Issuing Lender or the other Agents with any credit or other information
concerning the Collateral or the business, prospects, operations, Property,
financial or other condition or creditworthiness of the Borrower or of any of
its Subsidiaries which may come into the possession of any of the Administrative
Agent-Related Persons.
10.7. INDEMNIFICATION. Whether or not any of the transactions
contemplated hereby shall be consummated, each of the Lenders shall indemnify,
upon demand, each of the Administrative Agent-Related Persons (to the extent not
reimbursed by or on behalf of the Borrower, and without limiting the Obligations
of the Borrower to do so), ratably from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind whatsoever which may at any time
(including at any time following the expiration of the Letters of Credit and the
repayment of the Loans and the resignation of the Administrative Agent) be
imposed on, incurred by or asserted against any such Person in any way relating
to or arising out of this Agreement, any other Loan Document, any document
contemplated by or referred to herein or therein, the Collateral, or the
transactions contemplated hereby or thereby or any action taken or omitted by
any such Person under or in connection with any of the foregoing; provided,
however, that none of the Lenders shall be liable for the payment to any of the
Administrative Agent-Related Persons of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements to the extent arising from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each of
the Lenders shall reimburse the Administrative Agent upon demand for such
Lender's ratable share of any costs or out-of-pocket expenses (including
Attorney Costs) incurred by the Administrative Agent in connection with the
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, any
document contemplated by or referred to herein or any of the Collateral, in each
case, to the extent that the Administrative Agent is not reimbursed for such
expenses by or on behalf of the Borrower. Without limiting the generality of the
foregoing, if the
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U.S. Internal Revenue Service or any other Governmental Authority of the United
States or any other jurisdiction asserts a claim that the Administrative Agent
did not properly withhold tax from amounts paid to or for the account of any
Lender (because the appropriate form was not delivered or was not properly
executed, or because such Lender failed to notify the Administrative Agent of a
change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason), such Lender shall
indemnify the Administrative Agent fully for all amounts paid as a result
thereof, directly or indirectly, by the Administrative Agent as tax or
otherwise, including penalties and interest, and including any taxes imposed by
any jurisdiction on the amounts payable to the Administrative Agent under this
Section 10.7, together with all related costs and expenses (including Attorney
Costs). The obligations of each of the Lenders in this Section 10.7 shall
survive the payment of all of the Obligations hereunder.
10.8. ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. BankBoston and
its Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire Equity Interests in and generally engage in any
kind of banking, trust, financial advisory or other business with, the Borrower
and its Subsidiaries and Affiliates as though BankBoston were not the
Administrative Agent, the Collateral Agent or the Issuing Lender hereunder and
without notice to or consent of the Lenders or other Agents. With respect to its
Loans and its participations in Letters of Credit, BankBoston shall have the
same rights and powers under this Agreement and the other Loan Documents as any
other Lender and may exercise the same as though it were not the Administrative
Agent, the Collateral Agent or the Issuing Lender, and the terms "LENDER" and
"LENDERS" shall include BankBoston, acting in its individual capacity as a
Lender hereunder.
10.9. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may
resign as Administrative Agent upon not less than thirty (30) days' prior
written notice to the Lenders and the Borrower, such notice to specify the
effective date of resignation. If the Administrative Agent shall resign as
Administrative Agent under this Agreement, the Majority Lenders shall appoint
from among the Lenders a successor agent for the Lenders and the Issuing Lender,
which successor agent shall be subject to the approval of the Borrower if no
Event of Default is continuing, such approval not to be unreasonably withheld or
delayed. If no successor agent is appointed prior to the effective date of
resignation of the Administrative Agent, the Administrative Agent may appoint,
after consulting with the Lenders, and subject to the approval of the Borrower
if no Event of Default is continuing, such approval not to be unreasonably
withheld or delayed, a successor agent from among the Lenders or any Lender
Affiliate. Any successor Administrative Agent appointed under this Section 10.9
shall be a commercial bank organized under the laws of the United States or any
State thereof, and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of its appointment as successor agent
hereunder, such successor agent shall succeed to all the rights, powers and
duties of the retiring Administrative Agent, and the term "ADMINISTRATIVE AGENT"
shall mean such successor agent, and the retiring Administrative Agent's
appointment, powers and duties as Administrative Agent shall be terminated.
After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Article X and Sections 11.4 and
11.5 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Agreement. If no successor
agent has accepted appointment as Administrative Agent by the effective date of
resignation specified in the retiring Administrative Agent's written notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
become effective upon the effective date of resignation so specified, and the
Lenders shall perform all of the duties of the Administrative Agent hereunder
until such time, if any, as the Majority Lenders appoint a successor agent as
provided for above.
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10.10. COLLATERAL DOCUMENTS AND SUBSIDIARY GUARANTY.
(a) Each of the Lenders, the Issuing Lender and the other Agents hereby
further authorizes the Administrative Agent, on behalf of and for the benefit of
Lenders, the Issuing Lender and the other Agents, to be the agent for and
representative of Lenders, the Issuing Lender and the other Agents with respect
to the Subsidiary Guaranty, the Collateral and the Collateral Documents.
(b) Anything herein express or implied to the contrary notwithstanding,
without any notice to or consent, approval or authorization from any of the
Lenders, the Issuing Lender or the Agents, the Administrative Agent may from
time to time execute any Instruments necessary to (i) release any Liens
encumbering any item of Collateral, or (as the case may be) release from the
Subsidiary Guaranty any Subsidiary Guarantor, that is (in each such case) the
subject of a Sale permitted by the Loan Documents or to which Majority Lenders
(or such other Lenders as may be required to give such consent under Section
11.1) have otherwise consented, or (ii) release any Subsidiary Guarantor from
the Subsidiary Guaranty if and to the extent that such release is otherwise
permitted by the terms of the Loan Documents.
(c) Anything contained in any of the Loan Documents to be contrary
notwithstanding, the Administrative Agent, each of the Lenders, the Issuing
Lender and the other Agents hereby agree that (i) none of the Lenders or the
Issuing Lender shall have any rights individually to realize upon any of the
Collateral or to enforce the Subsidiary Guaranty, it being understood and agreed
that all powers, rights and remedies with respect to the Collateral and the
Subsidiary Guaranty may be exercised solely by the Administrative Agent for the
benefit of the Lenders, the Issuing Lender and the Agents in accordance with the
terms hereof, and (ii) in the event of a foreclosure by the Administrative Agent
on any of the Collateral pursuant to a public or private Sale, the
Administrative Agent or any Lender may be the purchaser of any or all of such
Collateral at any such Sale, and the Administrative Agent, as agent for and
representative of the Lenders (but not any Lender or Lenders in its or their
respective individual capacities, unless the Majority Lenders shall otherwise
agree in writing), shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such Sale, to use and apply any of the Obligations as a
credit on account of the purchase price payable by the Administrative Agent for
any Collateral at such Sale.
10.11. OTHER AGENTS. None of the Syndication Agent, in such capacity,
the Documentation Agent, in such capacity, or the Lead Arranger, in such
capacity, shall have any duties or responsibilities, or shall incur any
obligations or liabilities, under this Agreement or any of the other Loan
Documents. Each Lender acknowledges that it has not relied, and will not rely,
on either the Syndication Agent, Documentation Agent or the Lead Arranger in
deciding to enter into this Agreement or in making any Credit Extensions
hereunder.
ARTICLE XI.
MISCELLANEOUS
11.1. AMENDMENTS AND WAIVERS.
(a) Except as otherwise provided by paragraphs (b), (c) and (d) of this
Section 11.1, no amendment, termination or waiver of any provision of this
Agreement or of any of the other Loan Documents, and no consent with respect to
any departure by the Borrower or by any other
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Credit Party therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Majority Lenders, and then such amendment,
termination, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
(b) Without the prior written consent of all of the Lenders, no such
amendment, termination, waiver or consent shall be effective to:
(i) increase or extend the Aggregate Commitment, the Aggregate
Term Commitment, the Aggregate Revolving Commitment or the Aggregate
Incremental Commitment; extend or postpone the Revolving Commitment
Termination Date or the Incremental Commitment Termination Date; or
change Section 2.5(b) or 2.5(c);
(ii) extend or postpone the Maturity Date, or extend, postpone
or delay any Principal Payment Date; reduce the amount of principal of
Term Loans or Incremental Loans required to be repaid on any such date;
or extend or postpone any date for any payment of interest or Fees due
to any of the Lenders under any of the Loan Documents;
(iii) extend the stated expiration date of any Letter of
Credit beyond the Maturity Date;
(iv) reduce the principal of, or the rate of interest
specified herein on, any Loan, Letter of Credit Borrowing or any other
Obligation, reduce any Fees or other amounts payable hereunder or under
any of the other Loan Documents, or reduce the Applicable Margin or the
Applicable Commitment Fee Percentage provided for herein;
(v) reduce the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which shall be required
for the Lenders or any of them to take any action under this Agreement
or any of the other Loan Documents;
(vi) amend, terminate or waive this Section 11.1, change the
percentage set forth in, or otherwise amend, the definition of the term
"MAJORITY LENDERS", or amend, terminate or waive any provision of this
Agreement expressly requiring the consent of all of the Lenders in
order to take or to refrain from taking any action; or
(vii) release the guaranty or other Obligations of any
Subsidiary Guarantor under the Subsidiary Guaranty, or release all or
substantially all of the Collateral; EXCEPT, in each of such cases, (A)
as necessary to release Liens encumbering Collateral, or (as the case
may be) to release from the Subsidiary Guaranty any Subsidiary
Guarantor, that is the subject of any Sale, merger or other transaction
permitted by the Loan Documents or to which the Majority Lenders have
otherwise consented, or (B) otherwise in accordance with the express
provisions of the Collateral Documents or the other Loan Documents; or
(viii) consent to the assignment or other transfer or
delegation by the Borrower of any of its rights or obligations under
any of the Loan Documents.
(c) Without the prior written consent of each Lender that will be
directly affected thereby, no such amendment, termination, waiver or consent
shall in any event be effective to increase or extend the Commitment of any
Lender (or reinstate any Commitment of any Lender previously terminated pursuant
to Section 9.2 or any other provision of this Agreement).
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(d) No such amendment, termination or waiver of any provision of any of
the Loan Documents, or consent to any departure by any Credit Party therefrom,
shall in any event be effective to:
(i) amend, terminate or waive any provision of Article X as
the same applies to any Agent, or any other provision of any of the
Loan Documents as the same applies to the rights or obligations of any
Agent, in each case, without the consent of such Agent;
(ii) affect the rights or duties of the Issuing Lender under
this Agreement or any of the Letter of Credit Related Documents, in
each case, without the consent of the Issuing Lender;
(iii) affect the rights or duties of the Administrative Agent
under this Agreement or any of the other Loan Documents, in each case,
without the consent of the Administrative Agent;
(iv) affect the rights or duties of the Collateral Agent under
any of the Collateral Documents or any of the other Loan Documents, in
each case, without the consent of the Administrative Agent; or
(v) amend, terminate or waive any obligations of the Lenders
relating to the purchase of participations in Letters of Credit as
provided in Article III, without the consent of each of the
Administrative Agent and the Issuing Lender.
(e) The Administrative Agent may, but shall have no obligation
to, with the concurrence of any Lender, execute amendments, waivers or consents
on behalf of such Lender. Any waiver or consent under this Agreement or any of
the other Loan Documents shall in any event be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on any Credit Party in any case shall entitle any Credit Party to any
other or further notice or demand in similar or other circumstances. Any
amendment, termination, waiver or consent effected in accordance with this
Section 11.1 shall be binding upon each Lender at the time a party to this
Agreement, each future Lender and, if signed by a Credit Party, on such Credit
Party.
11.2. NOTICES.
(a) All notices, requests and other communications provided for
hereunder shall be in writing (including, unless the context expressly otherwise
provides, facsimile transmission) and mailed, transmitted by facsimile or
delivered: (i) if to the Borrower, to the address or facsimile number specified
for notices on the applicable signature page hereof; (ii) if to the
Administrative Agent, the Issuing Lender or any Lender, to the notice address
set forth on Schedule 1.1; or (iii) if to the Borrower or to the Administrative
Agent, to such other address as shall be designated by such party in a written
notice to each of the other parties, and if to any other party, to such other
address as shall be designated by such party in a written notice to the Borrower
and the Administrative Agent.
(b) All such notices, requests and communications shall be effective
when received or (as the case may be) transmitted by facsimile; provided,
however, that any matter transmitted by facsimile (i) shall be immediately
confirmed by a telephone call to the recipient at the number specified on the
applicable signature page hereof or on Schedule 1.1, and (ii) shall be followed
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promptly by a hard copy of the original thereof; EXCEPT that notices to the
Administrative Agent shall not be effective until actually received by the
Administrative Agent, and notices pursuant to Article III to the Issuing Lender
shall not be effective until actually received by the Issuing Lender.
(c) The Borrower acknowledges and agrees that any agreement of the
Administrative Agent, the Issuing Lender and the Lenders set forth in Articles
II and III herein to receive certain notices by telephone and facsimile is
solely for the convenience and at the request of the Borrower. The
Administrative Agent, the Issuing Lender and the Lenders shall be entitled to
rely on the authority of any Person purporting to be a Person authorized by the
Borrower to give such notice, and the Administrative Agent, the Issuing Lender
and the Lenders shall not have any liability to the Borrower or any other Person
on account of any action taken or not taken by any of the Administrative Agent,
the Issuing Lender or the Lenders in reliance upon any such telephonic or
facsimile notice. The Obligations of the Borrower to repay the Loans, Letter of
Credit Borrowings and other Credit Extensions shall not be affected in any way
or to any extent by any failure by any of the Administrative Agent, the Issuing
Lender or the Lenders to receive written confirmation of any telephonic or
facsimile notice or the receipt by any of the Administrative Agent, the Issuing
Lender or the Lenders of a confirmation which is at variance with the terms
understood by the Administrative Agent, the Issuing Lender or the Lenders to be
contained in the telephonic or facsimile notice.
11.3. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent, any of the
Lenders, the Issuing Lender or any of the other Agents, any right, remedy, power
or privilege under any of the Loan Documents shall operate as a waiver thereof;
nor shall any single or partial exercise by any such Person of any right,
remedy, power or privilege under any of the Loan Documents preclude any other or
further exercise thereof by such Person or by any of the other such Persons or
the exercise of any other right, remedy, power or privilege by any of such
Persons. The rights, powers and remedies given to each of the Administrative
Agent, the Lenders, the Issuing Lender and the other Agents hereby are
cumulative and shall be in addition to and independent of all rights, powers and
remedies existing by virtue of any statute or rule of law or in any of the other
Loan Documents or any of the Interest Rate Protection Agreements.
11.4. COSTS AND EXPENSES. The Borrower shall, whether or not any of the
transactions contemplated by this Agreement or any of the other Loan Documents
shall be consummated:
(a) pay or reimburse, on demand, all reasonable and properly documented
costs and expenses incurred or sustained by the Administrative Agent from time
to time in connection with the development, preparation, delivery, syndication
of Commitments under, or execution and delivery of, or any amendment,
supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any of the other Loan Documents, any of the
Collateral or any of the other Instruments or documents prepared in connection
herewith or therewith, or the consummation of any of the transactions
contemplated hereby or thereby, including the Attorney Costs incurred by the
Administrative Agent in connection therewith or with respect thereto;
(b) pay or reimburse each of the Lenders, the Issuing Lender and the
Agents, on demand, for all reasonable and properly documented costs and expenses
incurred or sustained by them from time to time in connection with the
enforcement, attempted enforcement or preservation of any rights or remedies
(including in connection with any "workout" or restructuring relating to the
Loans or any of the Obligations or Collateral, and including in
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connection with any Insolvency Proceedings involving the Borrower or any of its
Subsidiaries) under this Agreement, any of the other Loan Documents or any of
such other Instruments or documents, or in relation to any of the Collateral,
including Attorney Costs and the reasonable fees and expenses of any consultants
incurred by the Administrative Agent or by any of the Lenders; and
(c) pay or reimburse the Administrative Agent and the Issuing Lender,
on demand, for all reasonable and properly documented appraisal (including,
without duplication, the allocated cost of internal appraisal services), audit,
environmental inspection and review (including, without duplication, the
allocated costs of such internal services), search and filing costs, fees and
expenses, incurred or sustained by the Administrative Agent from time to time in
connection with any of the matters referred to under paragraphs (a) or (b) of
this Section 11.4.
11.5. INDEMNITY. Whether or not any of the transactions contemplated by
this Agreement or any of the other Loan Documents shall be consummated, the
Borrower shall, on demand, pay, indemnify and hold each of the Lenders, the
Issuing Lender, the Agents and each of their respective officers, directors,
other Affiliates, employees, counsel, agents and attorneys-in-fact (each, an
"INDEMNIFIED PERSON") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses or disbursements (including Attorney Costs) of any kind or
nature whatsoever with respect to each of (a) any investigation, litigation or
proceeding (including any Insolvency Proceedings involving the Borrower or any
of its Subsidiaries) related to this Agreement or any of the other Loan
Documents or any of the Collateral, Loans, Letter of Credit Borrowings, other
Credit Extensions or the Letters of Credit, or the use of any of the proceeds
thereof, whether or not any Indemnified Person is a party thereto, and (b) the
actual or alleged presence of Hazardous Materials in the air, surface water or
groundwater or on the surface or subsurface of any Property owned or at any time
operated by the Borrower or by any of its Subsidiaries, the generation, storage,
transportation, handling or disposal of Hazardous Materials at any location by
the Borrower or any of its Subsidiaries, whether or not owned or operated by the
Borrower or any of its Subsidiaries, the noncompliance of any such Property with
Environmental Laws (including applicable permits thereunder) applicable to any
such Property, or any Environmental Claim asserted against the Borrower, its
Subsidiaries or any Property owned or at any time operated by the Borrower or
any of its Subsidiaries (all the foregoing described in clauses (a) and (b)
above, collectively, the "INDEMNIFIED LIABILITIES"); provided, however, that the
Borrower shall have no obligation hereunder to any Indemnified Person with
respect to Indemnified Liabilities arising from the gross negligence or willful
misconduct of such Indemnified Person. The obligations in this Section 11.5
shall survive payment of all of the other Obligations.
11.6. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns; EXCEPT that the Borrower may not in any event
assign, transfer or delegate any of its rights or obligations under this
Agreement or any of the other Loan Documents without (in each case) the prior
written consent of the Administrative Agent and all of the Lenders.
11.7. ASSIGNMENTS, PARTICIPATIONS, ETC.
(a) Any Lender may at any time and from time to time assign and
delegate all or any part of the Loans, the Obligations, the Commitments and the
other rights and obligations of such Lender hereunder:
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(i) to any Person meeting the criteria of clause (a) of the
definition of the term "ELIGIBLE ASSIGNEE" upon the giving of notice to
the Borrower and the Administrative Agent; and
(ii) to any Person meeting the criteria of clause (b) of the
definition of the term "ELIGIBLE ASSIGNEE" upon the prior written
consents of each of the Borrower (which consent shall not be required
so long as any Event of Default shall be continuing) and the
Administrative Agent (neither of which consents shall in any event be
unreasonably withheld or delayed); provided, however, that each such
assignment pursuant to this clause (ii) shall be in an aggregate amount
of not less than $5,000,000 (or such lesser amount as may be agreed to
by the Administrative Agent or as shall constitute the aggregate amount
of the Commitments, Loans and other Obligations of the assigning
Lender);
provided, however, that the Borrower, the Issuing Lender and the Administrative
Agent may continue to deal solely and directly with such Lender in connection
with any interest so assigned to any such Person (each, an "Assignee") until (A)
written notice of such assignment, together with payment instructions, addresses
and related information with respect to the Assignee, shall have been given to
the Borrower and the Administrative Agent by such Lender and the Assignee; (B)
such Lender and its Assignee shall have delivered to the Borrower and the
Administrative Agent an Assignment and Assumption in the form of Exhibit M (an
"ASSIGNMENT AND ASSUMPTION"); and (C) in the case of any assignment to an
Assignee which is not already a Lender or a Lender Affiliate, the assignor
Lender or Assignee shall have paid to the Administrative Agent a processing fee
in the amount of $3,500; provided that, with respect to any such assignment to
any Lender or Lender Affiliate such processing fee shall be in the amount of
$1,750.
(b) From and after the date that the Administrative Agent notifies the
assignor Lender that the requirements of paragraph (a) above are satisfied, (i)
the Assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder and under the other Loan Documents have been assigned
to it pursuant to such Assignment and Assumption, shall have the rights and
obligations of a Lender under the Loan Documents, and (ii) the assignor Lender
shall, to the extent that rights and obligations hereunder and under the other
Loan Documents have been assigned by it pursuant to such Assignment and
Assumption, relinquish its rights and be released from its obligations under the
Loan Documents. Anything herein to the contrary notwithstanding, any Lender
assigning all of its Loans, Commitments and other rights and obligations
hereunder to an Assignee shall continue to have the benefit of all indemnities
hereunder following such assignment.
(c) Immediately upon each Assignee's making its payment under the
Assignment and Assumption, this Agreement shall be deemed to be amended to the
extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Aggregate Commitment arising
therefrom. The Commitment allocated to an Assignee shall reduce the Commitment
of the assigning Lender pro tanto.
(d) Any Lender may at any time sell to one or more banks or other
Persons that are not Credit Parties or Affiliates of any Credit Parties (a
"PARTICIPANT") participating interests in any Loans, Term Commitment, Revolving
Commitment or Incremental Commitment of such Lender and the other interests of
such Lender (the "ORIGINATING LENDER") hereunder and under the other Loan
Documents; provided, however, that (i) the Originating Lender's obligations
under
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this Agreement shall remain unchanged, (ii) the Originating Lender shall remain
solely responsible for the performance of such obligations, (iii) the Borrower,
the Issuing Lender and the Administrative Agent shall continue to deal solely
and directly with the Originating Lender in connection with the Originating
Lender's rights and obligations under this Agreement and the other Loan
Documents, and (iv) no Lender shall transfer or grant any participating interest
under which the Participant shall have rights to approve any amendment to, or
any termination, waiver or consent with respect to, this Agreement or any other
Loan Document; provided however, that such Participant shall have the may
approve any amendment, consent or waiver described in clauses (i), (ii) and
(iii) of Section 11.1(b). In the case of any such participation, the Participant
shall be entitled to the benefit of Sections 4.1, 4.3 and 11.5, subject to the
same limitations, as though it were also a Lender hereunder, and, if amounts
outstanding under this Agreement are due and payable and unpaid, or shall have
been declared or shall have become due and payable upon the occurrence of any
Event of Default, each Participant shall, to the extent permitted under
Applicable Law, be deemed to have the rights of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement.
(e) Notwithstanding any other provision contained in this Agreement or
any other Loan Document to the contrary, any Lender may assign and pledge all or
any portion of the Loans or other Obligations held by it to any Federal Reserve
Bank or the United States Treasury as collateral security pursuant to Regulation
A of the Federal Reserve Board and any Operating Circular issued by such Federal
Reserve Bank; provided, however, that any payment in respect of such assigned
Loans or other Obligations made by the Borrower to or for the account of the
assigning or pledging Lender in accordance with the terms of this Agreement
shall satisfy the Borrower's obligations hereunder with respect to such assigned
Loans to the extent of such payment. No such assignment shall release the
assigning Lender from its obligations hereunder.
11.8. CONFIDENTIALITY. Each Lender shall hold all non-public
information obtained pursuant to the requirements hereof which has been
identified as confidential by the Borrower in accordance with such Lender's
customary procedures for handling confidential information of this nature and in
accordance with prudent banking practices, it being understood and agreed by the
Borrower that, in any event, a Lender may make disclosures to Affiliates of such
Lender or disclosures reasonably required by any bona fide or potential
assignee, transferee or participant in connection with the contemplated
assignment, transfer or participation by such Lender of any Loans or any
participations therein or disclosures required or requested by any Governmental
Authority or representative thereof or pursuant to legal process; provided,
however, unless specifically prohibited by Applicable Law or court order, each
Lender shall notify the Borrower of any request by any Governmental Authority or
representative thereof (other than any such request in connection with any
examination of such Lender by such Governmental Authority) for disclosure of any
such non-public information prior to disclosure of such information; and,
provided further, in no event shall any Lender be obligated or required to
return any materials furnished by the Borrower or by any of its Subsidiaries.
11.9. SET-OFF. In addition to any other rights and remedies of the
Lenders provided by law, and regardless of the adequacy of any Collateral, if
any Event of Default shall be continuing, each Lender is authorized at any time
and from time to time, without prior notice to the Borrower, any such notice
being irrevocably waived by the Borrower to the fullest extent permitted by law,
to set off and apply, to the fullest extent permitted by Applicable Law, any and
all deposits (general or special, time or demand, provisional or final) at any
time held by, and other indebtedness at any time owing by, such Lender to or for
the credit or the account of the
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Borrower against any and all Obligations owing to such Lender, now or at any
time hereafter created, arising or existing, irrespective of whether or not the
Administrative Agent or such Lender shall have made demand under this Agreement
or any other Loan Document and although such Obligations may be contingent or
unmatured. Each Lender agrees promptly to notify the Borrower and the
Administrative Agent after any such set-off and application made by such Lender;
provided, however, that the failure to give any such notice shall not affect the
validity of such set-off and application. The rights of each Lender under this
Section 11.9 are in addition to all of the other rights and remedies (including
other rights of set-off) which such Lender may have.
11.10. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements made herein shall survive the
execution and delivery hereof and the making of each Credit Extension.
Notwithstanding anything herein or implied by law to the contrary, the
agreements of each Credit Party set forth in Sections 4.1, 4.3, 4,4, 11.4, 11.5
and 11.9 shall survive the payment of the Loans, the cancellation or expiration
of the Letters of Credit and the reimbursement of any amounts drawn thereunder,
and the termination hereof. The agreements of the Borrower set forth (a) in the
fourth paragraph of Section 2 (Syndication) of the Commitment Letter between the
Agents and the Borrower, dated June 30, 1999, (b) in the Fee Letter, dated June
30, 1999, executed in connection therewith, and (c) in the paragraph captioned
"Administrative Agent's Fee", and in subparagraph 12 of the paragraph captioned
"Conditions Precedent", each as set forth in the Term Sheet attached to such
Commitment Letter, shall survive the execution and delivery of this Agreement
and the making of each Credit Extension.
11.11. MARSHALLING; PAYMENTS SET ASIDE. Neither the Administrative
Agent nor any Lender shall be under any obligation to marshal any assets in
favor of any Credit Party or any other Person or against or in payment of any or
all of the Obligations. To the extent that any Credit Party makes any payment or
payments to the Administrative Agent or Lenders (or to the Administrative Agent
for the benefit of Lenders), or the Administrative Agent or the Lenders enforce
any security interests or exercise their rights of setoff, and such payment or
payments or the proceeds of such enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, any other state or federal law, common law or any equitable
cause, then, to the extent of such recovery, the Obligations or part thereof
originally intended to be satisfied, and all Liens, rights and remedies therefor
or related thereto, shall be revived and continued in full force and effect as
if such payment or payments had not been made or such enforcement or set-off had
not occurred.
11.12. OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS. The
obligations of the Lenders hereunder are several, and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
the Lenders pursuant hereto or thereto, shall be deemed to constitute the
Lenders as a partnership, an association, a joint venture or any other kind of
entity. The amounts payable at any time hereunder to each Lender shall, except
as otherwise expressly provided hereby, be a separate and independent debt, and
each Lender shall be entitled to protect and enforce its rights arising out of
this Agreement and the other Loan Documents, and it shall not be necessary for
any other Lender to be joined as an additional party in any proceeding for such
purpose.
11.13. NOTIFICATION OF ADDRESSES, LENDING OFFICES, ETC. Each Lender
shall notify the Administrative Agent in writing of any changes in the address
to which notices to such Lender
<PAGE> 109
-102-
should be directed, of addresses of its Lending Office, of payment instructions
in respect of all payments to be made to it hereunder and of such other
administrative information as the Administrative Agent shall reasonably request.
11.14. COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement in any number of separate counterparts, each of
which, when so executed, shall be deemed an original, and all of said
counterparts taken together shall be deemed to constitute but one and the same
instrument. A set of the copies of this Agreement signed by all of the parties
shall be lodged with the Borrower and the Administrative Agent.
11.15. SEVERABILITY. The illegality or unenforceability of any
provision of this Agreement or any Instrument required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any Instrument required hereunder.
11.16. NO THIRD PARTIES BENEFITED. This Agreement is made and entered
into for the sole protection and legal benefit of the parties hereto and their
permitted successors and assigns, and no other Person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any of the other Loan Documents.
None of the Administrative Agent, the Issuing Lender or any the Lenders shall
have any obligations to any Person not a party to this Agreement or any other
Loan Document.
11.17. GOVERNING LAW AND JURISDICTION; WAIVER OF TRIAL BY JURY.
(A) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
(B) JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE
COMMONWEALTH OF MASSACHUSETTS OR OF THE UNITED STATES FOR THE DISTRICT OF
MASSACHUSETTS, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
BORROWER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE BORROWER WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE
BY ANY OTHER MEANS PERMITTED BY MASSACHUSETTS LAW.
(C) WAIVER OF JURY TRIAL. THE PARTIES HERETO EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
<PAGE> 110
-103-
AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE. THE PARTIES HERETO EACH AGREE THAT ANY SUCH CLAIM OR
CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING
THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHTS TO A TRIAL
BY JURY IS WAIVED BY OPERATION OF THIS SECTION 11.17 AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR
ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
<PAGE> 111
-104-
IN WITNESS WHEREOF, the parties hereto have caused this CREDIT
AGREEMENT to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
IDG BOOKS WORLDWIDE, INC.,
919 E. Hillsdale Boulevard as Borrower
Suite 400
Foster City, CA 94404
By:_____________________________________
Name:
Title:
PAYMENT OFFICE ADDRESS: BANKBOSTON, N.A., as
Administrative Agent
100 Federal Street
Boston, MA 02110
By:_____________________________________
Name: Robert F. Milordi
Title: Managing Director
WELLS FARGO BANK,
NATIONAL ASSOCIATION, as
Syndication Agent
By:_____________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO, as Documentation Agent
By:_____________________________________
Name:
Title:
<PAGE> 112
-105-
BANKBOSTON, N.A., as the
Issuing Lender and a Lender
By:______________________________________
Name: Robert F. Milordi
Title: Managing Director
WELLS FARGO BANK,
NATIONAL ASSOCIATION, as a Lender
By:_____________________________________
Name:
Title:
THE FIRST NATIONAL BANK
OF CHICAGO, as a Lender
By:_____________________________________
Name:
Title:
UNION BANK OF CALIFORNIA,
as a Lender
By:_____________________________________
Name:
Title:
<PAGE> 113
-106-
CITY NATIONAL BANK, as a Lender
By:_____________________________________
Name:
Title:
THE BANK OF NOVA SCOTIA, as a Lender
By:_____________________________________
Name:
Title:
ALLFIRST BANK, as a Lender
By:_____________________________________
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-25-1999 SEP-25-1999
<PERIOD-START> MAR-27-1999 SEP-27-1998
<PERIOD-END> JUN-26-1999 JUN-26-1999
<CASH> 751 751
<SECURITIES> 0 0
<RECEIVABLES> 71,926 71,926
<ALLOWANCES> (29,011) (29,011)
<INVENTORY> 14,481 14,481
<CURRENT-ASSETS> 80,772 80,772
<PP&E> 14,951 14,951
<DEPRECIATION> (9,768) (9,768)
<TOTAL-ASSETS> 113,508 113,508
<CURRENT-LIABILITIES> 54,388 54,388
<BONDS> 0 0
0 0
0 0
<COMMON> 14 14
<OTHER-SE> 59,106 59,106
<TOTAL-LIABILITY-AND-EQUITY> 113,508 113,508
<SALES> 39,896 119,149
<TOTAL-REVENUES> 41,482 123,473
<CGS> 20,680 60,850
<TOTAL-COSTS> 36,871 105,450
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 74 92
<INCOME-PRETAX> 4,537 17,931
<INCOME-TAX> 1,906 7,569
<INCOME-CONTINUING> 2,631 10,362
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,631 10,362
<EPS-BASIC> .18 0.72
<EPS-DILUTED> 0.17 0.70
</TABLE>
