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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 26, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PRIMARK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
MICHIGAN 7370 38-2383282
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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1000 WINTER STREET
SUITE 4300N
WALTHAM, MASSACHUSETTS 02451
(781) 466-6611
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
MICHAEL R. KARGULA, ESQ.
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
PRIMARK CORPORATION
1000 WINTER STREET
SUITE 4300N
WALTHAM, MASSACHUSETTS 02451
(781) 466-6611
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
STEPHEN W. HAMILTON, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
1440 NEW YORK AVENUE, N.W.
WASHINGTON, D.C. 20005
(202) 371-7000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register securities for an offering pursuant to
Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE(1)
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<S> <C> <C> <C> <C>
9 1/4% Senior Subordinated
Exchange Notes Due 2008..... $150,000,000 100% $150,000,000 $41,700
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(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION -- DATED JANUARY 26, 1999
PROSPECTUS
OFFER TO EXCHANGE ALL
9 1/4% SENIOR SUBORDINATED NOTES DUE 2008 FOR
9 1/4% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2008
OF
PRIMARK CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.
NEW YORK CITY TIME, ON , 1999, UNLESS EXTENDED.
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Terms of the Exchange Offer:
- The Company is offering a total of $150,000,000 New Notes, which are
registered with the Securities and Exchange Commission, to all holders of
its Old Notes.
- All outstanding Old Notes that are validly tendered and not validly
withdrawn prior to the expiration of the Exchange Offer will be
exchanged.
- You may withdraw tenders of Old Notes at any time prior to the expiration
of the Exchange Offer.
- The Company will not receive any proceeds from the Exchange Offer.
- The exchange of Notes will not be a taxable exchange for U.S. federal
income tax purposes.
- The terms of the New Notes and the Old Notes are substantially identical,
except for certain transfer restrictions and registration rights relating
to the Old Notes.
- There is no existing market for the New Notes, and the Company does not
intend to apply for their listing on any securities exchange.
INVESTING IN THE NEW NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 13.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE NOTES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1999
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PRIMARK LOGO
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Primark Financial Primark Financial Primark Decision
Information Division Analytics Division Information Division
- ------------------------------------ ------------------------------------ ------------------------------------
Datastream/ICV I/B/E/S WEFA
Disclosure/Worldscope Baseline Yankee Group
Primark Investment Vestek Primark Decision Economics
Management Services
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* Primark Corporation has a 20% equity interest in Primark Decision Economics,
an unconsolidated company.
2
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TABLE OF CONTENTS
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PAGE
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Summary..................................................... 4
Risk Factors................................................ 13
Use of Proceeds............................................. 19
Capitalization.............................................. 20
Selected Consolidated Financial Data........................ 21
The Exchange Offer.......................................... 23
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 29
Industry Overview........................................... 37
Business.................................................... 38
Management.................................................. 51
Security Ownership of Certain Beneficial Owners and
Management................................................ 58
Description of Certain Indebtedness......................... 60
Description of the Notes.................................... 61
Certain United States Federal Tax Considerations............ 89
Plan of Distribution........................................ 91
Legal Matters............................................... 91
Experts..................................................... 91
Available Information....................................... 92
Information Incorporated by Reference....................... 92
Index to Consolidated Financial Statements.................. F-1
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The Registrant's principal executive offices are located at 1000 Winter
Street, Suite 4300N, Waltham, Massachusetts 02451, its telephone number is (781)
466-6611, and its Internet address is www.Primark.com.
------------------------
THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS". ALL STATEMENTS
REGARDING THE COMPANY'S EXPECTED FINANCIAL POSITION, BUSINESS AND FINANCING
PLANS ARE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE
EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN
GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO BE CORRECT. IMPORTANT
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM SUCH
EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THIS PROSPECTUS. ALL
SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE
COMPANY, ITS SUBSIDIARIES OR PERSONS ACTING ON THEIR BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
YOU ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE UPON THESE FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THEIR DATES. THE COMPANY DOES NOT INTEND TO
UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
3
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SUMMARY
You should read the following summary together with the more detailed
information and financial statements included elsewhere in this Prospectus. You
should carefully consider the information set forth under the caption "Risk
Factors" and are urged to read this Prospectus in its entirety. Unless the
context otherwise requires, "Primark" or the "Company" refers to Primark
Corporation and its subsidiaries.
THE COMPANY
Primark is a leading global information service provider of comprehensive
financial, economic and market research information to investment, legal,
accounting, banking, corporate and government customers. The Company develops
and markets "value-added" database and information products that cover
established and emerging markets worldwide. The Company's proprietary analytical
software applications provide for the analysis and presentation of financial,
economic and market research information.
The Company, which serves customers in the U.S., Europe and the Pacific
Rim, compiles, analyzes, integrates, packages and distributes current and
historical data, news and commentary on financial securities, companies, and
markets worldwide. Primark owns and maintains large-scale databases, which are
accessed through its on-line distribution systems and the Internet, as well as
through third-party distributors. The Company's databases are authoritative
sources of data and analytics to more than 5,000 organizations worldwide,
including 75 of the top 100 banks, 82 of the top 100 investment managers, 28 of
the top 50 insurance companies and 450 of the top 1,000 U.S. companies. The
Company believes its customers value Primark's products because of their high
quality data as well as Primark's understanding of niche markets, its ability to
develop products to serve these markets and its superior customer service and
support.
The Company's business operations are integrated into three customer-
focused divisions, with each division concentrating on specialized product sets,
which address the needs of specific customer market groups. Primark's three
operating divisions are:
- Primark Financial Information Division ("PFID"). PFID develops
"enterprise-wide" products and services for major financial institutions
on a global basis. It also has responsibility for all transactional
products, both historical and real-time, as well as products supporting
large-scale investment accounting functions, the individual investor and
the referential needs of very large financial market customers. This
division also manages the corporate network, PrimarkNet, which serves as
the major delivery channel to Primark customers on a global basis and
across all three divisions. PFID's product offerings serve most of
Primark's customer types and it is a major service provider to the
"sell-side" portion of the financial markets.
- Primark Financial Analytics Division ("PFAD"). PFAD concentrates on
developing and marketing a wide variety of analytical products for money
managers, fund sponsors and other investors. These products combine the
Company's databases, advanced software, analytical techniques and
forecasts for all phases of the investment process. PFAD's product
offerings concentrate on customers in the "buy-side" portion of the
financial markets.
- Primark Decision Information Division ("PDID"). PDID acquires, develops
and operates information content businesses that are primarily focused in
areas other than the financial marketplace, and also provides products
and services for decision support to financial customers.
The Company has established the Primark Data Company ("PDC") to support the
data needs of the Company's operating divisions. PDC is an essential ingredient
in the overall Primark strategy because of the need for high quality information
provided on an efficient basis. PDC is responsible for the aggregation,
concordance and integration of Primark's equity pricing, indices, company
account, ownership and economic data sets Company-wide. With major operations in
the United States, the United Kingdom, Ireland and India, PDC provides global
data knowledge and support to the Company's three divisions.
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Key factors in Primark's success are recognizable quality and international
market acceptance of its branded products sold by the various business units
within the divisions. Primark's business units, and related brands, by division
include:
PRIMARK FINANCIAL INFORMATION DIVISION
- Datastream. Datastream International Limited and its affiliates
("Datastream"), acquired in 1992, is one of the world's leading providers
of global historical and fundamental real-time securities data and news
covering more than 45,000 stocks from 59 countries, 97,000 corporate and
government bonds from 32 countries and more than 1,800 major indices.
- ICV. ICV Limited ("ICV"), acquired in 1996, is a leading provider in the
U.K. of on-line equity trading products with an approximately 69% market
share in 1997 of on-line U.K. equities trading and was the number one
rated vendor to U.K. brokers by the 1996, 1997 and 1998 Kimsey Surveys.
- Primark Investment Management Services. Primark Investment Management
Services Limited ("PIMS") is a leading provider of computer-based
accounting and other investment fund services, including portfolio
valuation and performance measurement services, to money managers in the
U.K. and, to a lesser extent, in continental Europe.
- Disclosure/Worldscope. Disclosure Incorporated ("Disclosure"), acquired
in 1995, and its Worldscope affiliates ("Worldscope"), of which a 50%
equity interest was acquired in 1995 and an additional 30% interest was
acquired in 1996, are two of the leading providers of "as reported" and
abstracted financial information with databases including more than five
million Securities and Exchange Commission ("SEC") filings by more than
16,000 U.S. companies, dating back to 1968, as well as foreign company
filings from more than 13,000 companies in 45 countries.
PRIMARK FINANCIAL ANALYTICS DIVISION
- I/B/E/S. I/B/E/S International Inc. ("I/B/E/S"), acquired in 1995, is a
leading provider of global earnings expectations, historical data on
earnings surprises and research reports from more than 800 brokerage
firms and 7,000 research analysts on more than 17,000 companies
worldwide.
- Baseline. Baseline Financial Services, Inc. ("Baseline"), acquired in
1997, offers a leading stock and portfolio analysis and selection system
designed specifically for institutional portfolio managers.
- Vestek. Vestek Systems, Inc. ("Vestek"), acquired in 1994, is an
international provider of portfolio information, analytics and consulting
support to investment professionals.
PRIMARK DECISION INFORMATION DIVISION
- WEFA. WEFA, Inc. ("WEFA"), acquired in 1997, is an international
provider of economic research, analysis and forecasts.
- Primark Decision Economics. Primark Decision Economics ("PDE"), an
unconsolidated company started in 1996 in which Primark has an equity
interest of 20%, disseminates timely, value-added economic forecasts,
analyses and commentaries covering the world's major economies and
markets.
- The Yankee Group. Yankee Group Research, Inc. (the "Yankee Group"),
acquired in 1996, is an international market research and consulting firm
focusing on the communications and computing industries, which in 1997
was rated number one in credibility by Information Week magazine.
Primark had net operating revenues of $397.9 million and $321.8 million for
the twelve months ended December 31, 1997 and the nine months ended September
30, 1998, respectively. The Company's principal sources of revenue are from
customer subscriptions, royalty revenues from third party distributors and fees
for consulting services. The Company has a high customer retention rate, which
in 1997 averaged approximately 85%. More than 80% of the Company's revenues are
derived from subscription or royalty contracts, and a majority of these
contracts are paid in advance either quarterly or annually. For the nine months
ended September 30, 1998, approximately 82% of Primark's revenues were from
subscriptions, 4% from royalties and 14% from other sources. Primark had EBITDA
before restructuring charges of approximately $89.0 million for the year ended
December 31, 1997 and approximately $71.7 million for the nine months ended
September 30, 1998. For a description of EBITDA, see "-- Summary Consolidated
Financial Data." Over the
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past four years ended December 31, 1997, Primark's revenues and EBITDA before
restructuring charges have grown at compounded annual growth rates of 41.7% and
38.8%, respectively.
BUSINESS AND OPERATING STRATEGY
Primark's business and operating strategy is designed to generate strong
revenue growth and increased profitability by selling existing products, by
integrating key products and operations, by launching and acquiring new products
and by developing ancillary revenue streams through capitalizing on its
international brands and comprehensive, high quality data. The key elements of
this strategy include:
Expanding Customer Relationships and Cross-Selling. Primark believes that
its customers have an increasing need for financial and economic information
from a select group of integrated providers of such information. By
cross-selling its variety of well-known brands, Primark believes that it is well
positioned to serve this need. In addition to cross-selling, the Company
believes that it will be able to expand relationships with existing customers by
using its core products and services as platforms for launching new integrated
database and analytic products drawn from multiple sources within the Company.
Management also intends to further integrate its databases with its software
products to encourage service expansion. Due to the low incremental cost of
providing additional products and services to existing customers, the Company
expects these measures to result in increased revenues and improved profit
margins.
Introducing New Products, Databases and Service Enhancements. The Company
believes it can further leverage its existing customer base, databases and
technology to introduce new products and services. For example, Primark recently
introduced I/B/E/S Active Express, an on-line platform for delivery of I/B/E/S
information as well as other databases; Piranha, a product enabling customers to
manipulate and integrate data from multiple databases on the customer's desktop;
and World Market Monitor, a daily, weekly, monthly or bi-annual economic report
tailored to the needs of individual customers. The Company believes its ability
to add new products will continue to provide it with a competitive advantage.
Leveraging Introduction of the Euro. In 1997, more than 45% of Primark's
revenues were derived from European customers and the Company believes it is
well positioned to take advantage of the introduction of the euro on January 1,
1999. The introduction of the euro is expected to lead to new European
securities, increased cross-border investing and the liberalization of the
European pension and retirement savings industry. The Company anticipates that
all of these trends may also dramatically increase the demand for its products
and services from its existing customers as well as new customers. Primark
currently possesses a leading position in U.K. equities trading and provides one
of the most comprehensive databases of European company filings available
electronically. Management intends to capitalize on these trends by introducing
new databases capturing European trading and company data, as well as software
products and news services to serve the information needs of customers
worldwide.
Capitalizing On, and Improving Distribution Through, New Channels and New
Partnerships. Primark currently relies on a variety of distribution channels
including proprietary software, on-line and satellite feed delivery, as well as
third party distributors, paper-based services, CD-ROM and the Internet to
distribute its products. The Company believes it can further capitalize on these
distribution channels to introduce new products and services to both existing
and new customers. Primark currently has contracts with America Online, E-Trade,
Microsoft Investor, Quicken and Quote.Com, among others, to provide database
products to on-line customers and will seek to further expand these
relationships.
Leveraging Technology. Primark will continue to use advanced information
technology to increase the efficiency, speed and flexibility of its data
gathering, database construction and customer delivery efforts. For example,
Primark plans to integrate its database platforms in order to optimize its
product capabilities. The Company has begun to use new technology that it
believes will facilitate the integration of multiple databases maintained in
diverse computer systems for use by its analytics packages. This will allow the
Company to leverage existing brands and databases to provide new products to new
and existing customers. Through the use of advanced information technology,
Primark has transformed Disclosure from a primarily paper-based business to one
that now derives 42% of its revenues from electronic delivery. Also, the Company
expects to continue to use new technology to leverage its brand name products
and believes these efforts will increase revenues and improve margins.
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Providing Superior Customer Service. Providing superior customer support
and service is a key aspect of Primark's business philosophy and has contributed
to a high customer retention rate, which for 1997 averaged approximately 85%.
Primark's sales and marketing staff, as well as its technical experts and
consultants, work closely with clients, often on-site, to maximize the value of
Primark products and services and to develop custom applications tailored to
clients' information and software needs. Primark believes its superior customer
service and support will continue to provide it with increased opportunities for
additional product and service revenues.
Capitalizing on Integration of Operating Units. Primark has grown
primarily through acquisitions over the last six years. In order to capitalize
on the advantages expected to result from the integration of these acquired
businesses, on June 30, 1998 the Company reorganized its twelve operating units
into three divisions, which focus on common customer groups. The Company
believes that the restructuring will enable it to accelerate the realization of
synergies in its marketing, sales and administrative operations, eliminate
redundant production and delivery platforms, provide broader access to the
Company's customer base and deliver current and new product offerings faster and
more efficiently. The restructuring resulted in approximately $68.7 million of
restructuring charges for the period ended June 30, 1998, of which approximately
$60.7 million were non-cash charges.
RECENT EVENTS
On December 29, 1998, the Company announced the execution of a definitive
agreement (the "Agreement") to acquire 100% of the outstanding common stock of
A-T Financial Information, Inc. ("A-T") for a total purchase price of $35
million. Founded in 1987, A-T is a provider of Windows-compatible financial
market data and software to money managers, traders, banks and other
institutional investors. A-T has launched an Internet site for individual
investors, which is marketed as "A-T Attitude." The company is expected to
report $13 million in revenues for 1998, which is an increase of 29% over the
prior year. The Agreement, which was executed with both A-T and certain major
A-T shareholders, is subject to a number of conditions, including
Hart-Scott-Rodino review and approval of the A-T shareholders. A-T shareholders
holding a majority of its common stock have agreed to vote in favor of the
merger contemplated by the Agreement. The closing of the transaction is expected
by the end of February 1999.
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THE EXCHANGE OFFER
Primark issued and offered for sale (the "Offering") $150.0 million
aggregate principal amount of 9 1/4% Senior Subordinated Notes due 2008 (the
"Old Notes") under an indenture dated December 21, 1998 (the "Indenture") in a
transaction pursuant to Rule 144A and Regulation S under the Securities Act of
1933, as amended (the "Securities Act"). In connection with the Offering, the
Company entered into a registration rights agreement (the "Registration Rights
Agreement") with Morgan Stanley & Co. Incorporated, BT Alex Brown Incorporated,
NationsBanc Montgomery Securities LLC, A.G. Edwards & Sons, Inc. and Chase
Securities Inc. (the "Placement Agents"), providing for the issuance and
registration of senior subordinated notes (the "New Notes", and together with
the "Old Notes," the "Notes"), similarly governed by the Indenture, to be
offered in exchange for the Old Notes (the "Exchange Offer").
Securities Offered............ The Company is offering up to $150.0 million
aggregate principal amount of new 9 1/4% Senior
Subordinated Exchange Notes due 2008, which
have been registered under the Securities Act.
The terms of the New Notes are substantially
identical to those of the Old Notes, except
that certain transfer restrictions and
registration rights relating to the Old Notes
do not apply to the New Notes, and if the
Exchange Offer is not completed by June 21,
1999, the interest rate on the Old Notes will
increase by 0.5% until the Exchange Offer is
completed.
The Exchange Offer............ The Company is offering to issue the New Notes
in exchange for a like principal amount of the
Old Notes. The Old Notes were not registered
with the Securities and Exchange Commission
(the "Commission"). The Company is offering to
issue the New Notes to satisfy its obligations
contained in the Registration Rights Agreement.
You may tender your Old Notes by following the
procedures under the heading "The Exchange
Offer."
Tenders; Expiration Date;
Withdrawal.................... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1999,
unless the Company extends it. If you decide to
exchange your Old Notes for New Notes, you must
acknowledge that you are not engaging in, and
do not intend to engage in, a distribution of
the New Notes. The tender of Old Notes pursuant
to the Exchange Offer may be withdrawn at any
time prior to 1999. If the
Company decides for any reason not to accept
any Old Notes for exchange, the Old Notes will
be returned without expense to the tendering
holder promptly after the expiration or
termination of the Exchange Offer. See "The
Exchange Offer -- Terms of the Exchange Offer;
Period for Tendering Old Notes" and "The
Exchange Offer -- Withdrawal Rights."
Certain Conditions to the
Exchange Offer................ The Exchange Offer is subject to customary
conditions, which the Company may waive. Please
read the section "The Exchange Offer -- Certain
Conditions to the Exchange Offer" of this
Prospectus for more information regarding
conditions to the Exchange Offer.
Certain Federal Tax
Considerations................ The exchange of Old Notes for New Notes
pursuant to the Exchange Offer will not result
in any gain or loss to a Note holder for
federal income tax purposes. See "Certain U.S.
Federal Income Tax Considerations" of this
Prospectus.
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Use of Proceeds............... The Company will receive no proceeds from the
Exchange Offer.
Exchange Agent................ State Street Bank and Trust Company is the
Exchange Agent for the Exchange Offer. The
address and telephone number of the Exchange
Agent are set forth under the heading "The
Exchange Offer -- Exchange Agent" of this
Prospectus.
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
If you do not exchange your Old Notes in the Exchange Offer, your Old Notes
will continue to be subject to the restrictions on transfer set forth in the
legend on the certificate for your Old Notes. In general, you may offer or sell
your Old Notes only if they are registered under, offered or sold pursuant to an
exemption from, or offered or sold in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently intend to register the Old Notes under the Securities Act. Under
certain circumstances, however, the Placement Agents may require the Company to
file and cause to become effective, a shelf registration statement which would
cover resales of Old Notes by the holders thereof. See "The Exchange
Offer -- Consequences of Exchanging or Failing to Exchange Old Notes" and
"Description of the Notes -- Registration Rights."
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except that certain transfer restrictions and registration rights
relating to the Old Notes do not apply to the New Notes and that if the Exchange
Offer is not completed by June 21, 1999, the interest rate on the Old Notes will
increase by 0.5% until the Exchange Offer is completed.
Securities Offered.................. $150.0 million aggregate principal
amount of 9 1/4% Senior Subordinated
Exchange Notes due 2008, which have
been registered under the Securities
Act.
Maturity............................ December 15, 2008.
Interest............................ Interest will be payable semi-annually
in cash on June 15 and December 15 of
each year, beginning on June 15, 1999.
Optional Redemption................. The Company may redeem any of the Notes
beginning on December 15, 2003. The
initial redemption price is 104.625% of
their principal amount, plus accrued
interest. The redemption price will
decline each year after 2003 and will
be 100% of their principal amount, plus
accrued interest, on December 15, 2006.
In addition, before December 15, 2001,
the Company may redeem up to 35% of the
aggregate principal amount of Notes
using proceeds from certain sales of
its capital stock at 109.250% of their
principal amount, plus accrued
interest. The Company may make such
redemption only if after any such
redemption, at least 65% of the
aggregate principal amount of Notes
originally issued remains outstanding.
Change of Control................... Upon a change of control (as defined
under "Description of the Notes"), the
Company will be required to make an
offer to purchase the Notes. The
purchase price will equal 101% of their
principal amount, plus accrued interest
to the date of purchase. The Company
will not be required to commence such
an offer to purchase if the Notes have,
on the 30th day after such
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change of control, a rating of at least
BBB- by Standard & Poor's Ratings Group
and a rating of at least Baa3 by
Moody's Investors Service, Inc. There
can be no assurance that the Company
will have sufficient funds available at
the time of any change of control to
make any required debt repayment
(including repurchases of the Notes).
Ranking............................. The Old Notes do, and the New Notes
will, rank equally with the other
senior subordinated indebtedness of the
Company. The Old Notes are, and the New
Notes will be, junior to senior
indebtedness of the Company and all
liabilities of its subsidiaries.
At September 30, 1998, assuming that
the Offering had been completed at that
time, the Company would have had
approximately $159.7 million of
indebtedness outstanding of which
approximately $9.7 million would have
been senior to the Notes. See "Risk
Factors -- Reliance on Subsidiaries,"
"Risk Factors -- Subordination," "Risk
Factors -- Leverage," "Risk Factors --
Ability to Service Debt" and
"Description of the Notes -- Ranking."
Certain Covenants................... The Indenture contains certain
covenants that, among other things,
will limit the ability of the Company
and certain of its subsidiaries to:
- incur indebtedness,
- pay dividends,
- prepay subordinated indebtedness,
- repurchase capital stock,
- make investments,
- create liens,
- engage in transactions with
stockholders and affiliates,
- sell assets, and
- engage in mergers and consolidations.
However, these limitations are subject
to a number of important qualifications
and exceptions.
Use of Proceeds..................... The Company will not receive any
proceeds from the Exchange Offer. The
Company has used $122 million of the
net proceeds from the Offering to repay
outstanding borrowings under the Credit
Facility (as defined herein), with the
balance to be used to fund certain
corporate activities and for other
general corporate purposes.
RISK FACTORS
You should consider carefully all of the information set forth in this
Prospectus and, in particular, the specific factors set forth under "Risk
Factors," beginning on page 13, before deciding to tender your Old Notes in this
Exchange Offer.
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10
<PAGE> 12
- --------------------------------------------------------------------------------
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary historical consolidated financial data presented below for, and
as of, each of the years ended December 31, 1993 and 1994 have been restated for
the discontinuance of TASC, Inc. and The Analytic Sciences Corporation Limited
and their respective affiliates (collectively, "TASC") and Triad International
Maintenance Corporation ("TIMCO"). The summary historical consolidated financial
data presented below for, and as of, each of the years ended December 31, 1995,
1996 and 1997 were derived from the Company's audited consolidated financial
statements and include TASC and TIMCO as discontinued operations. The summary
historical consolidated financial data for, and as of, each of the nine months
ended September 30, 1997 and 1998 were derived from unaudited consolidated
financial statements of the Company which, in the opinion of management, have
been prepared on the same basis as the Company's audited consolidated financial
statements and include all adjustments (consisting only of normal recurring
items) necessary for a fair and consistent presentation of the Company's results
of operations and financial position for such periods and as of such dates. The
results for the nine months ended September 30, 1998 are not necessarily
indicative of results to be expected for the full fiscal year. The summary
historical consolidated data set forth below should be read together with "Use
of Proceeds," "Selected Consolidated Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
consolidated financial statements of the Company contained elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- --------- --------- --------- -------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Operating Revenues........................... $ 98,810 $111,621 $ 184,779 $ 277,063 $ 397,875 $294,726 $ 321,819
Operating Expenses:
Cost of Services......................... 41,888 49,689 66,063 104,479 157,327 116,783 129,221
Selling, General and Administrative...... 32,935 37,205 71,921 111,463 151,559 115,957 120,933
Depreciation and Amortization............ 17,569 18,502 25,909 33,282 50,205 37,118 36,750
Restructuring Charge..................... -- -- -- -- 6,800 6,800 68,677
-------- -------- --------- --------- --------- -------- ---------
Total Operating Expenses............. 92,392 105,396 163,893 249,224 365,891 276,658 355,581
-------- -------- --------- --------- --------- -------- ---------
Operating Income (Loss)...................... 6,418 6,225 20,886 27,839 31,984 18,068 (33,762)
-------- -------- --------- --------- --------- -------- ---------
Interest Expense............................. (10,023) (3,184) (8,377) (12,468) (15,986) (11,805) (7,618)
Other Income (Expense) Net................... (683) (191) (2,498) 4,577 3,955 1,948 2,836
Income Tax Benefit (Expense)................. 854 (1,145) (4,630) (7,432) (12,963) (8,533) 100
-------- -------- --------- --------- --------- -------- ---------
Income (Loss) From Continuing Operations..... (3,434) 1,705 5,381 12,516 6,990 (322) (38,444)
-------- -------- --------- --------- --------- -------- ---------
Discontinued Operations...................... 10,446 12,045 13,469 24,592 14,680 13,074 195,361
Extraordinary Item -- Loss on Early Debt
Extinguishment............................. (1,499) -- (534) -- (1,955) (1,955) (5,121)
-------- -------- --------- --------- --------- -------- ---------
Net Income................................... 5,513 13,750 18,316 37,108 19,715 10,797 151,796
-------- -------- --------- --------- --------- -------- ---------
Preferred Stock Dividend..................... (1,426) (1,434) (1,434) (359) -- -- --
-------- -------- --------- --------- --------- -------- ---------
Net Income Applicable to Common
Stock(1)............................... $ 4,087 $ 12,316 $ 16,882 $ 36,749 $ 19,715 $ 10,797 $ 151,796
======== ======== ========= ========= ========= ======== =========
Earnings Per Common Share -- Basic:
Income (Loss) From Continuing
Operations............................. $ (0.27) $ 0.01 $ 0.21 $ 0.49 $ 0.26 $ (0.01) $ (1.52)
Net Income(1)............................ $ 0.22 $ 0.66 $ 0.88 $ 1.48 $ 0.75 $ 0.41 $ 5.99
Earnings Per Common Share -- Assuming
Dilution:
Income (Loss) From Continuing
Operations............................. $ (0.27) $ 0.01 $ 0.19 $ 0.46 $ 0.25 $ -- $ --
Net Income(1)............................ $ 0.22 $ 0.62 $ 0.82 $ 1.38 $ 0.71 $ -- $ --
Weighted Average Common and Common Equivalent
Shares Outstanding
Basic.................................... 18,326 18,510 19,150 24,813 26,348 26,415 25,343
Effect of Dilutive Securities............ -- 1,443 1,531 1,758 1,596 -- --
-------- -------- --------- --------- --------- -------- ---------
Diluted.................................. 18,326 19,953 20,681 26,571 27,944 26,415 25,343
======== ======== ========= ========= ========= ======== =========
OTHER DATA:
Net Cash Provided From Operating
Activities................................. $ 48,386 $ 40,268 $ 49,305 $ 65,707 $ 58,024 $ 38,412 $ 52,310
Net Cash (Used By) Provided From Financing
Activities................................. (41,663) (19,292) 220,355 4,749 74,746 77,415 (458,888)
Net Cash (Used By) Provided From Investing
Activities................................. (15,743) (10,280) (226,708) (105,989) (144,504) (124,611) 423,773
Effect of Currency on Cash................... (290) 477 57 927 (762) (344) 47
Capital Expenditures:
Equipment and Other...................... $ 7,648 $ 10,765 $ 9,803 $ 19,412 $ 23,965 $ 17,576 $ 14,486
Software................................. 4,021 4,372 5,704 16,916 19,971 14,121 12,591
-------- -------- --------- --------- --------- -------- ---------
Total Capital Expenditures........... $ 11,669 $ 15,137 $ 15,507 $ 36,328 $ 43,936 $ 31,697 $ 27,077
======== ======== ========= ========= ========= ======== =========
EBITDA Before Restructuring Charges (2)...... $ 23,987 $ 24,727 $ 46,795 $ 61,121 $ 88,989 $ 61,986 $ 71,665
Ratio of EBITDA Before Restructuring Charges
to Interest Expense(3)..................... 2.39x 7.77x 5.59x 4.90x 5.57x 5.25x 9.41x
Ratio of Debt to EBITDA Before Restructuring
Charges (4)................................ 5.44x 4.67x 5.12x 4.06x 4.16x 4.48x 1.05x
Ratio of Earnings to Fixed Charges(5)........ -- 1.49x 1.90x 2.19x 1.97x 1.53x --
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE> 13
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1998
AS OF DECEMBER 31, ------------------------
------------------------------------------------------ AS AS
1993 1994 1995 1996 1997 REPORTED ADJUSTED(7)
-------- -------- -------- -------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital (deficit)(6)..... $(21,183) $ (7,572) $ 22,538 $(60,507) $ (64,325) $ (174,618) $ (29,018)
Total Assets..................... 419,816 427,950 718,184 920,801 1,043,809 811,328 867,763
Total Assets less Goodwill,
Net............................ 267,915 272,048 380,015 427,966 487,072 293,781 350,216
Total Debt....................... 130,386 115,573 239,476 248,340 370,163 103,224 159,659
Shareholders' Equity............. 208,134 224,689 354,062 475,830 470,971 436,821 436,821
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1998
------------------
<S> <C>
SUPPLEMENTAL INFORMATION:
As Adjusted Interest Expense(8)............................. $11,876
Ratio of EBITDA Before Restructuring Charge to As Adjusted
Interest Expense(3)....................................... 6.03x
Ratio of As Adjusted Debt to EBITDA Before Restructuring
Charge(4)................................................. 1.62x
</TABLE>
- ---------------
(1) Includes an after-tax gain on the sale of discontinued operations of $8.4
million in 1996 and $187.4 million in 1998 and an after-tax extraordinary
loss of $5.1 million, $2.0 million and $534,000 for 1998, 1997 and 1995,
respectively. Also includes dividends on the Company's outstanding preferred
stock through its conversion to common stock in 1996 and gains and losses
associated with discontinued operations of the Company.
(2) EBITDA before restructuring charges represents operating income plus
depreciation, amortization expense and non-recurring restructuring charges
and should not be considered in isolation from, or as a substitute for,
operating income, net income or cash flows from operating activities
computed in accordance with generally accepted accounting principles. While
not computed in accordance with generally accepted accounting principles,
EBITDA is a widely used measure of a company's performance in its industry
because it assists in comparing performance on a consistent basis without
regard to depreciation and amortization, which may vary significantly
depending on accounting methods (particularly where acquisitions are
involved). Certain of the Company's debt agreements include financial
covenants that are based upon EBITDA. Due to the variety of methods that may
be used by companies and analysts to calculate EBITDA before restructuring
charges, the EBITDA before restructuring charges measures presented herein
may not be comparable to that presented by other companies. The year ended
December 31, 1997 and the nine months ended September 30, 1998 included $6.8
million and $68.7 million of restructuring charges, respectively.
(3) The ratios of EBITDA before restructuring charges to interest expense and as
adjusted interest expense represent EBITDA before restructuring charges from
continuing operations divided by interest expense and as adjusted interest
expense from continuing operations. See footnote (8) below.
(4) The ratios of debt and as adjusted debt to EBITDA before restructuring
charges are calculated as the total outstanding debt and as adjusted debt of
the Company divided by EBITDA before restructuring charges. This ratio for
September 30, 1997 and September 30, 1998 was calculated based on the
preceding twelve months of EBITDA before restructuring charges. See footnote
(7) below.
(5) The ratio of earnings to fixed charges is calculated as the amount of
earnings before taxes from continuing operations plus fixed charges from
continuing operations divided by the amount of fixed charges from continuing
operations. Fixed charges include interest expense from continuing
operations plus the estimated interest component of operating leases. The
interest component of operating leases is estimated to be approximately 33%
of such amounts. For the year ended December 31, 1993 and the nine months
ended September 30, 1998, the Company's earnings before fixed charges were
insufficient to cover its fixed charges by $3.4 million and $49.6 million,
respectively. The nine months ended September 30, 1998 includes a
restructuring charge of $68.7 million. Excluding restructuring charges, the
ratio of earnings to fixed charges would have been 3.95x for the nine months
ended September 30, 1998.
(6) Working capital is calculated as current assets minus net assets of
discontinued operations minus current liabilities.
(7) As Adjusted gives effect to the Offering, as if it had occurred on September
30, 1998.
(8) As Adjusted Interest Expense gives effect to the Offering, as if it had
occurred on January 1, 1998.
- --------------------------------------------------------------------------------
12
<PAGE> 14
RISK FACTORS
In determining whether to tender your Old Notes in the Exchange Offer, you
should consider carefully all of the information set forth in this Prospectus
and, in particular, the following factors. This Prospectus contains
forward-looking statements that involve risks and uncertainties. The Company's
actual results may differ materially from the results discussed in such
forward-looking statements. Factors that may cause such differences include, but
are not limited to, those discussed below and in the section of this Prospectus
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The risk factors set forth below (other than
"-- Consequences of Not Exchanging Old Notes") are generally applicable to the
Old Notes as well as the New Notes.
CONSEQUENCES OF NOT EXCHANGING NOTES
If you do not exchange your Old Notes for the New Notes pursuant to the
Exchange Offer, you will continue to be subject to the restrictions on transfer
of your Old Notes described in the legend on your Old Notes. The restrictions on
transfer of your Old Notes arise because the Company issued the Old Notes
pursuant to exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, you may only offer or sell the Old Notes if they are registered under
the Securities Act and applicable state securities laws, or offered and sold
pursuant to an exemption from such requirements. The Company does not intend to
register the Old Notes under the Securities Act. In addition, if you exchange
your Old Notes in the Exchange Offer for the purpose of participating in a
distribution of the New Notes, you may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. To the extent Old Notes are tendered and accepted in the
Exchange Offer, the trading market, if any, for the Old Notes would be adversely
affected. See "The Exchange Offer -- Consequences of Exchanging or Failing to
Exchange Old Notes."
RELIANCE ON SUBSIDIARIES
The Company is a holding company with no direct operations and no
significant assets other than the stock of its subsidiaries. The Company depends
on the cash flows of its subsidiaries to meet its obligations, including the
payment of interest and principal on the Notes. The Company's subsidiaries are
separate legal entities that have no obligation to make any funds available to
pay any amounts due on the Notes. The Company's subsidiaries will not guarantee
the payment of the principal or interest on the Notes. In the event of a
bankruptcy, liquidation or reorganization of any of the Company's subsidiaries,
holders of their indebtedness and their trade creditors will generally be
entitled to payment of their claims from the assets of those subsidiaries before
any assets are made available for distribution to the Company. If the Company
were a creditor of any such subsidiary, its claims to any of such subsidiaries'
assets would rank junior to security interests held by other creditors. As of
September 30, 1998, assuming that the Offering and the application of the net
proceeds therefrom had been completed at that time, subsidiaries of the Company
would have had approximately $243.4 million of liabilities.
SUBORDINATION
The Notes are unsecured and rank junior in right of payment to all senior
debt of the Company, including all indebtedness under the Company's credit
facility (the "Credit Facility"). Consequently, in the event of any payment or
distribution of assets of the Company upon the bankruptcy, liquidation or
reorganization of the Company, the holders of senior debt must be paid in full
before any payments may be made on the Notes. As of September 30, 1998, assuming
that the Offering and the application of the net proceeds therefrom had been
completed at that time, the Company would have had $225.0 million of
availability under the Credit Facility. In addition, the Company may incur
additional senior debt under the Indenture.
The Old Notes are not, and the New Notes will not be, secured by any of the
Company's assets. In the event of a bankruptcy, liquidation or reorganization of
the Company, or if payments under the Credit Facility are accelerated, the
Company's assets will be available to pay obligations on the Notes only after
all payments have been made on its secured and senior debt. There can be no
assurance that sufficient assets will remain to make full payment on the Notes.
13
<PAGE> 15
In the event of a default in payment with respect to any senior debt of the
Company, the Company will not make any payment on the Notes unless such default
has been cured or waived. In addition, payments on the Notes may be blocked for
up to 179 consecutive days in the event of certain non-payment defaults on the
Company's senior debt.
LEVERAGE
At September 30, 1998, assuming that the Offering and the application of
the net proceeds therefrom had been completed at that time the Company would
have had consolidated total indebtedness of approximately $159.7 million and
consolidated shareholders' equity of $436.8 million. In addition, at September
30, 1998, and under the same assumptions, the Company would have had $225.0
million of availability under its Credit Facility. The Company may utilize its
Credit Facility or incur additional indebtedness in the future in connection,
for example, with acquisitions, the repurchase of its common stock, general
corporate purposes and capital expenditures. In the event that the Company
incurs substantial indebtedness in the future, it could have important
consequences for the Noteholders including the following:
- the ability of the Company to obtain any necessary financing in the
future for working capital, capital expenditures, debt service
requirements or other purposes may be limited;
- the Company's level of indebtedness could limit its flexibility in
planning for, or reacting to, changes in its business;
- the Company could be more highly leveraged than some of its competitors,
which may place it at a competitive disadvantage;
- the Company's degree of indebtedness could make it more vulnerable to a
downturn in its business or the economy generally;
- the debt service requirements of any additional indebtedness could make
it more difficult for the Company to make payments on the Notes; and
- a substantial portion of the Company's cash flow from operations could be
dedicated to the repayment of its indebtedness and would not be available
for other purposes.
ABILITY TO SERVICE DEBT
The Company's ability to make payments on its indebtedness, including the
Notes, will depend on its ability to generate cash in the future. In the event
the Company does not generate sufficient cash flow to meet its debt service and
working capital requirements, the Company may need to seek additional financing.
There can be no assurance that any such financing could be obtained on terms
that are acceptable to the Company, or at all. In the absence of such financing,
the Company could be forced to dispose of assets to make up for any shortfall in
its payment obligations under circumstances that might not be favorable to
realizing the highest price for such assets. There can be no assurance that the
Company's assets could be sold quickly enough or for sufficient amounts to
enable the Company to meet its obligations, including its obligations with
respect to the Notes. A substantial portion of the Company's assets are, and may
continue to be, intangible assets. Therefore, it may be difficult for the
holders of the Notes to be paid in the event of an acceleration of the Notes.
TECHNOLOGICAL CHANGE
The Company operates principally in the information services industry,
which changes rapidly and is characterized by the continuous development of new
standards and technology. The Company's ability to apply new technology to, and
to develop new applications for, its information services businesses will be a
significant factor in the Company's ability to grow and remain competitive. In
addition, technological advances and/or the introduction of new products and
services in the information services industry could adversely affect the
Company. For example, Disclosure/Worldscope experienced significant new
competition since the release of the EDGAR database by the SEC in late 1995,
which reduced demand for Disclosure/Worldscope's paper based services, allowed
new competitors to enter the market at lower prices, and resulted in a 18.7%
decline in year over year annualized revenues for this business as of September
30, 1998.
14
<PAGE> 16
However, this decline was offset in part by the 23.6% period to period growth in
Disclosure/Worldscope's electronic business.
The Company's future success will depend significantly on its ability to
continue to develop and deliver technologically advanced products and services.
The cost of developing such products and services could adversely affect the
Company's future results of operations. In addition, there can be no assurance
that the Company will be able to respond in a timely manner to technological
changes or that the Company's services will not become noncompetitive because of
new service offerings by its competitors.
COMPETITION
The information services industry is highly competitive and is expected to
continue to be so in the future. In addition, the industry is characterized by
rapid technological change and entry into the field by large and
well-capitalized companies and smaller competitors. The Company competes, or may
compete, directly and indirectly with large, well-established information
providers as well as many of the database providers from whom the Company
obtains data for inclusion in its systems. Certain of the Company's competitors
offer databases and applications similar to those offered by the Company and
also have substantially larger customer bases, greater name recognition and
greater financial, technical and marketing resources than those of the Company.
The Company believes that its ability to compete will depend upon many
factors. These include:
- its ability to maintain and develop new products and access new markets
in a cost efficient manner;
- its ability to integrate its products and services;
- its ability to continue relationships with leading providers of
financial, economic and market research data;
- the timing and market acceptance of new services and enhancements to
performance, price, reliability, customer service and support; and
- sales and marketing efforts.
There can be no assurance that the Company will be able to compete
successfully against competitors or that competitive pressures will not have a
material adverse effect on the Company.
INTERNATIONAL OPERATIONS AND FOREIGN CURRENCY EXCHANGE RATE RISK
The Company is exposed to certain risks associated with an international
business, particularly with respect to foreign currency exchange rate movements.
A majority of the Company's revenues and expenses are incurred in currencies
other than the U.S. dollar. Consequently, the Company's operations have at times
been adversely affected and may again be adversely affected by fluctuations in
currency exchange rates. The Company engages in hedging activities to minimize
its ongoing exposure to foreign currency exchange rate risk. There can be no
assurance that the Company will be able to continue to engage in such hedging
activities on commercially satisfactory terms, if at all.
International business is also subject to the customary risks associated
with international transactions. These include political risks, local laws and
taxes, the potential imposition of trade or currency exchange restrictions,
tariff increases and difficulties or delays in collecting accounts receivable.
Weak foreign economies and/or a weakening of foreign currencies in certain
countries against the U.S. dollar would adversely affect the Company's overall
operating results and cash flows. In 1997, international revenues and operating
income represented approximately 56% of total consolidated revenues and
operating income, respectively.
RESTRICTIVE COVENANTS IMPOSED BY DEBT INSTRUMENTS
The Indenture and the Credit Facility contain restrictions on the Company
that affect the ability of the Company to incur additional indebtedness, create
liens, make investments, issue stock of subsidiaries, create restrictions on the
ability of certain subsidiaries to pay dividends or make certain payments to the
Company, or sell or otherwise dispose of all or substantially all of the assets
of the Company. In addition, the Credit Facility requires the Company to
maintain certain financial ratios. See "Description of the Notes -- Covenants"
and "Description of Certain Indebtedness." There can be no assurance that the
Company will be able to maintain
15
<PAGE> 17
such ratios or that such covenants will not adversely affect the Company's
ability to finance its future operations or capital needs or to engage in other
business activities that may be in the interest of the Company.
A breach of any of the covenants contained in the Indenture or the Credit
Facility or the inability of the Company to comply with the required financial
ratios could result in a default under the Credit Facility or the Indenture. In
the event of any such default, the Company could be prohibited from making any
payments on the Notes. In addition, the lenders under the Credit Facility could
elect to declare all amounts borrowed thereunder to be due and payable. If the
indebtedness under the Credit Facility were to be accelerated, there can be no
assurance that the assets of the Company would be sufficient to repay such
indebtedness and the Notes in full. See "-- Reliance on Subsidiaries,"
"-- Subordination" and "Description of the Notes."
RELIANCE ON FINANCIAL SERVICES INDUSTRY
The Company's business is dependent to a large extent upon the continued
need for the electronic distribution of high-quality databases, forecasts,
analytical tools and other financial information. The majority of the Company's
business serves institutions and professionals in the financial services
industry, although the Company also has corporate and government customers in
both the United States and other countries. As a result, a downturn in the
financial services industry could adversely affect the Company's overall
revenues and profits. For example, the Company believes that the adverse impact
on the financial services industry following the 1997 collapse in the Asian
financial markets, together with the more recent financial market volatility
caused by concerns over conditions in Russia and Latin America, has had a
negative impact on its revenue growth and profitability. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." In
addition, financial institutions are continuing to consolidate. This increases
the leverage of the Company's customers to negotiate price and decreases the
overall potential market for certain of the Company's services. These factors,
as well as other changes occurring in the U.S. and international financial
services industry, could have a material adverse effect on the Company's
financial position and results of operations.
ACQUISITION RISKS
Historically, the Company has completed numerous acquisitions and may
continue to do so in the future. No assurance can be given that the Company will
identify, finance and complete additional suitable acquisitions on acceptable
terms or that future acquisitions will be successfully integrated into the
Company's existing businesses. Any acquisitions may require substantial
attention from the Company's senior management, which may limit the amount of
time devoted to the Company's day-to-day operations. There can also be no
assurance that future acquisitions will not have an adverse effect upon the
Company's operating results. The Company could be adversely affected if it were
unable to find additional attractive acquisition candidates or to effectively
manage the integration of any businesses acquired in the future. The Company is
actively pursuing a number of potential acquisitions, although no agreements
have been reached at this time.
RISK ASSOCIATED WITH YEAR 2000 COMPLIANCE
The Company has a Year 2000 ("Y2K") plan that it is actively pursuing to
address the Company's Y2K issues. The Company began working on the Y2K problem
in 1995, with the goal to provide continuous and reliable service to the
Company's customers and a seamless transition to the new millennium. The
Company's Y2K plan focuses on each of the Company's internal systems, products,
and third parties with which the Company has a significant business
relationship. In addition to the databases and software that the Company
provides to its customers, the Company is reviewing, fixing, and testing all
aspects of its internal operations -- from hardware systems, software, and
desktop PC programs to physical security systems. This effort involves key data
suppliers, hardware manufacturers, telecommunications companies, electric
utilities, and more. The Company is also prepared to assist its users with Y2K
issues relating to their internal systems that directly interface with the
Company's systems. All Primark companies are working together to achieve
compliance by sharing information, sharing resources and holding corporate-wide
reviews. The Company believes that all material systems will be compliant by
June of 1999.
All organizations dealing with the Y2K must address the effect this issue
will have on their significant business relationships including suppliers and
customers. The Company is undertaking steps to work with third
16
<PAGE> 18
parties to understand their ability to continue providing services and products
to support the Company's operations through the change to the Y2K. If any
significant Y2K problems are identified with third parties, contingency plans
will be developed. For example, Primark products incorporate data derived from
many different suppliers. A major component of the Y2K projects is reviewing
each of the suppliers to ensure compliance on their part. Where there is any
doubt that a supplier will not be taking reasonable actions to ensure
compliance, the Company will seek alternatives within a suitable time frame.
There are some older products that are not Y2K compliant that the Company
will no longer support after 1999. All affected customers have been notified.
All other Company products are Y2K compliant.
The Company incurred $1.5 million related to the Y2K procedures in 1997 and
expects to incur costs of $2.7 million and $2.6 million for the years ended
December 31, 1998 and 1999, respectively. The Company expects to resolve every
significant Y2K problem and have the solutions thoroughly tested by June 30,
1999.
While the Company expects its Y2K efforts will be successful, if the
modifications and replaced systems are not made compliant in a timely manner, it
could result in a material adverse effect on the Company. Additionally, the
Company's products and services, are dependent on technological components,
equipment and software that were developed by third parties and that may not be
Y2K compliant. Failure of such third party components, equipment or software to
operate properly with regard to the Y2K could interrupt ongoing operations or
require the Company to incur unanticipated expenses to remedy any problems,
which could have a material adverse effect on the Company's business and
operating results.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon its senior
management and key employees and its ability to attract and retain key
management, marketing, finance and technical personnel. The market for
experienced management and highly skilled personnel is highly competitive. If
the Company loses the services of certain management personnel or is unable to
attract and retain skilled technical personnel, it could be materially adversely
affected.
FRAUDULENT CONVEYANCE CONSIDERATIONS
The Company's management believes that the indebtedness represented by the
Notes was incurred for proper purposes and in good faith, and that the Company
was, and after the consummation of the Offering continued to be, solvent, was
sufficient capital for carrying on its business and was able to pay its debts as
they mature. Notwithstanding management's belief, the indebtedness represented
by the Notes could be avoided, or claims in respect thereof could be
subordinated to all of the Company's other debt, if a court determined that,
after giving effect to the sale of the Notes and the application of the net
proceeds therefrom:
- the Company incurred such indebtedness with the intent of hindering,
delaying or defrauding creditors; or
- the Company received less than reasonably equivalent value or
consideration for incurring such indebtedness; and
(1) was or became insolvent or was rendered insolvent by reason of such
transactions;
(2) was engaged in a business or transaction for which the assets
remaining with the Company constituted unreasonably small capital;
or
(3) intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured.
The measure of insolvency for purposes of these fraudulent transfer laws
varies depending upon the law of the jurisdiction which is being applied.
Generally, however, a company would be considered insolvent if the sum of all
its liabilities, including contingent liabilities, were greater than the value
of all its property at a fair valuation, or if the present fair saleable value
of the company's assets were less than the amount required to repay its
liabilities on its debts, including contingent liabilities, as they become
absolute and matured.
17
<PAGE> 19
LACK OF PUBLIC MARKET FOR THE NOTES
There is no public market for the New Notes. The Placement Agents have
informed the Company that they intend to make a market in the New Notes.
However, any such market making may be discontinued at any time. Accordingly, no
assurance can be given as to the development or liquidity of any trading market
for the New Notes.
If the New Notes are traded after their initial issuance, they may trade at
a discount from their initial offering price as a result of, among other things,
prevailing interest rates, the market for similar securities, the Company's
financial condition and prospects and general economic conditions.
RISKS REGARDING FORWARD LOOKING STATEMENTS
This Prospectus contains "forward-looking statements". These
forward-looking statements, such as the Company's plans and strategies, its
anticipation of revenues from designated markets, statements regarding the
development of the Company's businesses, the markets for the Company's services
and products, the Company's anticipated capital expenditures and other
statements contained herein regarding matters that are not historical facts, are
only predictions and estimates regarding future events and circumstances.
Actual events or results may differ materially from expected events or
results as a result of risks facing the Company. Such risks include, but are not
limited to: (1) risks associated with operating on a global basis, including
fluctuations in the value of foreign currencies relative to the U.S. dollar, and
the ability to successfully hedge such risks, (2) the extent to which Primark
seeks growth through acquisitions, and the ability to identify and consummate
acquisitions on satisfactory terms, (3) uncertainty regarding the development
and market acceptance of new products, (4) loss of market share through
competition, (5) deterioration in economic conditions, particularly in the
financial services industry, and (6) Primark's inability to complete the
implementation of its Y2K plans on a timely basis. You are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
their dates. The Company does not intend to publicly update or revise any
forward-looking statements.
18
<PAGE> 20
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds to the Company from the sale of the Old Notes were approximately $145.6
million, after deducting underwriting discounts and commissions and other
expenses of the Offering payable by the Company. The Company has used $122
million of the net proceeds to repay outstanding borrowings under the Credit
Facility ($93.6 million outstanding as of September 30, 1998) with the balance
to be used to fund certain corporate activities including acquisitions,
repurchases of its common stock, capital expenditures and other general
corporate purposes. The debt being repaid was incurred under the Credit Facility
in 1998 to finance the repurchase of 4,540,000 shares of the Company's common
stock pursuant to a Dutch Auction self tender offer and 1,568,500 shares through
open market purchases, along with related fees and expenses. The Credit Facility
will mature on December 31, 2002, unless extended pursuant to the terms of the
Credit Agreement (as defined herein). Amounts drawn under the Credit Facility
bear interest at floating rates (6.66% weighted average at September 30, 1998)
and any amounts repaid under the Credit Facility may be reborrowed thereunder.
See "Description of Certain Indebtedness."
19
<PAGE> 21
CAPITALIZATION
The following table sets forth as of September 30, 1998 the historical
capitalization of the Company and as adjusted to give effect to the Offering, as
if it had occurred on September 30, 1998. The information set forth below should
be read in conjunction with "Selected Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical consolidated financial statements of the Company
contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
---------------------------
HISTORICAL AS ADJUSTED(1)
---------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 30,022 $ 82,057
======== ========
Total debt:
Credit facility............................................. $ 93,565 $ --
Senior subordinated notes offered hereby.................... -- 150,000
Letter of credit and notes to sellers....................... 6,750 6,750
Capital lease obligations and other......................... 2,909 2,909
-------- --------
Total debt........................................... 103,224 159,659
Less-current maturities.............................. (94,382) (817)
-------- --------
Total long-term debt................................. 8,842 158,842
-------- --------
Shareholders' equity:
Common stock and additional paid-in capital................. 88,862 88,862
Retained earnings........................................... 350,454 350,454
Cumulative foreign currency translation..................... (2,495) (2,495)
-------- --------
Total common shareholders' equity.................... 436,821 436,821
-------- --------
Total capitalization.............................. $445,663 $595,663
======== ========
</TABLE>
- ---------------
(1) Gives effect to the Offering as if it had occurred on September 30, 1998.
20
<PAGE> 22
SELECTED CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial data presented below for,
and as of, each of the years ended December 31, 1993 and 1994 have been restated
for the discontinuance of TASC and TIMCO. The selected historical consolidated
financial data presented below for, and as of, each of the years ended December
31, 1995, 1996 and 1997 were derived from the Company's audited consolidated
financial statements, which include TASC and TIMCO as discontinued operations,
and which have been audited by Deloitte & Touche LLP, independent public
accountants. The selected historical consolidated financial data for, and as of,
each of the nine months ended September 30, 1997 and 1998 were derived from
unaudited consolidated financial statements of the Company which, in the opinion
of management, have been prepared on the same basis as the Company's audited
consolidated financial statements and include all adjustments (consisting only
of normal recurring items) necessary for a fair and consistent presentation of
the Company's results of operations and financial position for such periods and
as of such dates. The results for the nine months ended September 30, 1998 are
not necessarily indicative of results to be expected for the full fiscal year.
The selected historical consolidated data set forth below should be read
together with "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements of the Company contained elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- --------- --------- --------- -------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Operating Revenues........................... $ 98,810 $111,621 $ 184,779 $ 277,063 $ 397,875 $294,726 $ 321,819
Operating Expenses:
Cost of Services......................... 41,888 49,689 66,063 104,479 157,327 116,783 129,221
Selling, General and Administrative...... 32,935 37,205 71,921 111,463 151,559 115,957 120,933
Depreciation and Amortization............ 17,569 18,502 25,909 33,282 50,205 37,118 36,750
Restructuring Charge..................... -- -- -- -- 6,800 6,800 68,677
-------- -------- --------- --------- --------- -------- ---------
Total Operating Expenses............. 92,392 105,396 163,893 249,224 365,891 276,658 355,581
-------- -------- --------- --------- --------- -------- ---------
Operating Income (Loss)...................... 6,418 6,225 20,886 27,839 31,984 18,068 (33,762)
-------- -------- --------- --------- --------- -------- ---------
Interest Expense............................. (10,023) (3,184) (8,377) (12,468) (15,986) (11,805) (7,618)
Other Income (Expense) Net................... (683) (191) (2,498) 4,577 3,955 1,948 2,836
Income Tax Benefit (Expense)................. 854 (1,145) (4,630) (7,432) (12,963) (8,533) 100
-------- -------- --------- --------- --------- -------- ---------
Income (Loss) From Continuing Operations..... (3,434) 1,705 5,381 12,516 6,990 (322) (38,444)
-------- -------- --------- --------- --------- -------- ---------
Discontinued Operations...................... 10,446 12,045 13,469 24,592 14,680 13,074 195,361
Extraordinary Item -- Loss on Early Debt
Extinguishment............................. (1,499) -- (534) -- (1,955) (1,955) (5,121)
-------- -------- --------- --------- --------- -------- ---------
Net Income................................... 5,513 13,750 18,316 37,108 19,715 10,797 151,796
-------- -------- --------- --------- --------- -------- ---------
Preferred Stock Dividend..................... (1,426) (1,434) (1,434) (359) -- -- --
-------- -------- --------- --------- --------- -------- ---------
Net Income Applicable to Common
Stock(1)............................... $ 4,087 $ 12,316 $ 16,882 $ 36,749 $ 19,715 $ 10,797 $ 151,796
======== ======== ========= ========= ========= ======== =========
Earnings Per Common Share -- Basic:
Income (Loss) From Continuing
Operations............................. $ (0.27) $ 0.01 $ 0.21 $ 0.49 $ 0.26 $ (0.01) $ (1.52)
Net Income(1)............................ $ 0.22 $ 0.66 $ 0.88 $ 1.48 $ 0.75 $ 0.41 $ 5.99
Earnings Per Common Share -- Assuming
Dilution:
Income (Loss) From Continuing
Operations............................. $ (0.27) $ 0.01 $ 0.19 $ 0.46 $ 0.25 $ -- $ --
Net Income(1)............................ $ 0.22 $ 0.62 $ 0.82 $ 1.38 $ 0.71 $ -- $ --
Weighted Average Common and Common Equivalent
Shares Outstanding
Basic.................................... 18,326 18,510 19,150 24,813 26,348 26,415 25,343
Effect of Dilutive Securities............ -- 1,443 1,531 1,758 1,596 -- --
-------- -------- --------- --------- --------- -------- ---------
Diluted.................................. 18,326 19,953 20,681 26,571 27,944 26,415 25,343
======== ======== ========= ========= ========= ======== =========
OTHER DATA:
Net Cash Provided From Operating
Activities................................. $ 48,386 $ 40,268 $ 49,305 $ 65,707 $ 58,024 $ 38,412 $ 52,310
Net Cash (Used By) Provided From Financing
Activities................................. (41,663) (19,292) 220,355 4,749 74,746 77,415 (458,888)
Net Cash (Used By) Provided From Investing
Activities................................. (15,743) (10,280) (226,708) (105,989) (144,504) (124,611) 423,773
Effect of Currency on Cash................... (290) 477 57 927 (762) (344) 47
Capital Expenditures:
Equipment and Other...................... $ 7,648 $ 10,765 $ 9,803 $ 19,412 $ 23,965 $ 17,576 $ 14,486
Software................................. 4,021 4,372 5,704 16,916 19,971 14,121 12,591
-------- -------- --------- --------- --------- -------- ---------
Total Capital Expenditures........... $ 11,669 $ 15,137 $ 15,507 $ 36,328 $ 43,936 $ 31,697 $ 27,077
======== ======== ========= ========= ========= ======== =========
EBITDA Before Restructuring Charges (2)...... $ 23,987 $ 24,727 $ 46,795 $ 61,121 $ 88,989 $ 61,986 $ 71,665
Ratio of EBITDA Before Restructuring Charges
to Interest Expense(3)..................... 2.39x 7.77x 5.59x 4.90x 5.57x 5.25x 9.41x
Ratio of Debt to EBITDA Before Restructuring
Charges (4)................................ 5.44x 4.67x 5.12x 4.06x 4.16x 4.48x 1.05x
Ratio of Earnings to Fixed Charges(5)........ -- 1.49x 1.90x 2.19x 1.97x 1.53x --
</TABLE>
21
<PAGE> 23
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
------------------------------------------------------ SEPTEMBER 30,
1993 1994 1995 1996 1997 1998
-------- -------- -------- -------- ---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital (deficit)(6).................... $(21,183) $ (7,572) $ 22,538 $(60,507) $ (64,325) $ (174,618)
Total Assets.................................... 419,816 427,950 718,184 920,801 1,043,809 811,328
Total Assets less Goodwill, Net................. 267,915 272,048 380,015 427,966 487,072 293,781
Total Debt...................................... 130,386 115,573 239,476 248,340 370,163 103,224
Shareholders' Equity............................ 208,134 224,689 354,062 475,830 470,971 436,821
</TABLE>
- ---------------
(1) Includes an after-tax gain on the sale of discontinued operations of $8.4
million in 1996 and $187.4 million in 1998 and an after-tax extraordinary
loss of $5.1 million, $2.0 million and $534,000 for 1998, 1997 and 1995,
respectively. Also includes dividends on the Company's outstanding preferred
stock through its conversion to common stock in 1996 and gains and losses
associated with discontinued operations of the Company.
(2) EBITDA before restructuring charges represents operating income plus
depreciation, amortization expense and non-recurring restructuring charges
and should not be considered in isolation from, or as a substitute for,
operating income, net income or cash flows from operating activities
computed in accordance with generally accepted accounting principles. While
not computed in accordance with generally accepted accounting principles,
EBITDA is a widely used measure of a company's performance in its industry
because it assists in comparing performance on a consistent basis without
regard to depreciation and amortization, which may vary significantly
depending on accounting methods (particularly where acquisitions are
involved). Certain of the Company's debt agreements include financial
covenants that are based upon EBITDA. Due to the variety of methods that may
be used by companies and analysts to calculate EBITDA before restructuring
charges, the EBITDA before restructuring charges measures presented herein
may not be comparable to that presented by other companies. The year ended
December 31, 1997 and the nine months ended September 30, 1998 included $6.8
million and $68.7 million of restructuring charges, respectively.
(3) The ratio of EBITDA before restructuring charges to interest expense
represents EBITDA before restructuring charges from continuing operations
divided by interest expense from continuing operations.
(4) The ratio of debt to EBITDA before restructuring charges is calculated as
the total outstanding debt of the Company divided by EBITDA before
restructuring charges. This ratio for September 30, 1997 and September 30,
1998 was calculated based on the preceding twelve months of EBITDA before
restructuring charges.
(5) The ratio of earnings to fixed charges is calculated as the amount of
earnings before taxes from continuing operations plus fixed charges from
continuing operations divided by the amount of fixed charges from continuing
operations. Fixed charges include interest expense from continuing
operations plus the estimated interest component of operating leases. The
interest component of operating leases is estimated to be approximately 33%
of such amounts. For the year ended December 31, 1993 and the nine months
ended September 30, 1998, the Company's earnings before fixed charges were
insufficient to cover its fixed charges by $3.4 million and $49.6 million,
respectively. The nine months ended September 30, 1998 includes a
restructuring charge of $68.7 million. Excluding restructuring charges, the
ratio of earnings to fixed charges would have been 3.95x for the nine months
ended September 30, 1998.
(6) Working capital is calculated as current assets minus net assets of
discontinued operations minus current liabilities.
22
<PAGE> 24
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Subject to the terms and conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal, the Company will accept for exchange Old
Notes which are properly tendered on or prior to the Expiration Date and not
withdrawn as permitted below. As used in this Prospectus, the term "Expiration
Date" means 5:00 p.m., New York City time, on , 1999; provided,
however, that if the Company, in its sole discretion, has extended the period of
time during which the Exchange Offer is open, the term "Expiration Date" means
the latest time and date to which the Company extends the Exchange Offer.
As of the date of this Prospectus, $150.0 million aggregate principal
amount of the Old Notes are outstanding. This Prospectus and the Letter of
Transmittal are first being sent on or about , 199 , to all
holders of Old Notes known to the Company. The Company's obligation to accept
Old Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth below under "-- Certain Conditions to the Exchange
Offer."
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders of Old Notes as described below.
During any such extension, all Old Notes previously tendered will remain subject
to the Exchange Offer and may be accepted for exchange by the Company. The
Company will return at no expense to the holder, any Old Notes not accepted for
exchange as promptly as practicable after the expiration or termination of the
Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof.
If any of the events specified in "-- Certain Conditions to the Exchange
Offer" should occur, the Company expressly reserves the right to amend or
terminate the Exchange Offer, and not to accept for exchange any Old Notes not
theretofore accepted for exchange. The Company will give oral or written notice
of any extension, amendment, non-acceptance or termination to holders of Old
Notes as promptly as practicable. In the case of an extension, the Company will
issue a press release or other public announcement no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
Following consummation of the Exchange Offer, the Company may, in its sole
discretion, commence one or more additional exchange offers to those holders of
Old Notes who did not exchange their Old Notes for New Notes on terms which may
differ from those contained in the Registration Rights Agreement. The Company
may use this Prospectus, as amended or supplemented from time to time, in
connection with additional exchange offers. Such additional exchange offers will
take place from time to time until all outstanding Old Notes have been exchanged
for New Notes.
PROCEDURES FOR TENDERING OLD NOTES
When an Old Note holder tenders, and the Company accepts, the Old Notes,
this will constitute a binding agreement between the Company and such holder
subject to the terms and conditions set forth in this Prospectus and the
accompanying Letter of Transmittal. Except as set forth below, to tender in the
Exchange Offer, a holder must transmit to State Street Bank and Trust Company,
the Exchange Agent, at the address set forth under "-- Exchange Agent" on or
prior to the Expiration Date either:
- a properly completed and duly executed Letter of Transmittal, including
all other documents required by such Letter of Transmittal, or
- if the Old Notes are tendered pursuant to the book-entry procedures set
forth below, the tendering Old Note holder may transmit an Agent's
Message (as defined below) instead of the Letter of Transmittal.
In addition, on or prior to the Expiration Date, either:
- the Exchange Agent must receive the certificates for the Old Notes along
with the Letter of Transmittal; or
23
<PAGE> 25
- the Exchange Agent must receive a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Notes into the
Exchange Agent's account at The Depository Trust Company ("DTC")
according to the procedure for book-entry transfer described below, along
with a Letter of Transmittal or an Agent's Message in lieu of such Letter
of Transmittal; or
- the holder must comply with the guaranteed delivery procedures described
below.
The term "Agent's Message" means a message, transmitted by DTC and received
by the Exchange Agent and forming a part of the Book-Entry Confirmation, which
states that DTC has received an express acknowledgment from the tendering holder
that such holder has received and agrees to be bound by the Letter of
Transmittal and the Company may enforce the Letter of Transmittal against such
holder.
The method of delivery of Old Notes, Letters of Transmittal or Agent's
Messages and all other required documents is at the election and risk of the
holders. If such delivery is by mail, the Company recommends registered mail,
properly insured, with return receipt requested. In all cases, you should allow
sufficient time to assure timely delivery. Do not send Letters of Transmittal,
Agent's Messages or Old Notes to the Company.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
are tendered either by a registered holder of Old Notes who has not completed
the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or for the account of an Eligible
Institution. An "Eligible Institution" is a firm which is a member of a
registered national securities exchange or a member of the National Association
of Securities Dealers, Inc. or a commercial bank or trust company having an
office or correspondent in the United States. If signatures on a Letter of
Transmittal or a notice of withdrawal are required to be guaranteed, the
guarantor must be an Eligible Institution. If Old Notes are registered in the
name of a person other than a signer of the Letter of Transmittal, the Old Notes
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by the Company in its sole discretion, duly executed by, the
registered holder with the signature thereon guaranteed by an Eligible
Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion. The Company's determination will be final
and binding. The Company reserves the absolute right to reject any and all
tenders of Old Notes improperly tendered or to not accept any Old Notes which
acceptance might, in its judgment or that of its counsel, be unlawful. The
Company also reserves the absolute right to waive any defects or irregularities
or conditions of the Exchange Offer as to any Old Notes either before or after
the Expiration Date (including the right to waive the ineligibility of any
holder who seeks to tender Old Notes in the Exchange Offer). The Company's
interpretation of the terms and conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
Letter of Transmittal and the instructions thereto) will be final and binding on
all parties. Unless waived, any defects or irregularities in connection with
tenders of Old Notes for exchange must be cured within such reasonable period of
time as the Company shall determine. Neither the Company, the Exchange Agent nor
any other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Old Notes for exchange, nor shall any
of them incur any liability for failure to give such notification.
If a person or persons other than the registered holder or holders of Old
Notes signs the Letter of Transmittal, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered holder or holders that appear on the Old
Notes.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the Letter of Transmittal or any Old Notes or powers of attorney,
such persons should so indicate when signing, and you must submit proper
evidence satisfactory to the Company of such persons' authority to so act unless
the Company waives this requirement.
By tendering, each holder represents to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person receiving such New Notes,
whether or not such person is the holder, and that neither the holder nor such
other person has any arrangement or understanding with any person to participate
in the distribution of the New Notes. In
24
<PAGE> 26
the case of a holder that is not a broker-dealer, each such holder, by
tendering, also represents to the Company that such holder is not engaged in, or
intends to engage in, a distribution of the New Notes. If any holder or any such
other person is an "affiliate," as defined under Rule 405 of the Securities Act,
of the Company, or is engaged in or intends to engage in or has an arrangement
or understanding with any person to participate in a distribution of the New
Notes to be acquired pursuant to the Exchange Offer, such holder or any such
other person could not rely on the applicable interpretations of the staff of
the Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such New Notes.
See "Plan of Distribution." The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Old Notes. See " -- Certain Conditions to the Exchange Offer." For purposes of
the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Company has given oral or
written notice to the Exchange Agent, with written confirmation of any oral
notice to be given promptly thereafter.
For each Old Note accepted for exchange, the Old Note holder will receive a
New Note having a principal amount of maturity equal to that of the surrendered
Old Note. Interest on the New Notes will accrue from December 21, 1998, the
original issue date of the Old Notes. If the Exchange Offer is not consummated
by June 21, 1999, the interest rate on the Old Notes from and including such
date until but excluding the date of consummation of the Exchange Offer will
increase by 0.5%. Payments of such interest, if any, on Old Notes in exchange
for which New Notes were issued will be made to the persons who, at the close of
business on June 1 or December 1 immediately preceding the interest payment
date, are registered holders of such Old Notes if such record date occurs prior
to such exchange, or are registered holders of the New Notes if such record date
occurs on or after the date of such exchange, even if Notes are cancelled after
the record date and on or before the interest payment date.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after the Exchange
Agent timely receives either certificates for such Old Notes or a Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at DTC, a
properly completed and duly executed Letter of Transmittal and all other
required documents or, in the case of a Book-Entry Confirmation, an Agent's
Message. If for any reason set forth in the terms and conditions of the Exchange
Offer the Company does not accept any tendered Old Notes or if Old Notes are
submitted for a greater principal amount than the holder desired to exchange,
the Company will return such unaccepted or non-exchanged Old Notes without
expense to the tendering holder (or, in the case of Old Notes tendered by
book-entry transfer into the Exchange Agent's account at DTC pursuant to the
book-entry procedures described below, such unaccepted or non-exchanged Old
Notes will be credited to an account maintained with DTC) as promptly as
practicable after the expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at DTC for the Exchange Offer within two business days after
the date of this Prospectus, and any financial institution that is a participant
in DTC's systems may make book-entry delivery of Old Notes by causing DTC to
transfer such Old Notes into the Exchange Agent's account at DTC in accordance
with DTC's procedures for transfer. However, although delivery of Old Notes may
be effected through book-entry transfer at DTC, the Letter of Transmittal or
facsimile thereof, with any required signature guarantees, or an Agent's Message
in lieu of such Letter of Transmittal, and any other required documents, must,
in any case, be transmitted to and received by
25
<PAGE> 27
the Exchange Agent at one of the addresses set forth below under " -- Exchange
Agent" on or prior to the Expiration Date or the guaranteed delivery procedures
described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if:
- the tender is made through an Eligible Institution;
- prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name
and address of the holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing
that within three New York Stock Exchange, Inc. ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and
- the Exchange Agent receives the certificates for all physically tendered
Old Notes, in proper form for transfer, or a Book-Entry Confirmation, as
the case may be, and all other documents required by the Letter of
Transmittal, within three NYSE trading days after the date of execution
of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
You may withdraw tenders of Old Notes at any time prior to the Expiration
Date.
For a withdrawal to be effective, you must send a written notice of
withdrawal to the Exchange Agent at one of the addresses set forth below under
"-- Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which such
Old Notes are registered, if different from that of the withdrawing holder. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates the withdrawing
holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at DTC to be credited with the withdrawn Old Notes and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company. The Company's determination will be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old Notes which
have been tendered for exchange but which are not exchanged for any reason will
be returned to the holder thereof without cost to such holder (or, in the case
of Old Notes tendered by book-entry transfer into the Exchange Agent's account
at DTC pursuant to the book-entry transfer procedures described above, such Old
Notes will be credited to an account maintained with DTC for the Old Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described under "-- Procedures for Tendering Old Notes" above
at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Notes in exchange
for, any Old Notes. The Company may terminate or amend
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the Exchange Offer, if at any time before the acceptance of such Old Notes for
exchange or the exchange of the New Notes for such Old Notes, the Exchange Offer
is determined by the Company, in its sole and absolute discretion, to violate
applicable law or any applicable interpretation of the staff of the SEC.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at one of the addresses set forth below.
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
Delivery to: State Street Bank and Trust Company, Exchange Agent
By Hand/Overnight Delivery: By Registered or Certified Mail:
State Street Bank and Trust State Street Bank and Trust
Company Company
Corporate Trust Department Corporate Trust Department
Two International Place, 4th Floor P.O. Box 778
Boston, Massachusetts 02110 Boston, Massachusetts 02102-0078
Attn: Kellie Mullen Attn: Kellie Mullen
By Facsimile: (617) 664-5290
Confirm by Telephone: (617) 664-5587
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE IS NOT VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer.
The Company will pay the estimated cash expenses to be incurred in
connection with the Exchange Offer, which are estimated in the aggregate to be
$ .
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register Old Notes under the Securities Act. See "Description of the
Notes -- Registration Rights." Based on interpretations by the staff of the
Commission, as set forth in no-action letters issued to third parties, the
Company believes that New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold or otherwise
transferred by holders thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution of such New
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<PAGE> 29
Notes. However, the Company does not intend to request the Commission to
consider, and the Commission has not considered, the Exchange Offer in the
context of a no-action letter and the Company cannot guarantee that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Each holder, other than a broker-dealer,
must acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of New Notes and has no arrangement or understanding to participate
in a distribution of New Notes. If any holder is an affiliate of the Company, is
engaged in or intends to engage in or has any arrangement or understanding with
respect to the distribution of the New Notes to be acquired pursuant to the
Exchange Offer, such holder (i) could not rely on the applicable interpretations
of the staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution." In addition, to
comply with state securities laws, the New Notes may not be offered or sold in
any state unless they have been registered or qualified for sale in such state
or an exemption from registration or qualification is available and is complied
with. The offer and sale of the New Notes to "qualified institutional buyers"
(as such term is defined under Rule 144A of the Securities Act) is generally
exempt from registration or qualification under the state securities laws. The
Company currently does not intend to register or qualify the sale of the New
Notes in any state where an exemption from registration or qualification is
required and not available.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis should be read in conjunction with the consolidated
financial statements of the Company and the notes thereto and the other
financial data appearing elsewhere in this Prospectus. The discussion and
analysis (i) for the quarter ended September 30, 1998 is extracted from the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998
and (ii) for the fiscal year ended December 31, 1997 is extracted from the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 and in
each case does not give effect to subsequent events.
RESULTS OF OPERATIONS
THREE MONTHS ENDED AND YEAR TO DATE SEPTEMBER 30, 1998 COMPARED TO THREE
MONTHS ENDED AND YEAR TO DATE SEPTEMBER 30, 1997
Primark reported net income of $21.9 million ($0.96 per share assuming
dilution) and 151.8 million ($5.99 per share) for the three and nine months
ended September 30, 1998, respectively. Net income for the three and nine months
ended September 30, 1997 was $7.6 million ($0.28 per share assuming dilution)
and $10.8 million ($0.41 per share). In accordance with SFAS No. 128, per share
calculations for the nine months ended September 30, 1998 and 1997 exclude the
impact of dilutive securities due to the loss from continuing operations
resulting from restructuring charges.
The five significant events which have affected net income for the year
have been the sale of TIMCO, the commercial impact of global economic and
financial market uncertainty, the sale of TASC, the recapitalization of the
Company using the proceeds from the sale of TASC, and the restructuring of the
Company. The sale of TIMCO and the commercial impact of recent financial market
uncertainty were third quarter events. The TIMCO sale was finalized on September
22, 1998 for $70 million resulting in an after tax gain of $14.2 million which
has been recorded to discontinued operations.
The beginning of the third quarter was somewhat stronger than the end, due
to the sharp drop in the financial markets in late August and the subsequent
volatility and uncertainty. Many of the Company's customers had large trading
losses and/or had made loans that became uncollectable and had to be written
off. These unfavorable circumstances have caused customers to announce layoffs
and cost controls to compensate for their lower earnings. As a result, the
Company's sales of new products, new subscriptions and one-time items to the
financial industry have softened and we expect this to continue through
year-end. Unfortunately, this slowdown occurs at the very time the Company is
experiencing higher expenses for new product development, rollout and support,
particularly Global Access Piranha, the Primark Information Optimizer and the
Primark/Dow Jones Equities Service. The uncertainty in financial markets has
affected more market segments than just the financial industry itself.
Accounting firms, law firms and consultants are big users of Primark's products,
especially material supplied by Disclosure. With fewer IPOs, secondary offerings
and high-yield debt issues, their business with the financial industry is down,
resulting in Primark doing less business with these specialized segments.
The September 30, 1998 net income year to date results reflects TASC as
part of discontinued operations. TASC was sold in the second quarter for $432
million in cash plus an estimated equity adjustment of $11.5 million. The equity
adjustment is based upon changes in TASC's consolidated equity account, less
certain inter-company transactions, from September 30, 1997 through the date of
the closing. On July 27, 1998, Litton sent notification that it was contesting
specific components of the equity adjustment totaling $4.2 million. Both Litton
and the Company are in the process of establishing the protocol to resolve all
disputed amounts.
The proceeds from the sale of TASC were used by the Company to repay $220
million of commercial bank debt and $112 million of senior notes in the second
quarter. The related unamortized deferred bank cost together with the call
premium on the senior notes was written off as an extraordinary loss totaling
$5.1 million, net of tax. Net income for the nine months ended September 30,
1997 includes the effect of a $2.0 million (after tax) extraordinary loss ($0.07
per share) for the write off of debt issue costs associated with prior debt that
was successfully refinanced. The Company instituted a corporate restructuring
plan to reflect the sale of TASC and position the Primark product lines in a
more integrated fashion to address market needs
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<PAGE> 31
and opportunities. The restructuring plan, including the extraordinary loss
mentioned previously, resulted in a $77.4 million charge to operating income in
the second quarter, and lowered net income $59.8 million.
The Company had income from continuing operations of $5.9 million ($0.26
per share on a dilutive basis) for the three months ended September 30, 1998
compared to $3.4 million ($0.12 per share on a dilutive basis) for the same
period last year. When restructuring items are not included, for the nine months
ended September 30, 1998 the Company had $16.3 million of income from continuing
operations ($0.62 per share on a pro forma dilutive basis) compared to $5.9
million earned last year ($0.21 per share on a pro forma dilutive basis).
Including restructuring charges, the loss from continuing operations was $38.4
million ($1.52 per share, basic and diluted) and $0.3 million ($0.01 per share,
basic and diluted) for the nine months ended September 30, 1998 and 1997,
respectively.
Continuing Operations
The most important decision made by management in 1998 was to sell
unrelated businesses and to create more value from its information service
business by reorganizing the Company into three operating divisions. These three
divisions are the Primark Financial Information Division, the Primark Financial
Analytics Division, and the Primark Decision Information Division, plus the
supporting Primark Data Company. Primark can serve its customers better while
improving margins through this new structure.
The Primark Financial Information Division consists of the businesses of
Datastream/ICV, including Primark Investment Management Services, Disclosure,
and Worldscope. This Division accounts for approximately 70% of Primark's
consolidated revenues and is focused on developing "enterprise wide" products
and services for major financial institutions on a global basis. It also has
responsibility for all real-time and transactional products, investment
accounting, and the reference and consumer markets. This division grew revenues
6.5% and 4.8% for the three and nine months ended September 30, 1998,
respectively. The Primark Financial Information Division has experienced
double-digit percentage revenue growth on a year to date basis across all
product groups with the exception of Disclosure's traditional paper document and
CD-ROM business. While currency had little impact on the three months ended
September 30, there were adverse currency effects on year to date operating
income, primarily for the Datastream/ICV product lines. Offsetting the negative
impact of currency movements was a gain on currency transactions of $1.0 million
for the nine months ended September 30, 1998. Datastream/ICV's real time and
transactional products, lead by Topic 3, are the leading providers of on-line
equity trading products in the UK with a market share of approximately 69%. The
Topic 3 product line has grown 24.5% and 29.4% for the quarter and year to date,
respectively, exclusive of the effect of currency. The Disclosure product lines
have exhibited growth in the electronic product revenues of 25.4% and 23.6% for
the three and nine month periods, respectively. This increase, however, was more
than offset by decreases in Disclosure's traditional paper document and CD-ROM
business where revenue of $11.6 million were down by 17.3% and 18.7% for the
three and nine months ended September 30, 1998, respectively. Management
believes that new products to be released in the latter part of 1998 through the
first half of 1999, together with Disclosure's legacy paper document and CD-ROM
business stabilizing, should result in improved growth and profitability
prospects for this Division.
The Primark Financial Analytics Division accounts for approximately 18% of
Primark's consolidated revenues and includes the businesses of I/B/E/S,
Baseline, and Vestek. This Division develops and markets a wide variety of
analytical products, which combine databases, advanced software, analytical
techniques, and forecasts for all phases of the investment process for money
managers, fund sponsors, and other investors. This division grew revenues 23.1%
and 27.0% for the three and nine months ended September 30, 1998, respectively.
Revenues from the sale of I/B/E/S data and analytical solutions increased 16.7%
and 24.1%, Baseline product increased revenues 41.5% and 36.6% and Vestek's
revenues increased 10.6% and 15.6% for the three and nine months ended September
30, 1998, respectively.
The Primark Decision Information Division accounts for approximately 12% of
Primark's consolidated revenues and acquires, develops and operates information
content businesses that are primarily focused in areas other than the financial
marketplace. However, it also provides products and services for decision
support to financial customers as well. This division contains the businesses of
WEFA and the Yankee Group.
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This division has grown revenues 9.4% and 13.6% for the three and nine-month
periods ended September 30, 1998.
Restructuring Charges
Effective June 1, 1998, the Company was reorganized to strategically focus
solely on its information services businesses. In connection with this
reorganization, the Company recorded a pre-tax charge of $77.4 million, of which
$8.7 million is recorded as an extraordinary loss on early extinguishment of
debt and the remaining $68.7 million is recorded within operating expenses for
direct and other reorganization related costs. The associated tax benefit of the
extraordinary item and the other restructuring charges is $3.6 million and $14.0
million, respectively.
The effect of the $68.7 million charge was to reduce 1998 year to date
earnings per share on a pro forma dilutive basis by $2.07. The restructuring
charge was the result of a decision to implement a new organizational structure
designed to better serve the Company's customers, more quickly capitalize on
evolving market opportunities and improve margins. The restructuring charge in
1998 includes: (i) $25.0 million of previously capitalized software related to
the planned integration of several product offerings on common software
platforms, (ii) $1.5 million of data that has been determined to be duplicative
and will not be used as a result of the software platform integration previously
discussed, (iii) write-off of $23.9 million of goodwill associated with software
and data written-off which was established as part of purchase accounting, (iv)
write-off of $7.2 million of goodwill related to DAFSA, and (v) write-off of
$3.1 million of a trademark no longer used in the restructured organization. An
additional $8.0 million of the restructuring charge relates primarily to the
integration of domestic and international sales offices and efficiencies gained
from technological advancements that will result in the phased reduction of
approximately 61 employees.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEARS ENDED DECEMBER 31, 1996 AND
DECEMBER 31, 1995
Primark reported net income of $19.7 million ($0.71 per share) for the
twelve months ended December 31, 1997 compared to $36.8 million ($1.38 per
share) in 1996 and $16.9 million ($0.82 per share) in 1995. Net income for 1997
and 1995 includes an after tax extraordinary loss of $2.0 million ($0.07 per
share) and $0.5 million ($0.03 per share) for the write off of debt issue costs
associated with bank debt which was successfully refinanced.
Primark reported income from continuing operations of $7.0 million ($0.25
per share) for the year ended December 31, 1997, compared to $12.5 million
($0.46 per share) and $5.4 million ($0.19 per share) in 1996 and 1995,
respectively. The 1997 income from continuing operations includes restructuring
charges of $6.2 million ($0.22 per share), net of tax, taken at DAFSA and
Disclosure during the first half of 1997. Excluding the restructuring charges,
1997 income from continuing operations increased 5.4% to $13.2 million ($0.47
per share). The Company's decision to discontinue the operations of TASC and
TIMCO in 1997, as well as PSLC in 1996, affected income from continuing
operations for all periods.
During 1996 and 1997, management pursued a strategy of focusing the
Company's operations on its information services businesses. In connection with
that strategy, the Company discontinued three operating segments as discussed
below and acquired several businesses in the information industry. The Company
is in the preliminary stages of investigating further organizational changes to
address the best way to manage the remaining information services segment. This
investigation includes, among other things, the examination of all tangible and
intangible assets of the Company for possible adjustment.
On December 8, 1997, the Company entered into an agreement for the sale of
TASC for $432 million in cash. The Company estimates the sale will generate a
net gain of approximately $179.9 million. On March 30, 1998 the shareholders of
Primark approved the sale. Consequently, the operating results and net assets of
TASC have been reclassified from continuing operations and recorded as a
discontinued operation for all periods presented. As an essential part of the
transaction, TASC and Primark entered into an information technology services
agreement. Under this agreement, TASC will continue to provide Primark
information technology research and development, planning, and technical
assistance for a three year period. TASC will also continue to manage the
Primark Telecommunications Network and supply professional information
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technology services to the business units of Primark and their customers. TASC
generated net income of $15.0, $13.0 and $9.7 million, for the twelve months
ended December 31, 1997, 1996 and 1995, respectively.
In June of 1997, the Company adopted a formal plan to dispose of its
transportation business, TIMCO. Accordingly, the operating results and net
assets of TIMCO have been reclassified from continuing operations and recorded
as a discontinued operation for all periods presented. During the three years
ended 1997, 1996 and 1995, TIMCO generated net losses of $0.3 million, and net
income of $2.4 million and $2.7 million, respectively.
In September of 1996, the Company sold its financial services segment,
PSLC, which resulted in a $8.4 million gain, net of tax. Discontinued operations
for the twelve months ended December 31, 1996 and 1995 included net income of
$0.8 and $1.0 million.
Acquisitions during the first quarter of 1997 and last half of 1996,
together with the Company's stock repurchase program, resulted in the Company
increasing its level of funded debt. As a result, interest costs from continuing
operations increased $3.5 million and $4.1 million during 1997 and 1996. The
Company allocated interest costs to each of the discontinued operations based
upon their ratios of net assets proportional to total net assets. After the
allocation of interest cost to discontinued operations, the Company reported
interest expense of $16.0 million, $12.5 million and $8.4 million for the years
ended 1997, 1996 and 1995, respectively.
During 1997, the Company's effective tax rate increased due to the
non-deductibility of goodwill created by certain of its recent acquisitions and
because no tax benefits have been recorded for the $8.6 million of net losses
incurred at DAFSA for the year. In 1996, the Company's effective tax rate
received a favorable impact from settling seven years of open tax returns.
The Company has a formal plan and task force assigned to make all of its
financial systems, product offerings and related databases year 2000 compliant.
In 1997 the Company spent $1.5 million of resources on this endeavor and
anticipates that it will be required to spend an additional $2.7 million and
$2.6 million in 1998 and 1999, respectively, to be year 2000 compliant. The
majority of the remaining year 2000 work will be performed at Datastream/ICV.
Summary of Operating Results
For the year ended December 31, 1997, revenues increased 43.6% and 115.3%
over the same periods in 1996 and 1995. The increase is primarily due to the
effect of the acquisitions of Baseline and WEFA during the first quarter of
1997; ICV, the Yankee Group, DAFSA and a controlling interest in Worldscope
during 1996; and Disclosure and I/B/E/S in 1995. On a pro forma basis to include
the effect of acquisitions, the Company grew 1997 revenues and operating income
6.7% and 17.6%, respectively, over the same period in 1996. These pro forma
growth rates include adverse currency movements and restructuring charges, a
resized DAFSA and Disclosure's paper based product fall-off.
DAFSA had the single most significant negative impact on operating income
during 1997. During 1997, DAFSA generated revenue of $5.5 million but incurred
operating losses of $8.4 million, which included a $5.0 million restructuring
charge. The restructuring program was implemented in the second quarter of 1997
and, together with the introduction of technology and applications developed at
Disclosure and WEFA, DAFSA was able to achieve near break-even results during
the fourth quarter of 1997.
Datastream/ICV
During 1997, the Datastream/ICV operation grew revenues 8.8%. These
businesses experienced most of the negative impacts of currency fluctuations.
Excluding the effects of currency and exchange fees, the Datastream/ICV
operation grew revenues approximately 13.1% for the year. Exclusive of currency
effects, ICV's Topic3 product line grew 19.2% for the year but overall revenues
were offset by declining exchange fee revenues. ICV's overall margins increased
due to shifts in product mix, primarily the reduction of minimum margin exchange
fee revenues. Excluding the effects of currency, Datastream grew revenues 12.7%
for the year. Datastream's annual growth in revenues was led by increases in the
UK of 9.4%, the Americas of 10.4%, Continental Europe of 17.3% and Asia of
15.1%. Including the effects of currency, the Pacific Basin accounted for $21.1
million of Datastream's annual revenues. The Company reduced investment in the
Far East region in
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early 1997 and does not plan to risk any further capital until management
believes the current period of adjustment comes to an end.
Disclosure/Worldscope
Disclosure and Worldscope generated revenues of $88.5 million for the year,
a decrease of 3.0% compared to the same period in 1996. Overall growth in
revenues was impacted by the 14.1% decrease in paper demand business.
Disclosure's electronic products now represent approximately 40% of total
revenues and continue to do very well with 29.9% growth in revenues for 1997. At
the beginning of 1996, the electronic products represented less than 19.6% of
Disclosure's total revenue.
Financial Analytics
The financial analytics group, comprised of I/B/E/S, Baseline, WEFA and
Vestek, generated $90.6 million of revenues for the year. As a group, on a pro
forma basis, these operations grew revenues 24.7% over 1996. The strong
performance in the year was led by I/B/E/S, Baseline and Vestek, which had
record growth in revenues of 42.9%, 32.8% and 18.3%, respectively.
Yankee
The Yankee Group was originally acquired, in part, to be the market
research arm of the Company's applied technology segment, focusing on
identifying current trends and future directions in communications and computer
industries for commercial, industrial and consumer markets. With the disposition
of TASC, management has folded Yankee in with information services. Yankee
finished the year with pro forma revenue growth of 11.2%.
CAPITAL RESOURCES AND LIQUIDITY
THREE MONTHS ENDED AND YEAR TO DATE SEPTEMBER 30, 1998 COMPARED TO THREE
MONTHS ENDED AND YEAR TO DATE SEPTEMBER 30, 1997
The Company's cash and cash equivalent balances increased $17.2 million
during the nine months ended September 30, 1998 primarily as a result of
operating activities contributing $52.3 million, investing activities providing
$423.8 million and financing activities using $458.9 million. Most of the $52.3
million of operating cash flows is from net income from continuing operations
plus the non cash charges taken for restructuring, the early extinguishment of
debt and depreciation and amortization.
Financing activities for the year used $458.9 million and were affected by
the following three transactions: (a) use of the proceeds from the sale of TASC
to pay down debt, (b) amounts borrowed under the Company's line of credit for
shares repurchased under the "Dutch Auction" self tender offer and share
repurchase program, and (c) common stock issuance pursuant the Company's option
plans. The Company used the proceeds from the sale of TASC to (i) prepay all
amounts outstanding on the Company's $112 million senior callable bonds,
including a 4.375% premium aggregating $4.9 million together with the accrued
interest thereon, (ii) prepay $220 million of the Company's outstanding term
loan together with accrued interest thereon, and (iii) prepay $500,000 of the
Company's other indebtedness. In conjunction with the sale of TASC, the Company
replaced its outstanding $75 million credit facility with a $225 million
revolving credit facility which expires in 2002. Interest on the borrowings
under the new revolving credit facility is payable at rates ranging from 0.375%
to 1.00% above the prevailing LIBOR rate of interest.
On May 20, 1998, the Company announced a "Dutch Auction" self-tender offer,
which expired on June 17, 1998. The Company purchased 4,540,000 shares at $34
per share under this arrangement. Total cost of these shares was $154.6 million,
including legal and accounting fees. On July 3, 1998, the Company implemented an
open market purchase program to buy up to 2,000,000 shares of its common stock
from time to time, depending on market conditions. As of September 30, 1998,
1,518,500 shares had been repurchased at a total cost of $40.8 million. On
October 2, 1998, the Company purchased an additional 50,000 shares at a total
cost of $1,454,000. Year to date, the Company has purchased a total of 6,108,500
shares at a total cost of $196.6 million, representing approximately 22.5% of
its total outstanding common stock. On November 10, 1998 the Company announced
that the Board of Directors approved the expansion of the open market purchase
program by an additional 2,000,000 shares, bringing the total potential buyback
to 8,540,000 shares,
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or approximately 31% of the Company's total outstanding before the "Dutch
Auction." The Company is using proceeds from the sale of TASC and TIMCO as well
as its revolving credit facility to fund the common stock repurchases.
On September 22, 1998 the Company completed the sale of TIMCO for $70
million. On April 1, 1998 the Company completed the sale of TASC and its
affiliated weather information companies to Litton Industries for $432 million
in cash. The Company has paid $43.0 million in taxes to date of the amount owed
on both the TASC and TIMCO sales. Investing activities also included $14.5
million for capital expenditures and $12.6 million for software. Capital
expenditures consisted primarily of computer equipment purchases while
capitalized software relates primarily to software used to improve the delivery
of the Company's products and services.
Year 2000 Readiness Disclosure
The statements in the following section include "Year 2000 readiness
disclosure" within the meaning of the Year 2000 Information and Readiness
Disclosure Act. The Year 2000 (Y2K) issue relates to a complex set of potential
problems arising from the ways in which computer software and hardware handle
dates. Many older systems use a two-digit date format that may create
ambiguities in passing into the new century.
The Company has a Y2K plan that it is actively pursuing to address the
Company's Y2K issues. The Company began working on the Y2K problem in 1995, with
the goal to provide continuous and reliable service to the Company's customers
and a seamless transition to the new millennium. The Company's Y2K plan focuses
on each of the Company's internal systems, products, and third parties with
which the Company has a significant business relationship. In addition to the
databases and software that the Company provides to its customers, the Company
is reviewing, fixing, and testing all aspects of its internal operations -- from
hardware systems, software, and desktop PC programs to physical security
systems. This effort involves key data suppliers, hardware manufacturers,
telecommunications companies, electric utilities, and more. The Company is also
prepared to assist its users with Y2K issues relating to their internal systems
that directly interface with the Company's systems. All Primark companies are
working together to achieve compliance by sharing information, sharing resources
and holding corporate-wide reviews. The Company believes that all material
systems will be compliant by June of 1999.
All organizations dealing with the Year 2000 must address the effect this
issue will have on their significant business relationships including suppliers
and customers. The Company is undertaking steps to work with third parties to
understand their ability to continue providing services and products to support
the Company's operations through the change to the Year 2000. If any significant
Year 2000 problems are identified with third parties, contingency plans will be
developed. For example, Primark products incorporate data derived from many
different suppliers. A major component of the Y2K projects is reviewing each of
the suppliers to ensure compliance on their part. Where there is any doubt that
a supplier will not be taking reasonable actions to ensure compliance, the
Company will seek alternatives within a suitable time frame.
There are some older products that are not Y2K compliant that the Company
will no longer support after 1999. All affected customers have been notified.
All other Company products are Y2K compliant.
The Company incurred $1.5 million related to the Y2K procedures in 1997 and
expects to incur costs of $2.7 million and $2.6 million for the years ended
December 31, 1998 and 1999, respectively. The Company expects to resolve every
significant Y2K problem and have the solutions thoroughly tested by June 30,
1999.
While the Company expects its Year 2000 efforts will be successful, if the
modifications and replaced systems are not made compliant in a timely manner, it
could result in a material adverse effect on the Company. Additionally, the
Company's products and services, are dependent on technological components,
equipment and software that were developed by third parties and that may not be
Year 2000 compliant. Failure of such third party components, equipment or
software to operate properly with regard to the Year 2000 could interrupt
ongoing operations or require the Company to incur unanticipated expenses to
remedy any problems, which could have a material adverse effect on the Company's
business and operating results.
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The European Economic and Monetary Union
Beginning January 1, 1999, member states of the Economic and Monetary Union
(EMU) may begin trading in either their local currencies or the euro, the
official currency of the EMU. Parties are free to choose the unit they prefer in
contractual relationship during the transitional period, beginning January 1999
and ending June 2002.
The Company has focused on the opportunities presented by the euro in order
to become recognized by the market as a leader in euro preparedness.
Technologically, a major milestone was reached at the end of September when all
of the Company's "customer-facing" software was euro ready and available for
customers to carry out their internal testing. On the content front, the Company
continues to enhance its euro preparedness through the rapid expansion of euro
data and indices. For example, the Company recently added euro denominated index
futures contracts, the HSBC Euroblock smaller companies index and certain
indices from the European Commission. The Company is also producing its own data
such as calculated synthetic benchmark bond yields for the Eurozone, synthetic
exchange rates and short-term interest rate series.
The Company has shared its euro expertise with its customers in 19 "euro
forums" being held around the world. These have been extremely well attended.
Additionally, the Company is being asked by many major buy- and sell-side
organizations to provide consultancy on the correct treatment of historical data
beginning January 4th next year.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEARS ENDED DECEMBER 31, 1996 AND
DECEMBER 31, 1995
Primark ended 1997 with $12.8 million in cash and cash equivalents compared
to $25.3 in 1996 and $59.9 in 1995. During 1997, $86.1 million was used to
purchase Baseline and WEFA, $56.2 million to repurchase and retire stock and
$43.9 million to fund capital expenditures. Partially offsetting these uses were
cash flows from operating activities which generated $58.0 million, the issuance
of long-term debt that provided $97.2 million, net of debt issue costs, and the
sale of the Weather Network which generated $3.5 million. During 1996, the
Company acquired four separate businesses for $71.1 million in net cash, $8.3
million in seller notes, 2.2 million shares of common stock and $7.6 million of
other consideration. Primark also increased capital expenditures $20.8 million
over 1995.
The 1996 cash expenditures were primarily funded from cash on the balance
sheet, the sale of PSLC for $14.3 million and increased operating cash flows.
During 1995, the Company issued $125.0 million of commercial bank debt and
$106.5 million of common stock that provided funds partially used for the
acquisition of Disclosure and I/B/E/S for $199.7 million in net cash.
Operating cash flows decreased $7.7 million during 1997. The decrease
reflects a decline in net income primarily attributable to the restructuring
charges, decreases in deferred income, and tax refunds due. The tax refunds
arose as the Company accepted stock from certain employees to pay taxes due on
their option exercises in accordance with the Company's benefit policies. The
Company received a compensation deduction associated with the option exercises,
which should result in approximately $25 million of tax refunds to be received
in 1998. The increase between 1995 and 1996 primarily represents additional cash
flows from acquired companies offset by increased working capital requirements.
All periods benefitted from improving growth in the base businesses.
Cash flows from financing activities provided $74.7 million for the year, a
$70.0 million increase over the same period in 1996. The increase is primarily
the result of the $300.0 million bank refinancing arrangement on February 7,
1997 which provided an additional $100.0 million in long term debt. The new
arrangement is comprised of a $75.0 million revolving credit facility and a
$225.0 million term loan expiring in June 2004. The new financing replaced an
outstanding $75.0 million revolving credit facility and a $125.0 million term
loan. The Company incurred costs of $2.8 million in conjunction with the
arrangement that will be amortized over the term of the debt. The additional
borrowings increased Primark's debt to total capital ratio from 34.3% at
December 31, 1996 to 44.0% at December 31, 1997. Partially offsetting this
increase was $56.2 million used to repurchase the Company's common stock
comprised of $26.6 million for a stock buy back program and $29.6 million
associated with the Company's acceptance of stock from certain employees to pay
withholding taxes on option exercises. These repurchased shares were retired
during the year. At year end, the Company had $27.6 million outstanding on its
revolving credit facility primarily as a result of withholding taxes due on
stock
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options exercised in December. During 1996, the Company entered into several non
cash financing transactions including the conversion of its $16.9 million
redeemable preferred stock to 1.2 million shares of common stock and issuance of
2.2 million shares of common stock in connection with the acquisition of ICV.
During 1995, the Company entered into a $200.0 million credit arrangement with
several banks to support the Disclosure and I/B/E/S acquisition. The credit
arrangement included a $75.0 million revolving credit facility and a $125.0
million term loan which were refinanced in 1997. In December of 1995, the
Company sold 4.1 million shares of common stock for $107.8 million and used the
net proceeds to repay loan balances and for other general corporate purposes.
Investing activities, primarily for acquisitions, used $144.5 million of
cash during 1997, compared to $106.0 million in 1996 and $226.7 million in 1995.
The majority of 1997 investing uses were for the purchases of Baseline and WEFA,
which used $41.2 million and $44.9 million, respectively. Capital expenditures
and capitalized software amounted to $43.9 million during the year, an increase
of $7.6 million over the same period in 1996. The majority of the expenditures
were for computer equipment, leasehold improvements for new facilities at
I/B/E/S and ICV, and capitalized software and data for upgrading and revising
Disclosure's product line and production operation. Partially offsetting these
uses were proceeds from the Company's sale of its investment in the Weather
Network that provided $3.5 million of cash. During 1996, the Company acquired
four separate operations with net cash consideration totaling $71.1 million. The
sale of PSLC partially offset these uses, providing $14.3 million. During 1995,
Primark purchased Disclosure and I/B/E/S for $199.7 million in net cash.
In June of 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income" and SFAS No. 131 "Disclosures about Segments of an Enterprise and
Related Information." The Company will adopt these statements during fiscal year
1998 and does not expect that the adoption of these statements will have a
material impact on the consolidated financial statements.
Changes in foreign exchange rates during 1997 negatively impacted the
Company's revenues and operating income by approximately $3.2 million and $4.9
million, respectively. Management anticipates that the international component
of its revenues and operating income will be approximately 50% and 55%,
respectively during 1998. The Company will continue to manage foreign currency
risk through its hedging program.
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INDUSTRY OVERVIEW
In 1997, in the U.S. alone the market size of the financial and economic
information services industry was estimated to be approximately $7.4 billion and
was projected to grow by 8.7% per annum through the year 2002. The broader
business information marketplace, which encompasses legal, credit and related
financial information, was estimated in 1997 to be approximately $35.0 billion
in the United States alone.
The Company believes the following factors are contributing to the growing
demand for financial and economic information:
- Investment and business decision-making has become increasingly more
complex.
- New types of financial securities are being introduced.
- Cross-border investing is growing rapidly, driving the demand for
information on markets around the world.
- Corporations are increasingly competing in the global marketplace.
- The availability of improved technology.
- The Internet is allowing individual consumers to access information that
was once confined to the institutional investor.
These developments put a greater premium on accurate, timely and
comprehensive information. To be effective, information needs to be organized,
integrated, analyzed and displayed in an easy to understand and user-friendly
manner.
Among the more prominent and growing users of financial and economic
information are:
- Investment and Commercial Banks -- requiring information across a number
of functional activities, including investment research, investment
banking and credit and risk management.
- Investment Firms -- requiring information in the context of asset
allocation and security selection, portfolio construction and tracking,
trading, valuation and reporting.
- Corporations -- requiring information to analyze competitors, marketing
and sales planning and risk exposure.
- Professional Services Firms -- requiring information to analyze markets,
industries and companies.
- Individual Consumers -- requiring information to help in managing their
personal investments and retirement funds.
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BUSINESS
Primark is a leading global information service provider of comprehensive
financial, economic and market research information to investment, legal,
accounting, banking, corporate and government customers. The Company develops
and markets "value-added" database and information products that cover
established and emerging markets worldwide. The Company's proprietary analytical
software applications provide for the analysis and presentation of financial,
economic and market research information.
The Company, which serves customers in the U.S., Europe and the Pacific
Rim, compiles, analyzes, integrates, packages and distributes current and
historical data, news and commentary on financial securities, companies, and
markets worldwide. Primark owns and maintains large-scale databases, which are
accessed through its on-line distribution systems and the Internet, as well as
through third-party distributors. The Company's databases are authoritative
sources of data and analytics to more than 5,000 organizations worldwide,
including 75 of the top 100 banks, 82 of the top 100 investment managers, 28 of
the top 50 insurance companies and 450 of the top 1,000 U.S. companies. The
Company believes its customers value Primark's products because of their high
quality data as well as Primark's understanding of niche markets, its ability to
develop products to serve these markets and its superior customer service and
support.
The Company's business operations are integrated into three
customer-focused divisions, with each division concentrating on specialized
product sets, which address the needs of specific customer market groups.
Primark's three operating divisions are:
- Primark Financial Information Division ("PFID"). PFID develops
"enterprise-wide" products and services for major financial institutions
on a global basis. It also has responsibility for all transactional
products, both historical and real-time, as well as products supporting
large-scale investment accounting functions, the individual investor and
the referential needs of very large financial market customers. This
division also manages the corporate network, PrimarkNet, which serves as
the major delivery channel to Primark customers on a global basis and
across all three divisions. PFID's product offerings serve most of
Primark's customer types and it is a major service provider to the
"sell-side" portion of the financial markets.
- Primark Financial Analytics Division ("PFAD"). PFAD concentrates on
developing and marketing a wide variety of analytical products for money
managers, fund sponsors and other investors. These products combine the
Company's databases, advanced software, analytical techniques and
forecasts for all phases of the investment process. PFAD's product
offerings concentrate on customers in the "buy-side" portion of the
financial markets.
- Primark Decision Information Division ("PDID"). PDID acquires, develops
and operates information content businesses that are primarily focused in
areas other than the financial marketplace, and also provides products
and services for decision support to financial customers.
The Company has established the Primark Data Company ("PDC") to support the
data needs of the Company's operating divisions. PDC is an essential ingredient
in the overall Primark strategy because of the need for high quality information
provided on an efficient basis. PDC is responsible for the aggregation,
concordance and integration of Primark's equity pricing, indices, company
account, ownership and economic data sets Company-wide. With major operations in
the United States, the United Kingdom, Ireland and India, PDC provides global
data knowledge and support to the Company's three divisions.
Key factors in Primark's success are recognizable quality and international
market acceptance of its branded products sold by the various business units
within the divisions. Primark's business units, and related brands, by division
include:
PRIMARK FINANCIAL INFORMATION DIVISION
- Datastream. Datastream, acquired in 1992, is one of the world's leading
providers of global historical and fundamental real-time securities data
and news covering more than 45,000 stocks from 59 countries, 97,000
corporate and government bonds from 32 countries and more than 1,800
major indices.
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- ICV. ICV, acquired in 1996, is a leading provider in the U.K. of on-line
equity trading products with an approximately 69% market share in 1997 of
on-line U.K. equities trading and was the number one rated vendor to U.K.
brokers by the 1996, 1997 and 1998 Kimsey Surveys.
- Primark Investment Management Services. PIMS is a leading provider of
computer-based accounting and other investment fund services, including
portfolio valuation and performance measurement services, to money
managers in the U.K. and, to a lesser extent, in continental Europe.
- Disclosure/Worldscope. Disclosure, acquired in 1995, and Worldscope, of
which a 50% equity interest was acquired in 1995 and an additional 30%
interest was acquired in 1996, are two of the leading providers of "as
reported" and abstracted financial information with databases including
more than five million SEC filings by more than 16,000 U.S. companies,
dating back to 1968, as well as foreign company filings from more than
13,000 companies in 45 countries.
PRIMARK FINANCIAL ANALYTICS DIVISION
- I/B/E/S. I/B/E/S, acquired in 1995, is a leading provider of global
earnings expectations, historical data on earnings surprises and research
reports from more than 800 brokerage firms and 7,000 research analysts on
more than 17,000 companies worldwide.
- Baseline. Baseline, acquired in 1997, offers a leading stock and
portfolio analysis and selection system designed specifically for
institutional portfolio managers.
- Vestek. Vestek, acquired in 1994, is an international provider of
portfolio information, analytics and consulting support to investment
professionals.
PRIMARK DECISION INFORMATION DIVISION
- WEFA. WEFA, acquired in 1997, is an international provider of economic
research, analysis and forecasts.
- Primark Decision Economics. PDE, an unconsolidated company started in
1996 in which Primark has an equity interest of 20%, disseminates timely,
value-added economic forecasts, analyses and commentaries covering the
world's major economies and markets.
- The Yankee Group. Yankee Group, acquired in 1996, is an international
market research and consulting firm focusing on the communications and
computing industries, which in 1997 was rated number one in credibility
by Information Week magazine.
Primark had net operating revenues of $397.9 million and $321.8 million for
the twelve months ended December 31, 1997 and the nine months ended September
30, 1998, respectively. The Company's principal sources of revenue are from
customer subscriptions, royalty revenues from third party distributors and fees
for consulting services. The Company has a high customer retention rate, which
for 1997 averaged approximately 85%. More than 80% of the Company's revenues are
derived from subscription or royalty contracts, and a majority of these
contracts are paid in advance either quarterly or annually. For the nine months
ended September 30, 1998, approximately 82% of Primark's revenues were from
subscriptions, 4% from royalties and 14% from other sources. Primark had EBITDA
before restructuring charges of approximately $89.0 million for the year ended
December 31, 1997 and approximately $71.7 million for the nine months ended
September 30, 1998. For a description of EBITDA, see "-- Summary Consolidated
Financial Data." Over the past four years ended December 31, 1997, Primark's
revenues and EBITDA before restructuring charges have grown at compounded annual
growth rates of 41.7% and 38.8%, respectively.
BUSINESS AND OPERATING STRATEGY
Primark's business and operating strategy is designed to generate strong
revenue growth and increased profitability by selling existing products, by
integrating key products and operations, by launching and acquiring new products
and by developing ancillary revenue streams through capitalizing on its
international brands and comprehensive, high quality data. The key elements of
this strategy include:
Expanding Customer Relationships and Cross-Selling. Primark believes that
its customers have an increasing need for financial and economic information
from a select group of integrated providers of such information. By cross-
selling its variety of well-known brands, Primark believes that it is well
positioned to
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serve this need. In addition to cross-selling, the Company believes that it will
be able to expand relationships with existing customers by using its core
products and services as platforms for launching new integrated database and
analytic products drawn from multiple sources within the Company. Management
also intends to further integrate its databases with its software products to
encourage service expansion. Due to the low incremental cost of providing
additional products and services to existing customers, the Company expects
these measures to result in increased revenues and improved profit margins.
Introducing New Products, Databases and Service Enhancements. The Company
believes it can further leverage its existing customer base, databases and
technology to introduce new products and services. For example, Primark recently
introduced I/B/E/S Active Express, an on-line platform for delivery of I/B/E/S
information as well as other databases; Piranha, a product enabling customers to
manipulate and integrate data from multiple databases on the customer's desktop;
and World Market Monitor, a daily, weekly, monthly or bi-annual economic report
tailored to the needs of individual customers. The Company believes its ability
to add new products will continue to provide it with a competitive advantage.
Leveraging Introduction of the Euro. In 1997, more than 45% of Primark's
revenues were derived from European customers and the Company believes it is
well positioned to take advantage of the introduction of the euro on January 1,
1999. The introduction of the euro is expected to lead to new European
securities, increased cross-border investing and the liberalization of the
European pension and retirement savings industry. The Company anticipates that
all of these trends may also dramatically increase the demand for its products
and services from its existing customers as well as new customers. Primark
currently possesses a leading position in U.K. equities trading and provides one
of the most comprehensive databases of European company filings available
electronically. Management intends to capitalize on these trends by introducing
new databases capturing European trading and company data, as well as software
products and news services to serve the information needs of customers
worldwide.
Capitalizing On, and Improving Distribution Through, New Channels and New
Partnerships. Primark currently relies on a variety of distribution channels
including proprietary software, on-line and satellite feed delivery, as well as
third party distributors, paper-based services, CD-ROM and the Internet to
distribute its products. The Company believes it can further capitalize on these
distribution channels to introduce new products and services to both existing
and new customers. Primark currently has contracts with America Online, E-Trade,
Microsoft Investor, Quicken and Quote.Com, among others, to provide database
products to on-line customers and will seek to further expand these
relationships.
Leveraging Technology. Primark will continue to use advanced information
technology to increase the efficiency, speed and flexibility of its data
gathering, database construction and customer delivery efforts. For example,
Primark plans to integrate its database platforms in order to optimize its
product capabilities. The Company has begun to use new technology that it
believes will facilitate the integration of multiple databases maintained in
diverse computer systems for use by its analytics packages. This will allow the
Company to leverage existing brands and databases to provide new products to new
and existing customers. Through the use of advanced information technology,
Primark has transformed Disclosure from a primarily paper-based business to one
that now derives 42% of its revenues from electronic delivery. Also, the Company
expects to continue to use new technology to leverage its brand name products
and believes these efforts will increase revenues and improve margins.
Providing Superior Customer Service. Providing superior customer support
and service is a key aspect of Primark's business philosophy and has contributed
to a high customer retention rate, which for 1997 averaged approximately 85%.
Primark's sales and marketing staff, as well as its technical experts and
consultants, work closely with clients, often on-site, to maximize the value of
Primark products and services and to develop custom applications tailored to
clients' information and software needs. Primark believes its superior customer
service and support will continue to provide it with increased opportunities for
additional product and service revenues.
Capitalizing on Integration of Operating Units. Primark has grown
primarily through acquisitions over the last six years. In order to capitalize
on the advantages expected to result from the integration of these acquired
businesses, on June 30, 1998 the Company reorganized its twelve operating units
into three divisions, which focus on common customer groups. The Company
believes that the restructuring will enable it to
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accelerate the realization of synergies in its marketing, sales and
administrative operations, eliminate redundant production and delivery
platforms, provide broader access to the Company's customer base and deliver
current and new product offerings faster and more efficiently. The restructuring
resulted in approximately $68.7 million of restructuring charges for the period
ended June 30, 1998, of which approximately $60.7 million were non-cash charges.
BUSINESS AND PRODUCTS
OVERVIEW
While Primark supplies information to investment and commercial banks,
investment firms, corporations, government organizations, professional service
firms and individual consumers, it is particularly focused on the needs of the
international investment community. The organizations in the financial community
generally can be divided into two groups, although there are hybrids and
exceptions. One group consists of "buy-side" firms, which invest individual
consumer assets or institutional pension funds. The second group is the
"sell-side" firms, which perform investment research, brokerage and trading
functions, often combined with corporate finance services.
Within the "buy-side," investment managers can be classified according to
their particular style of investing -- large cap, small cap, emerging markets,
value, growth, indices, etc. While the actual method by which they make
investment decisions may vary according to their investment style, the overall
investment process is essentially similar across all firms. It can be broken
down into five major categories.
<TABLE>
<S> <C> <C> <C> <C>
Asset Security Portfolio Security Fund
Deployment & Research & Construction & Trading & Accounting
Criteria and and Tracking
Selection
& denotes arrow pointing right
</TABLE>
Primark is involved in all aspects of the investment decision-making
process. PFAD focuses extensively on the "buy-side" sector; however, depending
on the functional activity, Primark may also have either of its other operating
divisions supply information and analytical services to that function. For
example:
ASSET DEPLOYMENT CRITERIA. The allocation of resources across
different asset categories -- equity versus fixed income, international
versus domestic, industry selection. The Company's operations that serve
these activities are through Vestek and I/B/E/S products (PFAD) and through
WEFA and PDE products (PDID).
SECURITY RESEARCH AND SELECTION. The evaluation of individual
investment securities. Depending on the investment approach
used -- technical, fundamental or quantitative -- the information needs
will be different, as will the analytical tools. The Company's operations
that serve these activities are through Datastream, Disclosure and ICV
products (PFID) and through Baseline, I/B/E/S and Vestek products (PFAD).
PORTFOLIO CONSTRUCTION AND TRACKING. The process of creating a
portfolio of individually selected securities that collectively possesses
the appropriate risk and return characteristics. The Company's subsidiaries
that serve these activities are through PFAD with the Vestek and Baseline
products.
SECURITY TRADING. The actual buying and selling of individual
securities. Timing, costs and other technical factors play important roles
in the efficient execution of a funding strategy. PFID's ICV products serve
these activities.
FUND ACCOUNTING. The accounting for the investment management process
on an intra-day, daily, weekly, monthly and annual basis. This includes
accounting for portfolio valuation, transactions, tax, regulatory and
client reports and performance measurement. The Company's operations that
serve these activities are the Datastream and PIMS products through PFID
and the Vestek product through PFAD.
The "sell-side" firms are involved in many aspects of the investment cycle,
and each of these aspects is generating stronger demand for more and better
financial and economic information. All of Primark's divisions offer products
essential to these firms, with PFID representing the largest share of those
offerings. Some of the functions performed by the sell-side include:
BROKERAGE. This involves the generation and fulfillment of buy and
sell orders for specific securities from money managers, trust departments,
insurance companies and individuals. Information from PFID
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through Datastream and Disclosure as well as I/B/E/S and WEFA information
through PFAD and PDID, respectively, are useful in this process, along with
corporate news and securities price quotes.
RESEARCH. Analysts study corporate securities and other investment
instruments to estimate the likely returns from these investments and
arrive at buy and sell recommendations. PFID's Datastream, Disclosure and
Worldscope together with I/B/E/S and WEFA (PFAD and PDID, respectively)
provide useful data and tools to the investment research analyst, as well
as distribution systems for the results of their work.
TRADING. The actual process of identifying buyers and sellers of
securities and executing orders, whether for customers or the firm's own
account, make up the bulk of activities in trading. Such orders are usually
accomplished through exchanges for most equities, options and futures,
while bonds and foreign exchange are more often traded directly or through
other brokers. PFID's ICV products directly supports the trading process in
London with quotes and news. However, traders have become interested in
value-added data as trading strategies become more sophisticated so
Datastream and Disclosure combined with PFAD's I/B/E/S, and PDID's WEFA and
PDE to provide information to this segment.
CORPORATE FINANCE. The traditional investment banking functions
involving the underwriting of securities, determining capital structure and
merger and acquisition activity are very information intensive. All three
divisions through the products of Datastream, Disclosure, Worldscope,
I/B/E/S and WEFA provide extensive support to investment bankers.
In addition to the financial community, the Company's customers include
corporations and governmental organizations.
CORPORATIONS. To aid in the increasing competition in the global
marketplace, corporations require greater financial and economic
information on countries, markets and competitors. The Company's operations
that serve those needs are PFID's Disclosure, PFAD's I/B/E/S and PDID's
WEFA, PDE and Yankee Group products.
GOVERNMENTAL ORGANIZATIONS. As issues related to commerce, trade and
international finance gain prominence in governmental decision making,
along with fiscal and monetary policy, governmental organizations require
greater amounts of financial and economic data. The Company's operations
that serve these needs are PFID's Disclosure, PFAD's I/B/E/S and PDID's
WEFA, PDE and Yankee Group products.
The decision to organize Primark under the current divisional structure was
made in June of 1998 and is an important step in fully integrating operational
functions within Primark to rationalize an efficient approach to customer needs
and allow for further market penetration with existing and new product
offerings.
PRIMARK FINANCIAL INFORMATION DIVISION
The Primark Financial Information Division recorded $292.8 million of
revenues for the 1997 fiscal year. This represented 74% of Primark's total
revenues. PFID generated $195.9 million of revenues outside of North America
with $112.7 million of those revenues coming from Datastream products, $47.8
million from ICV and $22.9 million from PIMS. The $96.9 million generated in
North America represented $71.2 million from Disclosure, $8.8 million from
Worldscope and $14.1 million from Datastream sales.
Datastream. Datastream provides global historical economic and financial
information to customers worldwide and, together with PIMS products, is a
leading provider of computer-based accounting and other investment fund services
in the United Kingdom.
The core of Datastream's products is its centralized data system which
maintains a series of linked databases of extensive international economic and
financial data collected from wire services, official publications of national
agencies, stock, options and futures exchanges, other information vendors,
brokers, dealers, banks and issuers. Customers have online access to
Datastream's databases through personal computers, networks or workstations.
Datastream's products and services enable customers to perform extensive
investment research and analysis, investment administration and portfolio
valuations on securities in all major markets, and to produce graphics,
statistics, time series analysis and perform other analytical
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functions. Datastream's products and services fall into two principal
categories -- investment research and fund management services.
Investment research services accounted for approximately 85% of
Datastream's total revenues for each of the fiscal years ended December 31,
1997, 1996 and November 30, 1995, respectively. These services consist of a set
of software programs to manipulate, analyze and present financial and economic
information obtained from Datastream's databases. The software is designed to
facilitate the customers' access to data from any of Datastream's databases and
to manipulate this data through a variety of pre-programmed and user-defined
ways to produce graphs, tables and reports and to perform analyses.
Fund management services accounted for approximately 15% of Datastream's
total revenues for each of the fiscal years ended December 31, 1997, 1996 and
November 30, 1995, respectively. Fund management services, available through
PIMS, provide investment accounting, portfolio valuation and performance
measurement activities.
A critical component of Datastream's business is the data itself.
Datastream's principal supply requirements are for raw financial data, which are
acquired from numerous data suppliers worldwide and developed internally. Once
acquired, the data sets are edited and stored in Datastream's databases for
access and manipulation through Datastream's applications and value-added
software programs. Data suppliers generally retain ownership of the raw data,
but allow Datastream and its customers the use of such data. Datastream places
great importance on the quality of its data and has developed a program to
continuously review its data sources to ensure quality, control and continuity.
Wherever possible, Datastream develops multiple sources of data to provide
backup and cross checking.
Data relating to equities include pricing information for earnings and
dividends on approximately 45,000 stocks from 59 countries, including all major
markets and many emerging markets. This data includes historical earnings and
dividend data, as well as forecast data supplied by market specialists. Data
relating to bonds include maturity and yield on approximately 97,000 corporate
and government bonds from 32 countries, all Eurobonds and related indices. Data
relating to futures and options includes current prices, previously traded
prices, trading volume and intra-day high and low values from the international
options and futures exchanges, including LIFFE (London), MONEP and MATIF
(Paris), SOFFEX (Switzerland), EOE (Amsterdam), DTB (Germany), Chicago and
Philadelphia.
Datastream has included databases from I/B/E/S, Disclosure, Worldscope and
WEFA as an integral part of its investment research services. Consequently, it
has helped these companies gain additional customers, as well as customers new
to Datastream. Datastream has also installed the full Disclosure index on its
online system and offers index searches and electronic ordering of hard copy
documents to Datastream users. Vestek is also developing investment management
software products that have been marketed and supported by Datastream's European
sales and service personnel. This responsibility for the European sales and
service of Vestek products has now been shifted to I/B/E/S's European operations
as part of the initiatives to integrate operations within PFAD.
ICV. ICV provides real-time on-line prices, news and research on the U.K.
equities market as well as systems for order entry and trade reporting. The
Company's software combines real-time prices with news and other data in a
unique format which the Company believes has become the standard presentation
for U.K. equity data. ICV has incorporated Datastream's historical information
as an add on to its major product, TOPIC, and is continuing to integrate both
Primark company fundamental data and third party data into its major products.
The core of ICV products is its central systems that take real-time data
from several exchanges and combine the prices with news. The information is then
broadcast to a customer base of nearly 9,000 terminals using the datacast
bandwidth on terrestrial television, leased telecommunication circuits or via
satellite. The data is broadcast to customers' systems, provided by ICV, where
the signal is decoded, stored on a local database and presented on user screens
utilizing software designed and maintained by ICV. Timeliness and reliability
are important aspects of ICV's service. ICV's central systems are designed to
provide state-of-the-art timeliness by handling incoming data within a few
milliseconds through a program code that resides in memory. Reliability is
provided through several back-up sites. The Company's investment in trading
systems
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has allowed for the set up of a U.K.-wide interactive network which can be used
to link customers' offices and provide a future conduit to any new data sources
ICV may acquire or develop in the future. ICV's two principal products are TOPIC
and MARKET-EYE.
TOPIC services accounted for 53%, 47% and 45% of ICV's total revenue for
the fiscal years ended December 31, 1997, 1996 and 1995, respectively. TOPIC
services provide real-time data on prices and comparative quotes from market
makers combined with historical data and broker research. During 1997, the
London Stock Exchange moved to an electronic order driven market. In connection
with this change, ICV was able to meet its customers' requirements for an
interactive trade execution and reporting system through its TOPIC product. The
TOPIC services are used by traders and fund managers, stockbrokers, U.K.
clearing banks and major publicly traded corporations.
MARKET-EYE services accounted for 12%, 11% and 11% of ICV's revenue for the
fiscal years ended December 31, 1997, 1996 and 1995, respectively. MARKET-EYE is
aimed predominantly at small brokers, financial planners and private investors
and is accessible via the Internet. The data include prices and news and may be
combined with analytical and charting packages supplied by third parties.
Stock exchange fees accounted for 29%, 35% and 36% of ICV's revenue for the
fiscal years ended December 31, 1997, 1996 and 1995, respectively. Exchange fees
are revenues collected by ICV and remitted to the stock exchanges to permit
customer use of exchange data feeds. Consequently, the exchange fee business is
a low margin business.
ICV has leveraged its existing technology through alliances with other
information companies, providing access to new markets. During 1996, ICV entered
a joint venture with Merrill Lynch to leverage its technology with Merrill
Lynch's expertise in live trading systems. Also during 1996, Primark and ICV
entered a joint venture with Dow Jones & Company, Inc. and its subsidiary Dow
Jones Markets to develop an international equity trading information product by
combining ICV's technology, Datastream and other Primark subsidiaries'
historical databases, the global news capability of Dow Jones and the real time
data capability of Dow Jones Markets. The product has been named the Primark/Dow
Jones Equities Service ("PDJES").
On May 29, 1998, Dow Jones & Company Inc. announced that it had closed the
sale of its wholly owned subsidiary Dow Jones Markets to Bridge Information
Systems, Inc. ("Bridge"). Although both Dow Jones & Company and Dow Jones
Markets are separately contractually obligated to provide news and financial
information for the PDJES product, the Company did not begin to sell the PDJES
product as originally planned for mid-1998 in the U.K. and Ireland, as well as
to global accounts. This suspension of sales occurred even though development
work on the PDJES was finished and client testing completed with positive
reactions. Since Bridge is both a competitor and also a supplier, the Company
wanted to ascertain whether the change in the ownership of Dow Jones Markets
would adversely affect the performance of the PDJES in any way before placing
the PDJES in operational use at client sites. On September 9, 1998, Dow Jones
Markets advised ICV that it would change the datafeed for the PDJES from the
original "Marketfeed" supplied by Dow Jones Markets to a datafeed provided by
Bridge. In the opinion of the Company, considerable cost and time would be
required to reprogram the PDJES to use this new Bridge feed and the resulting
product would have less functionality. The Company believes Dow Jones Markets is
contractually obligated to supply Marketfeed for the ten-year life of the
agreement with Dow Jones & Company, Inc. and Dow Jones Markets. However, the
Company is seeking to renegotiate its arrangements with both Dow Jones and Dow
Jones Markets to provide the Company with greater flexibility and control over
the PDJES product, while preserving all its legal rights under the current
contracts.
Disclosure. Disclosure is a leading provider of "as reported" and
abstracted financial information throughout the world, distributing information
on more than 16,000 U.S. companies and 13,000 foreign companies, derived from a
variety of government and third-party sources. Disclosure's proprietary content
is provided on a subscription and per use basis through electronic media such as
online services and compact laser discs, as well as through printed products.
Disclosure's customers include investment and commercial banks, money managers,
corporations, law, accounting and consulting firms, libraries and universities.
Disclosure's financial information products and services are based upon a
wide spectrum of SEC documents such as Forms 10-K and 10-Q, proxy statements,
registration statements and material event
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<PAGE> 46
reports, and increasingly non-SEC documents such as foreign company financial
filings, news, economic data, pricing information and U.S. and foreign annual
reports. The information included in Disclosure's products is obtained through
contractual relationships with the SEC and major stock exchanges, from other
Primark companies and through commercial acquisition of the information. Once
acquired, Disclosure indexes, tags, abstracts and formats the information to
allow for ease in navigation, searches and analysis.
Primark considers Disclosure's electronic media business, comprised of
Global Access, Worldscope, compact discs and revenues from third party
distributors of its value-added database products, as representing Disclosure's
next generation of product offerings. These products now represent approximately
40% of Disclosure's overall revenues, up from less than 20% in the beginning of
1996.
Disclosure's image-based services are delivered through the Global Access
and Laser D products as well as through Research Centers located in major
cities. Global Access is a web-based front end that offers online and real-time
access to Disclosure's proprietary electronic index of public company documents;
online delivery of Disclosure's value-added EDGAR database; access to over ten
years of data on 29,000 companies in the Worldscope and SEC databases;
institutional and corporate ownership data; and links to third-party content
such as I/B/E/S, WEFA and industry news. Global Access provides real-time
broadcast alert functionality as well as desktop full text and field searching
and screening of company and industry information with direct downloading to
spreadsheets and wordprocessors. Laser D is a multi-disc CD-ROM document
database that provides a desktop library of information to high volume document
users who require immediate access to documents filed with the SEC, banking
agencies and U.S. and foreign stock exchanges. The Research Centers are staffed
by research specialists who assist customers in locating requested information
and produce alert services for customers who want early identification of
specified documents. Approximately 82%, 81% and 81% of Disclosure's total
revenues were derived from document services for the twelve months ended
December 31, 1997, 1996, and 1995, respectively.
Disclosure's database segment provides products that can be machine read
and manipulated by end users. Disclosure's Global Researcher and Compact D
products provide access to perform sophisticated searching of financial and text
information on more than 29,000 companies. These products also provide reporting
and graphing functionality. Proprietary Disclosure databases include EdgarPlus
(SEC filings with value-added navigational and style tags), the Securities
Exchange Act database (more than 11,000 U.S. company profiles and financial
statement abstracts dating back more than 10 years) and other databases on
institutional corporate insider transactions. These proprietary databases are
offered directly by Disclosure and also by third-party vendors which target both
the commercial and consumer markets, enhancing Disclosure's product through
their hardware, software and market focus. Such vendors include America Online
Inc, Bridge Information Systems, Inc., FactSet Research Corp., Lexis-Nexis,
Dialog, UMI Inc. and West Publishing Co. Approximately 18%, 19% and 19% of
Disclosure's total revenues were derived from database services for the years
ended December 31, 1997, 1996 and 1995, respectively.
Worldscope. Worldscope contains a collection of descriptive profiles and
standardized financial statements on more than 11,900 companies in 45 countries.
The Worldscope database is standardized to a common definition of generally
accepted accounting principles across all major countries, indexed and organized
for cross-border screening and searching. In addition to its global database,
Worldscope offers an emerging market database. Worldscope products are delivered
via third-party distributors, CD-ROM and online platforms. In October 1996,
Primark acquired an additional 30% ownership in Worldscope, giving Primark an
80% controlling interest.
PRIMARK FINANCIAL ANALYTICS DIVISION
The Primark Financial Analytics Division generated $60.1 million of
revenues for the 1997 fiscal year. This represented 15% of Primark's total
revenues. Within PFAD, I/B/E/S accounted for $32.7 million, Baseline $18.2
million and Vestek $9.3 million of revenues.
I/B/E/S. I/B/E/S is a leading source of global earnings expectational
information for investors, financial institutions and portfolio managers
worldwide. I/B/E/S collects and processes earnings per share estimates provided
by more than 7,000 individual securities analysts, representing approximately
800 firms, on more than 17,000 companies globally. The estimates and related
data are delivered through third-party
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distributors and I/B/E/S Express (a proprietary software delivery system). Many
I/B/E/S products permit the customer to perform analytical functions and are
enhanced by reports and graphics. Approximately 40%, 38% and 30% of I/B/E/S'
revenues were generated from the I/B/E/S Express product for the years ended
December 31, 1997, 1996 and 1995, respectively.
I/B/E/S has expanded its product line by launching I/B/E/S Trapeze, a
real-time, electronic brokerage research distribution system. This
state-of-the-art technology delivers brokerage reports to managers' desks in New
York, London and other financial centers within a few moments, complete with
color graphics, audio and video capabilities.
Baseline. Baseline provides portfolio managers at investment companies,
banks, investment consulting firms, and other institutional investors with
online valuation graphics that portray critical financial information on more
than 7,000 U.S. companies. The Baseline product consists of data and software
that manipulates, analyzes and graphically presents company financial
information to end users through personal computers, typically linked by
computer networks.
Baseline's principal supply requirements are for raw financial data which
is acquired from numerous data suppliers including other Primark companies. Once
acquired, the data is verified, manipulated and stored in Baseline's database
for manipulation through Baseline's applications and daily transmission to
customers. Baseline places great importance on the quality of its data and has
developed a program to continuously review its data sources to assure quality
control and continuity. Wherever possible, Baseline develops multiple sources of
data to provide backup and cross checking.
Vestek. Vestek develops, markets and supports investment information
services and application software used to manage, analyze and optimize
institutional portfolios of equity, fixed income and other financial
instruments. Vestek also provides consulting services for investment managers
and plan sponsors. Through its international sales force, Vestek currently
serves more than 250 clients in nine countries.
PRIMARK DECISION INFORMATION DIVISION
The Primark Decision Information Division generated $44.9 million of
revenues for the 1997 fiscal year. This represented 11% of Primark's total
revenues. Within PDID, WEFA accounted for $25.9 million, and the Yankee Group
$19.0 million. Revenues from PDE are not included in the PDID totals as Primark
Decision Economics is not a majority owned operation and is accounted for on the
equity method.
WEFA. Founded by Nobel Laureate Economist Lawrence R. Klein, who remains
active in the business, WEFA is a leading provider of international value-added
economic information, software and consulting services to companies,
governments, universities and financial institutions. WEFA provides analysis and
forecasts for 60 industries across 60 countries through its Global Industrial
Outlook Service, its electronic database and a semi-annual publication. WEFA
recently introduced the World Market Monitor, a desktop application for tracking
and analyzing global economic conditions. Targeted to financial institutions and
corporations, the product provides users with economic, demographic and
financial information on 175 countries.
Primark Decision Economics. In August 1996, Primark invested in a joint
venture with noted economist Dr. Allen Sinai. This joint venture is called
Primark Decision Economics, Inc. and Dr. Sinai has been its Chief Executive
Officer and Chief Global Economist from the outset. The purpose of this venture
is to disseminate timely value-added economic forecasts, analysis and
commentaries covering the world's major economies and markets, and to support
real-time and longer-term decision-making by financial institutions,
corporations and governments engaged in trading, investing and planning.
The Yankee Group. The Yankee Group consists of a global team of highly
skilled technology and market experts that focuses on identifying current trends
and future directions in the communications and computer industries for business
and consumer markets. The Yankee Group markets these insights by providing
strategic planning, technology forecasting, consulting and market research to
clients worldwide, including vendors and users of major computer and
communications systems and services. The Yankee Group's products and services
fall into three principal categories -- Planning Services, Custom Consulting
Engagements, and Seminars and Conferences.
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Planning Services accounted for 66% and 71% of the total revenues for the
years ended December 31, 1997 and 1996. An annually renewable Planning Service
subscription provides a customer with consultation time with a research analyst,
quarterly audio conferences, access to the Yankee Group's published research
reports and white papers in both electronic and paper formats and discounts on
seminars. The Yankee Group currently offers 24 Planning Service packages
covering a broad variety of topics in communications and computing.
Custom consulting engagements accounted for 20% of the total revenues for
both the years ended December 31, 1997 and 1996. Custom consulting engagements
often result as an extension of Planning Services when an inquiry or a study is
more extensive than that offered through a Planning Service subscription. Custom
consulting contracts are also entered into with external parties where the
company considers the study to be of strategic importance.
Seminars and conferences accounted for 14% and 9% of the total revenues for
the years ended December 31, 1997 and 1996, respectively. The Yankee Group holds
an average of 15 to 20 seminars and/or conferences a year, often in conjunction
with industry publication houses.
CUSTOMERS
No single customer of the information businesses accounts for more than 2%
of the Company's consolidated revenues.
Primark Financial Information Division
Datastream/ICV's customers include approximately 5,000 financial
organizations in 52 countries, including investment bankers, brokers, investors,
fund managers, insurance companies and market makers that use financial and
economic information. Other users include publishers of financial journals and
daily newspapers, business schools and universities. Datastream/ICV's customers
are based predominantly in the U.K. and typically subscribe through annual
contracts. These contracts are automatically renewed unless notice of
cancellation is given two to three months before the annual renewal date. In
1997, the renewal rate was 93%.
Disclosure's customer base includes the majority of U.S. investment banks,
money managers, corporations, law and accounting firms, together with other
institutions and individuals performing financial research. Disclosure also
distributes its information through over 50 third party vendors. Subscription
services accounted for 53%, 53% and 51% of Disclosure/Worldscope's revenues for
the fiscal years ended December 31, 1997, 1996 and 1995, respectively. In 1997,
Disclosure/Worldscope experienced a renewal rate for its subscription services
of 90%.
Primark Financial Analytics Division
I/B/E/S directly serves more than 2,250 customers worldwide and thousands
more through its distribution networks. I/B/E/S' customers are represented by
financial institutions and portfolio managers worldwide, with particular
interest by the quantitative analysts who access and download information
directly into analytic models. I/B/E/S products are also sold to end users, such
as management consultants and traditional investment analysts who utilize
I/B/E/S for general research. Approximately 97% of I/B/E/S' 1997 revenues were
derived through annual subscription contracts of which 12% were through soft
dollar arrangements. In 1997, I/B/E/S experienced a renewal rate for its
subscription services of 92%.
Baseline serves over 6,000 portfolio managers in nearly 600 organizations,
including investment companies, banks, investment consulting firms, and other
institutional investors located throughout the U.S. and Canada who typically
subscribe through bi-annual and annual contracts. These contracts are
automatically renewed unless notice of cancellation is given before the renewal
date. In 1997, Baseline experienced a renewal rate for its subscription services
in excess of 95%.
Vestek's clients include major banks, plan sponsors, consultants, insurers
and investment managers. The majority of Vestek's revenues are derived from
online subscription services. In 1997, Vestek experienced a renewal rate for its
subscription services of 92%.
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Primark Decision Information Division
WEFA has approximately 1,600 customers operating in corporations, financial
services, governments, utilities and other businesses. The company performs
consulting and planning services to best analyze the potential impact of various
economic alternatives faced by its customers. In 1997, WEFA experienced a
renewal rate for its subscription services of 88%.
The Yankee Group's customers consist primarily of both suppliers and users
of computer and communication technology. Yankee's customer base includes major
consulting firms, telecommunications companies, computer hardware manufacturers,
software companies, research analysts and the information technology departments
of major corporations.
MARKETING
The products and services of Primark's information companies are marketed
worldwide. Increasingly, the individual Primark companies are offering each
other's data through their own delivery platforms.
Primark Financial Information Division
Datastream is located in London, England and has sales and support offices
located in Germany, France, Italy, Spain, Switzerland, the Netherlands, Belgium,
Luxembourg, Sweden, Japan, Hong Kong, Singapore, Australia, South Korea,
Thailand, Canada and the U.S. ICV is located in London, England and has sales
and support offices throughout the U.K. Datastream/ICV sells Disclosure, I/B/E/S
and WEFA data through its platforms.
Disclosure and Worldscope market and distribute their products
predominately in the U.S. In addition to employing a domestic and international
sales force, Disclosure extends its sales and marketing reach with Research
Centers strategically located in the major financial centers including ten major
U.S. cities and several international locations including London, Frankfurt,
Madrid, Paris, Milan, Hong Kong, Mexico City and Tokyo. Disclosure also
incorporates I/B/E/S and WEFA data in its Global Access platform.
Since the creation of PFID on July 7, 1998, the sales and customer support
operations of all PFID units have been integrated, with separate managers for
this overall range of activities for North America and for the rest of the
world.
Primark Financial Analytics Division
I/B/E/S, headquartered in New York City with offices in London, Hong Kong
and Tokyo, delivers its products directly to customers via state-of-the-art
electronic delivery media. I/B/E/S Express is a PC-based proprietary software,
database management and communications package. The I/B/E/S Express platform
separately provides portions of the data from Disclosure, WEFA and Vestek.
I/B/E/S also offers its products through a network of more than 30 electronic
third-party distributors including Bloomberg L.P., Bridge Information Systems,
Inc., Datastream/ICV, FactSet Research Corp., FAME, Onesource, Reuters Group
PLC, S & P Compustat and Vestek. These third-party distributors offer I/B/E/S a
mechanism to reach new markets and link I/B/E/S data to other databases and
applications software.
Baseline's product is targeted primarily toward portfolio managers of
domestic equities and carries portions of both I/B/E/S's and Disclosure's data
as part of its product offering. Baseline delivers its product directly to
customers via an online advanced electronic delivery platform. Baseline markets
its product through its own domestic sales force.
Headquartered in San Francisco, Vestek's products are marketed through its
sales force located in New York, Los Angeles and Japan. Vestek's European sales
operations are integrated within I/B/E/S, covering all of Europe from I/B/E/S's
London office. Vestek includes data from I/B/E/S, Worldscope and Datastream in
portions of its product line.
Primark Decision Information Division
WEFA markets its product through its international sales force. With
headquarters in Philadelphia, WEFA has offices in several U.S. cities and in the
U.K., Germany, France, South Africa and Mexico. WEFA also employs analysts in
other countries. WEFA delivers its data online through I/B/E/S, Disclosure and
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Datastream/ICV as well as through its own electronic distribution platform. WEFA
believes its historical association with the Wharton School of Business and with
Nobel Laureate Lawrence R. Klein gives it a distinct advantage in the
marketplace.
The Yankee Group markets its services internationally primarily through its
own sales force. The Company considers its historic record of accurately
forecasting the general direction of communication and computing technology
together with its focus on customer support as its greatest competitive
advantages. The Yankee Group's industry analysts are the company's critical
resource. These individuals have significant expertise in their areas of
concentration, gained through industry experience, constant study of the
technology market and ongoing dialogue with vendors and consumers in the
industry. The Yankee Group headquarters are in Boston, with offices in London
and Tokyo.
COMPETITION
The global information industry is highly competitive. There are many large
and successful companies in the information services industry that supply
financial, economic and market research data which compete with products and
services provided by Primark's information businesses.
Principal competitive factors include the quality, reliability and
comprehensiveness of the analytical services and data provided, flexibility in
tailoring services to client needs, experience, innovation, the capability of
technical and client service personnel, data processing and decision support
software, reputation, price and geographic coverage. Primark distinguishes its
products through its broad international coverage, wide range of databases,
accuracy of data, proprietary software applications, reputation, experience and
quality of customer support provided.
Primark's ability to remain competitive in the information market will
depend largely upon its ability to maintain and develop new products and access
new markets in a cost efficient manner, as well as the integration of all its
information products and services. There can be no assurance that Primark will
continue to maintain its market share in the future. See "Risk
Factors -- Competition."
TECHNOLOGY DEVELOPMENT
An essential element in the Company's strategy has been to offer
proprietary value-added content through state-of-the art delivery systems that
incorporate the latest improvements in information technology ("IT"). Over the
past several years, through selected acquisitions and internal development, the
IT organizations of the Company's financial, economic and market research
businesses have been strengthened, operations and reliability have been
improved, software development and maintenance procedures have been upgraded and
major steps have been taken toward euro and Y2K compliance. The Company believes
that its IT resources provide it with enhanced capabilities. In addition, the
Company intends to take additional steps to further integrate these IT
functions. For example, the computer operations and communications departments
of Datastream and ICV have been assigned to a single IT manager, who has the
mandate to consolidate all aspects of these operations. The opportunities for
similar changes in other business units are being reviewed.
One of the most promising areas for immediate integration is in building
the Primark Telecommunications Network ("PTN"), a worldwide telecommunications
network for the Company that integrates all telecommunications requirements in a
common architecture, providing greater capacity and a higher level of service at
lower costs. The Company anticipates that the PTN will also facilitate the
delivery of new products to the Company's entire customer base. The PTN will
provide facilities such as high-speed image transmission, bulk data downloading
and voice/data transmission on the same lines. Elements of the PTN will also
allow for the internal data exchange needed to effectively share data for the
creation of new products.
The Company has developed a database and software capability called The
Primark Information Optimizer (the "PIO"). The PIO is essentially creating a
unified and integrated database for all of Primark, while each of its components
remain as independent databases compatible with existing legacy products. The
PIO will enable the rapid development of new products and allow each Primark
company to readily deliver all relevant Primark data to its customers. The
Company plans to use the capabilities of the PIO to create a data
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and software product that can be offered to financial clients for their internal
use in retrieving and standardizing information in multiple formats and stored
in multiple databases.
TRADEMARKS
Primark's information companies hold numerous trademarks worldwide that are
subject to continuous renewal. These trademarks are significant to the Company's
business, and are registered in all of the Company's major markets to ensure
recognition among its many global trading customers.
EMPLOYEES
At October 1, 1998, the Company and its subsidiaries employed 2,922
persons, excluding employees employed in discontinued operations. The Company
believes its relationship with its employees to be excellent.
PROPERTIES
The Company currently occupies its principal executive offices, comprised
of approximately 17,848 square feet, in Waltham, Massachusetts under lease
agreements that expire in July 2001 with provision for two five-year renewal
options. The Company's principal executive offices are located at 1000 Winter
Street, Suite 4300N, Waltham, MA 02451, (781) 466-6611.
Baseline occupies 23,000 square feet of space at its New York headquarters.
Baseline also has an office in Philadelphia.
Datastream's two principal office facilities are located in London,
England. Comprised of an aggregate total of 100,995 square feet, these
facilities are occupied under lease agreements that expire in 2005 and 2018.
Through its affiliates, Datastream also occupies under short-term leases an
aggregate total of approximately 55,000 square feet of office space, principally
located in Australia, Belgium, Canada, France, Germany, Hong Kong, Italy, Japan,
Luxemborg, the Netherlands, Singapore, South Korea, Spain, Sweden, Switzerland,
Thailand and the United States.
Disclosure's headquarters, comprised of approximately 99,640 square feet,
are located in Bethesda, Maryland. The property is occupied under lease
agreements that expire in 2006. Disclosure's regional offices occupy
approximately 63,900 square feet of office space under lease terms that expire
through 2004. These offices are located in California, Georgia, Illinois,
Massachusetts, New York, Texas and Washington, D.C.
I/B/E/S occupies 39,800 square feet of space at its New York City
headquarters under a lease agreement that expires in 2007. Additional office
space totaling 10,950 square feet is located in England, Hong Kong and Japan
with lease terms through 2007.
ICV's facilities occupy approximately 36,000 square feet of space located
primarily in England.
Vestek occupies approximately 13,555 square feet of space at its San
Francisco headquarters under a lease agreement that expires in 1999 with
provision for one five-year renewal option.
WEFA occupies 45,550 square feet of space at its Pennsylvania headquarters
under a lease agreement that expires in 2005. Additional office space of
approximately 29,700 square feet is leased in Canada, Europe and South Africa
expiring through 2005.
The Yankee Group occupies approximately 23,600 square feet of space at its
Boston headquarters under a lease agreement that expires in 2003 and has
international offices located in London and Tokyo.
LEGAL PROCEEDINGS
The Company's management believes that the outcome of all pending legal
proceedings will not, individually, or in the aggregate, have a material adverse
effect on the Company's business, results of operations or financial condition.
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MANAGEMENT
DIRECTOR AND EXECUTIVE OFFICERS
The table below sets forth, as of October 1, 1998, certain information
concerning individuals who were the directors and executive officers of the
Company on June 1, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Joseph E. Kasputys................. 62 Chairman, President and Chief Executive Officer
Stephen H. Curran.................. 51 Executive Vice President and Chief Financial Officer
Ira Herenstein..................... 61 Senior Vice President of Marketing of Primark Financial
Technologies, Inc.
Michael R. Kargula................. 51 Executive Vice President, General Counsel and Secretary
Patrick G. Richmond................ 48 Executive Vice President of Corporate Development
William J. Swift, III.............. 46 Senior Vice President and Tax Counsel
Kevin J. Bradley................... 70 Director
John C. Holt....................... 57 Director
Steven Lazarus..................... 67 Director
Patricia McGinnis.................. 51 Director
Jonathan Newcomb................... 52 Director
Constance K. Weaver................ 46 Director
</TABLE>
Joseph E. Kasputys, has served as Chairman, President and Chief Executive
Officer of the Company since May 1988. From June 1987 until May 1988, he served
as President and Chief Operating Officer of the Company. Prior to joining the
Company in June 1987, he was Executive Vice President of McGraw-Hill, Inc., a
publishing and information services company. Prior to joining McGraw-Hill in
1985, he was President and Chief Executive Officer of Data Resources, Inc., an
economic forecasting and consulting firm. Mr. Kasputys has been a director of
the Company since 1987. He is a member of the Nominating Committee of the Board.
Mr. Kasputys is also a director of Lifeline Systems, Inc., a company that
develops and manufactures personal response products and provides related
monitoring and other services and New Era of Networks, Inc., a company that
develops, markets and supports application integration software and provides
application services.
Stephen H. Curran, has served as Senior Vice President and Chief Financial
Officer of the Company since 1988. In 1997 he was elected Executive Vice
President and Chief Financial Officer.
Ira Herenstein, has served as Vice President of Marketing of the Company
since December 1996. From June 1995 to November 1996, Mr. Herenstein was
Managing Director of Datastream International, Inc. From March of 1994 to June
of 1995, he was president of Datastream's North American operations. From 1992
until March of 1994, Mr. Herenstein was an independent consultant in the
information services industry. In addition, Mr. Herenstein was with the
McGraw-Hill Corporation for 28 years, during which time he held the positions of
President of Standard & Poor's Corporation and Executive Vice President of the
Computer and Communications Information Group.
Michael R. Kargula, has served as Senior Vice President, General Counsel
and Secretary of the Company since 1988. In 1997 he was elected Executive Vice
President, General Counsel and Secretary.
Patrick G. Richmond, has served as Vice President of Corporate Development
of the Company since May 1989. In 1997 he was elected Executive Vice President
of Corporate Development.
William J. Swift III, has served as Vice President and Tax Counsel of the
Company since 1988. In 1998 he was elected Senior Vice President and Tax
Counsel.
Kevin J. Bradley, served as the Chairman of Corporate Investment
Associates, Inc., an investment management firm from November 1990 to September
1995. From November 1985 until October 1990, he was a Limited Partner of Weiss
Asset Management Limited Partnership, an investment management firm. From 1977
through November 1985, he served as Chairman and Chief Executive Officer of the
Travelers Investment Management Company, a subsidiary of The Travelers
Corporation (a financial services company).
51
<PAGE> 53
Mr. Bradley has been a director of the Company since 1981. He is Chairman of the
Compensation Committee and a member of the Audit Committee of the Board.
John C. Holt, is an employee of the Company and has served as the President
and Chief Executive Officer of TASC, an applied information technology company
and formerly a wholly-owned subsidiary of the Company, and Executive Vice
President of the Company from April 1994 until April 1, 1998. From April 1, 1998
until December 31, 1998, Mr. Holt serves as a consultant to TASC. From 1982
until January 1994, Mr. Holt held the position of Executive Vice President of
the Dun & Bradstreet Corporation ("D&B"), an information services company, and
served as a director of that company from 1985 until 1994. In addition, Mr. Holt
was the former Chairman, President and Chief Executive Officer of the A.C.
Nielsen Company, a marketing information company and a former affiliate of D&B.
Mr. Holt has been a director of the Company since 1985. He is a member of the
Finance Committee of the Board.
Steven Lazarus, is Managing Director of the ARCH Venture Partners L.P., a
venture partnership investing in companies in the early stage of development,
and has held that position since July 1994. From 1986 to 1994, he was President
and Chief Executive Officer of Argonne National Laboratory/The University of
Chicago Development Corporation ("ARCH"), which transforms scientific
discoveries into viable high technology products and services. Prior to joining
ARCH in October 1986, he was a Group Vice President at Baxter Travenol
Laboratories, Inc., a manufacturer and distributor of hospital supplies and
related medical equipment. Mr. Lazarus has been a director of the Company since
1987. He is Chairman of the Nominating Committee and a member of the Audit and
Compensation Committees of the Board. Mr. Lazarus is a director of Amgen Inc., a
biotechnology company and Illinois Superconductor Corporation, an advanced
materials company serving the telecommunications industry. He is also a director
of New Era of Networks, Inc. (described above), Nanophase Technologies Corp., a
developer and marketer of nano-crystalline materials for use as ingredients and
components in a wide range of commercial applications, and First Consulting
Group, Inc., a provider of information technology and other consulting services
to healthcare organizations. Mr. Lazarus has been a director of the Company
since 1987.
Patricia McGinnis, is the president and Chief Executive Officer of the
Council for Excellence in Government, a national membership organization of
private sector leaders who have served as senior officials in government. She
has held this position since June 1994. From 1982 until May 1994, she was a
principal at the public affairs consulting firm of Winner/Wagner & Francis
(formerly the FMR Group). Previously, she served in various senior policy
positions in the federal government including the Office of the Vice President,
the Department of Health and Human Services, the Department of Commerce, the
Office of Management and Budget and the Senate Budget Committee. Ms. McGinnis
has been a director of the Company since 1995. She is a member of the
Compensation Committee of the Board.
Jonathan Newcomb, is President and Chief Executive Officer of Simon &
Schuster, an educational, computer and English-language book publisher and the
publishing operation of Viacom Inc. and has held this position since June 1994.
From January 1991 until May 1994, he served as President and Chief Operating
Officer of Simon & Schuster. From November 1989 until December 1990, Mr. Newcomb
was Executive Vice President, Operations of that company. He has been a director
of the Company since 1996. Mr. Newcomb is Chairman of the Finance Committee of
the Board and a member of the Nominating Committee. Mr. Newcomb is also a
director of Marine Midland Bank.
Constance K. Weaver, is Financial Vice President -- Investor Relations of
AT&T Corp., a communications service company, a position she has held since May
1996. From June 1995 to April 1996, she held the position of Senior
Director -- Investor Relations of Microsoft Corporation, a computer software
company. From June 1993 through May 1995, she held the position of Vice
President, Investor Relations of MCI Communications Corporation, a
telecommunications company. From June 1991 until July 1993 and from January 1990
until May 1991, she held the position of Director, Investor Relations and
Director, Corporate Communications, respectively, of that company. From 1988
until January 1990, she was the Executive Director, Business Week Executive
Programs and Services Department for McGraw-Hill, Inc. Ms. Weaver has been a
director of the Company since 1994. She is Chairwoman of the Audit Committee and
a member of the Finance Committee of the Board.
52
<PAGE> 54
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Members of the Board held an aggregate of seven regular meetings and three
special meetings during 1997 and also served on standing committees of the
Board. In addition to the Finance Committee, the Company has the following
standing committees of the Board:
Audit Committee -- The Audit Committee, which held two meetings during
1997, recommends to the Board the selection of independent auditors;
reviews the scope of the independent audit and auditors' fees; reviews the
annual financial statements and audit results, including auditors'
recommendations; reviews the Company's internal control system; reviews the
scope of the internal audit procedures and results of those procedures; and
reviews the Company's policies relating to business conduct.
Compensation Committee -- The Compensation Committee held two meetings
during 1997. The Compensation Committee establishes the salaries and other
direct compensation for all officers of the Company, annually reviews and
makes recommendations to the Board with respect to the compensation to be
paid to outside directors of the Company, and administers certain incentive
plans of the Company.
Nominating Committee -- The Nominating Committee, which held one
meeting during 1997, is authorized to make recommendations to the Board
concerning nominees for directors to be elected at the Company's Annual
Meeting of Shareholders, nominees to fill vacancies on the Board, and
policies relating to tenure and retirement of the Company's directors and
successors to the Company's two highest ranking offices. The Nominating
Committee accepts recommendations from shareholders of individuals to be
considered as nominees for directors.
EXECUTIVE COMPENSATION
The following table ("Summary Compensation Table") sets forth the
compensation paid or awarded for performance during the last three completed
fiscal years by the Company or a subsidiary to the Company's Named Executive
Officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------- --------------------
AWARDS PAYOUTS
---------- -------
OTHER SECURITIES
ANNUAL UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSA- OPTIONS PAYOUTS COMPENSA-
PRINCIPAL POSITION YEAR ($) ($) TION($) (#) ($) TION($)
------------------ ---- ------ ----- --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph E. Kasputys(1).................... 1997 609,583 146,601 -- (2) 1,000,000 -- 7,627(3)
Chairman, President and 1996 601,184 426,948 58,258(4) 40,000 -- 33,419
Chief Executive Officer of the Company 1995 584,376 391,804 56,561(4) 101,000(5) -- 115,377
John C. Holt(6).......................... 1997 427,515 355,050 -- (2) 20,000 -- 30,000(7)
President and Chief Executive Officer 1996 417,510 261,584 -- (2) 16,000 -- 33,515
of TASC, and Executive Vice President 1995 407,535 237,169 -- (2) 57,000(5) 516,316(6) 30,000
of the Company
Stephen H. Curran(8)..................... 1997 232,500 37,345 -- (2) 23,000 -- 6,674(3)
Executive Vice President and 1996 221,846 106,382 -- (2) 11,000 -- 32,466
Chief Financial Officer of the Company 1995 204,751 87,531 -- (2) 14,000 -- 114,424
Ira Herenstein(9)........................ 1997 325,000 76,820 -- (2) 25,000 -- 7,643(3)
Senior Vice President of 1996 325,250 123,312 -- (2) 8,000 274,120(10) 33,435
Marketing of the Company 1995 -- -- -- -- -- --
Michael R. Kargula(1)(8)................. 1997 244,750 43,980 -- (2) 25,000 -- 6,554(3)
Executive Vice President, General 1996 240,285 128,191 -- (2) 13,000 -- 32,346
Counsel and Secretary of the Company 1995 234,125 117,791 -- (2) 37,000(5) -- 114,304
</TABLE>
- ---------------
(1) Messrs. Kasputys and Kargula previously held the positions of Chairman of
TASC and Vice President and General Counsel of TASC, respectively. In
connection with the Company's sale of TASC to Litton Industries, Inc., Mr.
Kasputys and Mr. Kargula resigned such positions effective as of the
closing date of the transaction.
(2) While the executive officers received other compensation in the form of
perquisites, such perquisites do not exceed the lesser of $50,000 or ten
percent of each executive officer's total annual salary and bonus for 1997
as reported for such executive officer herein.
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<PAGE> 55
(3) Includes matching contributions of $4,750 made by the Company under the
Savings Plan for each of Messrs. Kasputys, Curran, Kargula and Herenstein.
Includes $2,877, $1,924, $1,804 and $2,893 for Messrs. Kasputys, Curran,
Kargula and Herenstein, respectively, representing the premium amounts paid
by the Company for executive life insurance on behalf of such executive
officers.
(4) The amount includes $29,260 and $35,395 for fiscal years ended December 31,
1996 and December 31, 1995 for imputed interest relating to a certain loan
by the Company to Mr. Kasputys for payment of income taxes in connection
with the grant of stock to Mr. Kasputys under the Primark Corporation 1988
Incentive Plan ("Incentive Plan"). Such loan is interest-free; evidenced by
promissory notes; secured by 40,605 shares of common stock of the Company;
and, subject to annual repayments, is fully payable on December 31, 1998.
The largest aggregate amount of indebtedness outstanding thereunder in 1997
was $509,121, of which $443,781 was outstanding on September 30, 1998.
(5) Includes 51,000, 32,000 and 18,000 shares subject to option for Messrs.
Kasputys, Holt and Kargula, respectively, which options vest in three
annual installments with the first installment having vested during 1996.
The options were granted in recognition of the executive officers'
agreements to accept a 50 percent reduction in the amount of their
respective merit increases in fiscal years 1995, 1996 and 1997.
(6) In connection with the sale of TASC, Mr. Holt resigned as an officer and
director of TASC and as an officer of the Company. He will continue to be a
member of the Board of Directors of the Company. In 1995, Mr. Holt was paid
$516,316 in connection with a certain long-term incentive arrangement under
the Employment Agreement dated February 28, 1994 among the Company, TASC
and Mr. Holt.
(7) Includes $19,508 and $10,492 allocated to Mr. Holt's account under the
PSSOP and the TASC Supplemental Employee Retirement Plan, respectively, for
the fiscal year ended December 31, 1997.
(8) In connection with the exercise of stock options, Messrs. Curran and
Kargula borrowed $216,647 and $393,772, respectively, from the Company.
Such loans are interest-free; evidenced by promissory notes; secured by
13,000 and 20,000 shares of common stock of the Company, respectively; and
are fully payable on December 16, 2004.
(9) Mr. Herenstein was not an officer of the Company during fiscal year 1995
and since June 30, 1998.
(10) Represents the amount paid to Mr. Herenstein pursuant to the terms of an
employment agreement between the Company and Mr. Herenstein dated December
3, 1996 under which Mr. Herenstein is deemed to have exercised as of
September 30, 1996 all value appreciation rights that were granted to him
under the Primark Information Services UK Limited And Affiliates Long-Term
Incentive Plan while he was an executive officer of a Primark subsidiary.
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<PAGE> 56
OPTION GRANTS IN LAST FISCAL YEAR
Set forth below is information concerning the grant of stock options to
each of the persons named on the Summary Compensation Table during 1997.
<TABLE>
<CAPTION>
GRANT DATE
INDIVIDUAL GRANTS VALUE
---------------------------------------------------------------- -----------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES BASE PRICE EXPIRATION PRESENT DATE OF
NAME GRANTED(#)(1) IN FISCAL YEAR ($/SH) DATE VALUE($)(2) EXERCISABILITY
---- ------------- -------------- ----------- ---------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Joseph E. Kasputys......... 500,000(3) 32.84% $ 24.25 January 6, 2007 6,934,033 January 7, 1999
250,000(3) 16.42% $30.313 January 6, 2007 3,026,041 January 7, 2000
250,000(3) 16.42% $36.375 January 6, 2007 2,657,782 January 7, 2001
John C. Holt............... 20,000(4) 1.31% $ 25.00 February 24, 2007 285,972 February 25, 1998
Stephen H. Curran.......... 13,000 .85% $ 25.00 February 24, 2007 197,503 February 25, 1997
10,000 .66% $ 23.50 May 27, 2007 154,137 May 28, 1997
Ira Herenstein............. 25,000(4) 1.64% $ 24.25 January 6, 2007 346,798 January 7, 1998
Michael R. Kargula......... 15,000 .99% $ 25.00 February 24, 2007 227,888 February 25, 1997
10,000 .66% $ 23.50 May 27, 2007 154,137 May 28, 1997
</TABLE>
- ---------------
(1) All stock options have a ten-year term.
(2) As suggested by the SEC's rules on executive compensation disclosure, the
Company used the Black-Scholes model of option valuation to determine grant
date present value. The following assumptions were made for purposes of
calculating the Grant Date Present Value: an option term of ten years,
volatility ranging from 35.46% to 42.02%, dividend yield at 0%, interest
rate ranging from 6.56% to 6.95% and a vesting discount which utilized a 3%
risk of forfeiture that produced a range from .8853 to .94116. The Company
does not advocate or necessarily agree that the Black-Scholes model can
properly determine the value of an option.
(3) The option becomes fully exercisable upon a change of control or, in the
sole discretion of the Compensation Committee, in the event the Board
designates a successor as chief executive officer of the Company.
(4) The stock options vest in three equal annual installments with the first
installment vesting on the Date of Exercisability as noted in the table
above.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
Set forth below is information concerning the value of unexercised
in-the-money stock options held on December 31, 1997 by each person named in the
Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FY-END(#) AT FY-END($)(2)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph E. Kasputys..................... 1,018,220 37,407,366 414,170 1,016,830 10,661,912 12,339,651
John C. Holt........................... 0 0 343,470 249,530 9,180,396 6,263,292
Stephen H. Curran...................... 166,240 5,909,915 103,000 0 2,419,439 0
Ira Herenstein......................... 0 0 89,640 63,360 2,051,415 1,156,401
Michael R. Kargula..................... 211,580 7,521,775 139,060 5,940 3,357,666 158,524
</TABLE>
- ---------------
(1) The "Value Realized" is equal to the difference between the option exercise
price and the fair market value of the Company's common stock on the New
York Stock Exchange (the "NYSE") on the date of exercise.
(2) The value is based upon the $40.6875 closing price of a share of the
Company's common stock on the NYSE at December 31, 1997, minus the exercise
price.
DIRECTORS' COMPENSATION
During 1997, each director who was not an employee of the Company or of any
of its subsidiaries received as compensation for the director's services an
annual retainer of $20,000. The fee for each Board meeting and committee meeting
attended by a non-employee director is $1,500 and $750, respectively;
55
<PAGE> 57
provided, however, that if a committee meeting is held on a date when no Board
meeting is held, each non-employee director who is a member of the committee is
entitled to receive $1,500 for each such meeting attended. In addition,
non-employee directors of the Company automatically receive on an annual basis a
non-qualified stock option to acquire 7,500 shares under the Stock Option Plan
for Non-Employee Directors. The directors who serve as officers of the Company
or of a subsidiary receive no compensation for their services as a director
other than their regular salaries and benefits.
The Company maintains the Primark Corporation Supplemental Death Benefit
and Retirement Income Plan, which covers certain key officers and non-employee
directors of the Company. Under the Primark Corporation Supplemental Death
Benefit and Retirement Income Plan, in the event of the death of a non-employee
director prior to his or her retirement from the Board, the director's surviving
spouse is entitled to a lump sum payment of $150,000 payable at the time of the
director's death. The Primark Corporation Supplemental Death Benefit and
Retirement Income Plan also provides that a non-employee director can elect to
receive either (i) a supplemental retirement benefit of $15,000 annually
(payable in monthly installments) for each of the ten years following such
director's retirement at age 65 or older, or (ii) a post-retirement death
benefit of $150,000 payable to such director's surviving spouse upon the death
of the director if such death occurs after the director's retirement on or after
attaining age 65. No benefits are to be payable under the plan unless the
director has been a member of the Company's Board of Directors for at least five
years. Additionally, a non-employee director leaving the Board after a change of
control would be entitled to receive a cash payment of $150,000. A non-employee
director receiving this payment would not be entitled to receive any other
payments under the Primark Corporation Supplemental Death Benefit and Retirement
Income Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is composed entirely
of non-employee directors. The three directors comprising the Compensation
Committee are Mr. Kevin J. Bradley, Chairman, Mr. Steven Lazarus and Ms.
Patricia McGinnis.
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
During 1997, Mr. Kasputys served as Chairman, President and Chief Executive
Officer of the Company pursuant to an employment agreement which was approved by
the shareholders at the 1997 Annual Meeting of Shareholders. Pursuant to the
terms of the employment agreement, Mr. Kasputys is employed as the Chairman,
President and Chief Executive Officer of the Company until December 31, 2001 at
a minimum annual salary of $602,000 and is eligible to receive a bonus. Mr.
Kasputys is entitled to participate in (i) retirement and other employee benefit
plans, (ii) insurance and fringe benefits provided by the Company, including the
use of an automobile for business purposes, (iii) up to $10,000 annually as
reimbursement for expenses incurred in obtaining tax and estate planning
assistance, and (iv) annual retirement compensation for life in an amount equal
to 55 percent of his salary (excluding his bonus but including all amounts paid
under the Company's defined benefit plan) during the final year prior to the
date he retires at age 62 or later. If Mr. Kasputys predeceases his spouse at
the time of his retirement or thereafter, his spouse is entitled to 60 percent
of Mr. Kasputys' annual retirement compensation as calculated in the preceding
sentence. If Mr. Kasputys dies prior to his retirement, his spouse is entitled
to 50 percent of his final salary until such time as Mr. Kasputys would have
become 65 and annual payments of 33 percent of such salary thereafter for life.
Although the retirement benefits are paid solely from corporate assets, it is
expected that such costs would be recovered over time through Company-owned life
insurance on Mr. Kasputys. In the event Mr. Kasputys is terminated prior to
retirement at age 62 for cause or voluntarily terminates his employment, the
retirement obligations described in this paragraph also terminate; and if Mr.
Kasputys is terminated without cause prior to age 62, he is entitled to reduced
retirement compensation calculated by reducing the full retirement compensation
amount by two percent for each full year not worked by Mr. Kasputys prior to age
62. Any termination by the Board of Mr. Kasputys' employment (other than
termination for "cause" (as defined) by a two-thirds vote of all of the members
of the Board) does not prejudice Mr. Kasputys' right to compensation or other
benefits under the employment agreement and all options granted to Mr. Kasputys
become exercisable. Termination other than termination for cause by a two-thirds
vote of all of the members of the Board would
56
<PAGE> 58
result in liability for liquidated damages in an amount equal to two times the
amount of Mr. Kasputys' annual salary and the bonus paid to him in the year
prior to termination (on a pro-rated basis) as well as health, life and
disability insurance for a period of two years in the same amounts provided
prior to termination. Mr. Kasputys is also subject to certain non-solicitation,
non-disclosure and noncompete provisions as set forth in the Employment
Agreement.
Messrs. Curran and Kargula receive certain non-contributory supplemental
death and retirement benefits. The pre-retirement death benefit payable to the
executive's surviving spouse will equal, per annum, 50 percent of the
executive's final salary until such time as the executive would have reached age
65; thereafter, payments will equal, per annum, 20 percent of such salary until
the executive would have reached age 75. At retirement the executive may elect
to receive (i) supplemental retirement income equal to 20 percent of such
executive's final salary for each of the first ten years following retirement;
or (ii) other available post-retirement benefits which are actuarially
equivalent to the foregoing ten-year payment option. Although the supplemental
death and retirement benefits are paid solely from general corporate assets, it
is expected that such costs would be recovered over time through Company-owned
life insurance on the participants.
Each of the Named Executive Officers has entered into a separate change of
control agreement. Each change of control agreement was amended on September 29,
1997. The amended change of control agreements provide that in the event of a
change of control of the Company or if a potential change of control exists
while the executive is an employee of the Company and the executive's employment
is terminated other than for certain specified events, the Company will pay to
the executive an amount generally equal to three times the average annual
compensation paid to such executive during the lesser of (i) five calendar years
preceding the date of termination if prior to a change of control, or the date
of the change of control of the Company if such has occurred by the time of
termination; or (ii) the portion of such five year period during which the
Company existed and the executive was an employee of the Company if the
executive's employment is terminated by the Company without cause within three
years after a change of control. The change of control agreements may be
unilaterally rescinded or amended by the Board of Directors of the Company
without the consent of the executive prior to a change of control or the
occurrence or threat of actions potentially leading to a change of control. Mr.
Holt's change of control agreement was terminated on the closing date of the
TASC sale pursuant to the terms of the Termination Agreement, Receipt and
Release by and among Mr. Holt, the Company and TASC dated April 1, 1998.
57
<PAGE> 59
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
Based on information filed with the SEC on Schedule l3Gs, certain
information is set forth below with respect to beneficial owners of more than
five percent of the shares of the Company's common stock as of December 1, 1998.
See also "Management -- Security Ownership of Management."
<TABLE>
<CAPTION>
NUMBER PERCENT OF CLASS
NAME AND ADDRESS OF SHARES AS OF DECEMBER L, 1998
---------------- --------- ----------------------
<S> <C> <C>
Capital Research and Management Company..................... 2,288,900(l) 10.77%
SMALLCAP World Fund, Inc.
333 South Hope Street
Los Angeles, California 90071
GeoCapital, LLC............................................. 1,588,033(2) 7.47%
767 Fifth Avenue
45th Floor
New York, New York 10153-4590
</TABLE>
- ---------------
(l) Based on the Schedule 13G dated July 9, 1998 for the period ended December
31, 1997. Capital Research and Management Company serves as investment
advisor to various investment management companies and has the sole power to
dispose of the reported securities. SMALLCAP World Fund, Inc. is an
investment management company and has the sole power to vote 1,350,000 of
the listed shares.
(2) Based on the Schedule 13G dated February 18, 1998 for the period ended
December 31, 1997. Sole dispositive power was claimed with respect to
1,588,033 shares.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of common stock of the
Company beneficially owned as of December 1, 1998 by each director, the chief
executive officer and, as of December 31, 1997, the four other most highly
compensated executive officers (the "Named Executive Officers") and by all
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME SHARES OWNERSHIP
---- --------- ---------
<S> <C> <C>
Kevin J. Bradley(1)......................................... 57,768 .27%
Stephen H. Curran(2)(3)..................................... 243,979 1.14%
Ira Herenstein(2)(3)(4)..................................... 54,594 .26%
John C. Holt(2)(3)(4)....................................... 575,464 2.64%
Michael R. Kargula(2)(3).................................... 300,010 1.40%
Joseph E. Kasputys(2)(3).................................... 1,891,870 8.53%
Steven Lazarus(1)........................................... 104,340 .49%
Patricia McGinnis(1)........................................ 30,000 .14%
Jonathan Newcomb(1)......................................... 24,800 .12%
Constance K. Weaver(1)...................................... 37,500 .18%
All directors and executive officers as a group
(12 persons)(5)(6)........................................ 3,685,965 15.65%
</TABLE>
- ---------------
(1) Includes for Messrs. Bradley, Lazarus and Newcomb 57,468, 82,404, and 22,500
shares, respectively, and for Mdmes. McGinnis and Weaver 30,000 and 37,500
shares, respectively, which such directors have the right to acquire
pursuant to the exercise of the options held by them under the Primark
Corporation Stock Option Plan for Non-Employee Directors ("Stock Option Plan
for Non-Employee Directors"). Directors who are employees of the Company, or
a subsidiary thereof, are not eligible to receive option grants under this
plan.
(2) Includes 28,262 shares for each of Messrs. Curran and Kasputys, 29,210
shares for Mr. Kargula and 12,484 shares for Mr. Herenstein allocated to the
participant's account under the Primark Corporation Savings and Stock
Ownership Plan (formerly the Primark Corporation Employee Stock Ownership
Plan)
58
<PAGE> 60
("Savings Plan"). Includes 144 shares held by Mr. Holt under the TASC, Inc.
Profit Sharing and Stock Ownership Plan ("PSSOP"). Also includes 2,473
shares held by Mr. Curran under the Primark Corporation 1992 Employee Stock
Purchase Plan ("ESPP").
(3) Includes 931,000, 574,320, 113,000, 155,000 and 42,110 shares subject to
stock options exercisable within 60 days of December 1, 1998 held by Messrs.
Kasputys, Holt, Curran, Kargula and Herenstein, respectively, which options
were granted under various plans of the Company.
(4) Effective April 1, 1998 and June 30, 1998, each of Mr. Holt and Mr.
Herenstein, respectively, ceased to be an executive officer of the Company.
Mr. Holt continues as a director and an employee of the Company and Mr.
Herenstein continues as a part-time employee of the Company.
(5) Includes 2,076,930 shares subject to stock options exercisable within 60
days of December 1, 1998 held by individuals who were executive officers of
the Company on December 31, 1997 under various plans of the Company.
(6) Includes 155,237 shares for all executive officers as a group which are held
under the Savings Plan. As to shares held in the Savings Plan, the executive
officers possess both voting and dispositive power with respect to all such
shares. Non-employee directors of the Company are not eligible to
participate in these plans. Also includes 3,131 shares held by executive
officers as a group which are held under the ESPP.
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<PAGE> 61
DESCRIPTION OF CERTAIN INDEBTEDNESS
The Company has a Revolving Credit Agreement, dated as of February 7, 1997,
among the Company, the lenders parties thereto from time to time, the issuing
banks referred to therein, and Mellon Bank, N.A., as Agent, as amended (the
"Credit Agreement"), which provides for the Credit Facility. Under the Credit
Agreement, Primark may, subject to certain conditions, borrow up to $225
million. The Credit Facility will mature on December 31, 2002, unless extended
pursuant to the terms of the Credit Agreement. The following summary of the
material provisions of the Credit Agreement does not purport to be complete and
is subject to, and is qualified in its entirety by reference to, the Credit
Agreement, a copy of which is available from the Company upon request.
The Credit Facility is secured by a pledge of the outstanding common stock
of certain subsidiaries of the Company.
Amounts drawn under the Credit Facility will bear interest at rates ranging
from 0.375% to 1.50% above the current prevailing LIBOR rate of interest, with
the rate determined according to the results of the Company's operations and
financial position.
The Credit Agreement contains negative covenants limiting the ability of
the Company to incur debt, create liens, pay dividends, make distributions or
stock repurchases, make investments or capital expenditures, engage in
transactions with affiliates, sell assets, engage in mergers and acquisitions
and assume or make guaranties. In addition, the Credit Agreement contains
affirmative covenants, including covenants requiring compliance with laws,
maintenance of corporate existence, properties and insurance, payment of taxes
and performance of other material obligations and the delivery of financial and
other information.
The Credit Agreement also requires the Company to comply with certain
financial tests and to maintain certain financial ratios on a consolidated
basis. The Company must maintain (i) a Consolidated Net Worth (Adjusted) (as
defined in the Credit Agreement) of not less than $450 million from June 30,
1998 to December 30, 1998, and increasing such amount by $25 million for each
one year period of December 31 to December 30 thereafter; (ii) a Consolidated
Fixed Charge Coverage Ratio (as defined in the Credit Agreement) for the period
of three consecutive fiscal quarters ending on December 31, 1998 of not less
than 1.25, the period of four consecutive fiscal quarters ending on the last day
of such fiscal quarter within 1999 of not less than 1.50 and thereafter of not
less than 2.00; and (iii) a Consolidated Funded Senior Debt Ratio (Adjusted) for
the period of four consecutive fiscal quarters ending from September 30, 1998
through December 30, 1998 of not greater than 4.50, ending from December 31,
1998 through March 30, 2000 of not greater than 4.25 and thereafter of not
greater than 4.00. "Consolidated Funded Senior Debt Ratio (Adjusted)" means,
generally, (a) the amount, not less than zero, equal to (i) indebtedness of the
Company (and its subsidiaries) other than indebtedness that is subordinated to
the Credit Facility, minus (ii) the amount, not less than zero, equal to cash
and cash equivalents minus $10.0 million, divided by (b) consolidated EBITDA (as
defined in the Credit Agreement) less capital expenditures.
Failure to satisfy any of the financial covenants constitutes an event of
default under the Credit Agreement. The Credit Agreement also includes other
customary events of default, including, without limitation, a cross-default to
other indebtedness, material undischarged judgments, bankruptcy and a change of
control.
The Credit Agreement permits the Company to repurchase shares of its common
stock up to $250 million, of which $195 million had been utilized through
September 30, 1998.
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DESCRIPTION OF THE NOTES
The Old Notes were, and the New Notes will be, issued under the Indenture
between the Company, as issuer, and State Street Bank and Trust Company (the
"Trustee"). A copy of the Indenture is available upon request from the Company.
The following summary of certain provisions of the Indenture does not purport to
be complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Indenture, including the definitions of certain terms
therein and those terms made a part thereof by the Trust Indenture Act of 1939,
as amended. Whenever particular defined terms of the Indenture not otherwise
defined herein are referred to, such defined terms are incorporated herein by
reference. For definitions of certain capitalized terms used in the following
summary, see "-- Certain Definitions." The Indenture is filed as an exhibit to
the registration statement which includes this Prospectus. The New Notes are
identical in all material respects to the terms of the Old Notes, except for
certain transfer restrictions and registration rights relating to the Old Notes
and except that, if the Exchange Offer is not consummated by June 21, 1999, the
interest rate on the Old Notes from and including such date until but excluding
the date of consummation of the Exchange Offer will increase by 0.5%. See
"-- Registration Rights."
GENERAL
The Old Notes are, and the New Notes will be, unsecured senior subordinated
obligations of the Company and will mature on December 15, 2008. The Trustee
authenticated and delivered Old Notes for original issue in an aggregate
principal amount of $150.0 million. The New Notes will be treated as a
continuation of the Old Notes, which initially bear interest at 9 1/4% per annum
from the December 21, 1998 or from the most recent Interest Payment Date to
which interest has been paid or provided for, payable semiannually (to Holders
of record at the close of business on the June 1 or December 1 immediately
preceding the Interest Payment Date) on June 15 and December 15 of each year,
commencing June 15, 1999.
If by June 21, 1999, the Company has not consummated a registered exchange
offer for the Old Notes or caused a shelf registration statement with respect to
resales of the Old Notes to be declared effective, the interest rate on the Old
Notes will increase by 0.5% per annum until the consummation of a registered
exchange offer or the effectiveness of a shelf registration statement. See
"-- Registration Rights."
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, the City of New York which initially will
be the corporate trust office of an affiliate of the Trustee at State Street
Bank and Trust Company, N.A., 61 Broadway, 15th Floor, New York, New York 10006
or in the City of Boston at the corporate trust office of the Trustee at Two
International Place, 4th Floor, Boston, Massachusetts 02110; provided that, at
the option of the Company, payment of interest may be made by check mailed to
the Holders at their addresses as they appear in the Security Register.
The Old Notes are, and the New Notes will be, issued only in fully
registered form, without coupons, in denominations of $1,000 of principal amount
and any integral multiple thereof. See "-- Book-Entry; Delivery and Form." No
service charge will be made for any registration of transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any
transfer tax or other similar governmental charge payable in connection
therewith.
Subject to the covenants described below under "Covenants" and applicable
law, the Company may issue additional Notes under the Indenture. The Notes
offered hereby and any additional Notes subsequently issued would be treated as
a single class for all purposes under the Indenture.
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OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole or in part,
at any time or from time to time, on or after December 15, 2003 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date), if redeemed during the 12-month period commencing
December 15, of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2003............................................. 104.625%
2004............................................. 103.083
2005............................................. 101.542
2006 and thereafter.............................. 100.000
</TABLE>
In addition, at any time prior to December 15, 2001, the Company may redeem
up to 35% of the principal amount of the Notes with the Net Cash Proceeds of one
or more sales by the Company of its Capital Stock (other than Disqualified
Stock), at any time or from time to time in part, at a Redemption Price
(expressed as a percentage of principal amount) of 109.250%, plus accrued and
unpaid interest to the Redemption Date (subject to the rights of Holders of
record on the relevant Regular Record Date that is prior to the Redemption Date
to receive interest due on an Interest Payment Date); provided that at least 65%
of the aggregate principal amount of Notes originally issued remains outstanding
after each such redemption and notice of any such redemption is mailed within 60
days after the consummation of such sale or sales.
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not listed on a national securities exchange, by lot
or by such other method as the Trustee in its sole discretion shall deem to be
fair and appropriate; provided that no Note of $1,000 in principal amount or
less shall be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal to
the unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note.
SINKING FUND
There will be no sinking fund payments for the Notes.
RANKING
The Old Notes are, and the New Notes will be, senior subordinated
Indebtedness of the Company and rank pari passu in right of payment with all
existing and future senior subordinated indebtedness of the Company and senior
in right of payment to all existing and future subordinated indebtedness of the
Company. The payment of the Senior Subordinated Obligations will, to the extent
set forth in the Indenture, be subordinated in right of payment to the prior
payment in full, in cash or cash equivalents, of all existing and future Senior
Indebtedness. After giving pro forma effect to the Offering, as of September 30,
1998, the Company and its subsidiaries would have had approximately $9.7 million
of indebtedness outstanding other than the Notes, all of which would have been
Senior Indebtedness. See "Capitalization." In addition, all existing and future
liabilities (including trade payables) of the Company's subsidiaries will be
effectively senior to the Notes. As of September 30, 1998, the Company's
subsidiaries would have had approximately $243.4 million of liabilities. See
"Risk Factors -- Reliance on Subsidiaries" and "Risk Factors -- Subordination."
Notwithstanding the foregoing, payment from the money or the proceeds of U.S.
Government Obligations held in any defeasance trust described under
"-- Defeasance" below, will not be contractually subordinated in right of
payment to any Senior Indebtedness or subject to the restrictions described
herein.
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Except with respect to the money, securities or proceeds held under any
defeasance trust established in accordance with the Indenture, upon any payment
or distribution of assets or securities of the Company of any kind or character,
whether in cash, property or securities, upon any dissolution or winding up or
total or partial liquidation or reorganization of the Company, whether voluntary
or involuntary, or in bankruptcy, insolvency, receivership or other proceedings,
all amounts due or to become due upon all Senior Indebtedness shall first be
paid in full, in cash or cash equivalents, before the Holders of the Notes or
the Trustee on behalf of the Holders of the Notes shall be entitled to receive
any payment (by or on behalf of) the Company on account of Senior Subordinated
Obligations or any payment to acquire any of the Notes for cash, property or
securities, or any distribution with respect to the Notes of any cash, property
or securities. Before any payment may be made by, or on behalf of, the Company
on any Senior Subordinated Obligations (other than with the money, securities or
proceeds held under any defeasance trust established in accordance with the
Indenture), upon any such dissolution, winding up, liquidation or
reorganization, any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or securities, to
which the Holders of the Notes or the Trustee on behalf of the Holders of the
Notes would be entitled, but for the subordination provisions of the Indenture,
shall be made by the Company or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person making such payment or
distribution or by the Holders of the Notes or the Trustee if received by them
or it, directly to the holders of the Senior Indebtedness (pro rata to such
holders on the basis of the respective amounts of Senior Indebtedness held by
such holders) or their representatives or to any trustee or trustees under any
indenture pursuant to which any such Senior Indebtedness may have been issued,
as their respective interests appear, to the extent necessary to pay all such
Senior Indebtedness in full, in cash or cash equivalents after giving effect to
any concurrent payment, distribution or provision therefor to or for the holders
of such Senior Indebtedness.
No direct or indirect payment by or on behalf of the Company of Senior
Subordinated Obligations (other than with the money, securities or proceeds held
under any defeasance trust established in accordance with the Indenture),
whether pursuant to the terms of the Notes or upon acceleration or otherwise
shall be made if, at the time of such payment, there exists a default in the
payment of all or any portion of the obligations on any Senior Indebtedness of
the Company and such default shall not have been cured or waived or the benefits
of this sentence waived by or on behalf of the holder of such Senior
Indebtedness. In addition, during the continuance of any other event of default
with respect to any Designated Senior Indebtedness pursuant to which the
maturity thereof may be accelerated, upon receipt by the Trustee of written
notice from the trustee or other representative for the holders of such
Designated Senior Indebtedness (or the holders of at least a majority in
principal amount of such Designated Senior Indebtedness then outstanding), no
payment of Senior Subordinated Obligations (other than with the money,
securities or proceeds held under any defeasance trust established in accordance
with the Indenture) may be made by or on behalf of the Company upon or in
respect of the Notes for a period (a "Payment Blockage Period") commencing on
the date of receipt of such notice and ending 179 days thereafter (unless, in
each case, such Payment Blockage Period shall be terminated by written notice to
the Trustee from such trustee of, or other representatives for, such holders or
by payment in full in cash or cash equivalents of such Designated Senior
Indebtedness or such event of default has been cured or waived). Not more than
one Payment Blockage Period may be commenced with respect to the Notes during
any period of 360 consecutive days. Notwithstanding anything in the Indenture to
the contrary, there must be 180 consecutive days in any 360-day period in which
no Payment Blockage Period is in effect. No event of default (other than an
event of default pursuant to the financial maintenance covenants under the
Credit Agreement) that existed or was continuing (it being acknowledged that any
subsequent action that would give rise to an event of default pursuant to any
provision under which an event of default previously existed or was continuing
shall constitute a new event of default for this purpose) on the date of the
commencement of the Payment Blockage Period shall be, or shall be made, the
basis for the commencement of a second Payment Blockage Period by the
representative for, or the holders of, such Designated Senior Indebtedness,
whether or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days.
To the extent of any payment of Senior Indebtedness (whether by or on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or
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other similar Person under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then if such payment is recovered by, or paid over
to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar Person, the Senior Indebtedness or part thereof originally intended to
be satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred. To the extent the obligation to repay any Senior Indebtedness
is declared to be fraudulent, invalid, or otherwise set aside under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then
the obligation so declared fraudulent, invalid or otherwise set aside (and all
other amounts that would come due with respect thereto had such obligation not
been so affected) shall be deemed to be reinstated and outstanding as Senior
Indebtedness for all purposes hereof as if such declaration, invalidity or
setting aside had not occurred.
By reason of the subordination provisions described above, in the event of
liquidation or insolvency, creditors of the Company who are not holders of
Senior Indebtedness may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than Holders of the Notes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definition of all terms as well as any other capitalized
term used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition by a Restricted Subsidiary; provided that Indebtedness of such
Person which is redeemed, defeased, retired or otherwise repaid at the time of
or immediately upon consummation of the transactions by which such Person
becomes a Restricted Subsidiary or such Asset Acquisition shall not be Acquired
Indebtedness.
"Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Subsidiaries for such period
determined in conformity with GAAP; provided that the following items shall be
excluded in computing Adjusted Consolidated Net Income (without duplication):
(i) the net income of any Person that is not a Restricted Subsidiary,
except to the extent of the amount of dividends or other distributions
actually paid to the Company or any of its Restricted Subsidiaries by such
Person during such period;
(ii) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of
the "Limitation on Restricted Payments" covenant described below (and in
such case, except to the extent includable pursuant to clause (i) above),
the net income (or loss) of any Person accrued prior to the date it becomes
a Restricted Subsidiary or is merged into or consolidated with the Company
or any of its Restricted Subsidiaries or all or substantially all of the
property and assets of such Person are acquired by the Company or any of
its Restricted Subsidiaries;
(iii) the net income of any Restricted Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by
the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary;
(iv) any gains or losses (on an after-tax basis) attributable to Asset
Sales;
(v) solely for purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of
the "Limitation on Restricted Payments" covenant described below, any
amount paid or accrued as dividends on Preferred Stock of the Company or
any Restricted Subsidiary owned by Persons other than the Company and any
of its Restricted Subsidiaries;
(vi) the Restructuring Charge;
(vii) all extraordinary gains and extraordinary losses (on an
after-tax basis);
(viii) write-offs of intangible assets, including research and
development, relating to assets acquired by the Company and its Restricted
Subsidiaries if such write-offs are done at the time of, or within three
months after, such acquisition; and
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(ix) any non-cash compensation expense incurred in connection with the
exercise of or paid or payable solely with Capital Stock (other than
Disqualified Stock) of the Company or any options, warrants or other rights
to acquire Capital Stock (other than Disqualified Stock) of the Company.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means (i) an investment by the Company or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged into or consolidated with the
Company or any of its Restricted Subsidiaries; provided that such Person's
primary business is related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such investment or (ii)
an acquisition by the Company or any of its Restricted Subsidiaries of the
property and assets of any Person other than the Company or any of its
Restricted Subsidiaries that constitute substantially all of a division or line
of business of such Person; provided that the property and assets acquired are
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by the Company or
any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any of its
Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transaction) in one transaction
or a series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted Subsidiaries
or (iii) any other property and assets (other than the Capital Stock or other
Investment in an Unrestricted Subsidiary) of the Company or any of its
Restricted Subsidiaries outside the ordinary course of business of the Company
or such Restricted Subsidiary and, in each case, that is not governed by the
provisions of the Indenture applicable to mergers, consolidations and sales of
assets of the Company; provided that "Asset Sale" shall not include (a) sales or
other dispositions of inventory, receivables and other current assets, (b)
sales, transfers or other dispositions of assets constituting a Restricted
Payment permitted to be made under the "Limitation on Restricted Payments"
covenant, or (c) sales or other dispositions of assets for consideration at
least equal to the fair market value of the assets sold or disposed of, to the
extent that the consideration received would satisfy clause (B) of the
"Limitation on Asset Sales" covenant.
"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether outstanding on December
21, 1998 or issued thereafter, including, without limitation, all Common Stock
and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value of the
rental obligations under a Capitalized Lease.
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"Change of Control" means such time as (i) a "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
more than 35% of the total voting power of the Voting Stock of the Company on a
fully diluted basis; or (ii) individuals who on December 21, 1998 constitute the
Board of Directors (together with any new directors whose election by the Board
of Directors or whose nomination by the Board of Directors for election by the
Company's shareholders was approved by a vote of at least two-thirds of the
members of the Board of Directors then in office who either were members of the
Board of Directors on December 21, 1998 or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the members of the Board of Directors then in office.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income: (i) Consolidated Interest
Expense, (ii) income taxes (other than income taxes (either positive or
negative) attributable to extraordinary and non-recurring gains or losses or
sales of assets), (iii) depreciation expense, (iv) amortization expense and (v)
all other non-cash items reducing Adjusted Consolidated Net Income (other than
items that will require cash payments and for which an accrual or reserve is, or
is required by GAAP to be, made), less all non-cash items increasing Adjusted
Consolidated Net Income, all as determined on a consolidated basis for the
Company and its Restricted Subsidiaries in conformity with GAAP; provided that,
if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary,
Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in
accordance with GAAP) by an amount equal to (A) the amount of the Adjusted
Consolidated Net Income attributable to such Restricted Subsidiary multiplied by
(B) the percentage ownership interest in the income of such Restricted
Subsidiary not owned on the last day of such period by the Company or any of its
Restricted Subsidiaries.
"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries), Preferred Stock dividends in respect of Preferred
Stock of the Company or any Restricted Subsidiary held by Persons other than the
Company or a Wholly Owned Restricted Subsidiary and all but the principal
component of rentals in respect of Capitalized Lease Obligations paid, accrued
or scheduled to be paid or to be accrued by the Company and its Restricted
Subsidiaries during such period; excluding, however, (i) any amount of such
interest of any Restricted Subsidiary if the net income of such Restricted
Subsidiary is excluded in the calculation of Adjusted Consolidated Net Income
pursuant to clause (iii) of the definition thereof (but only in the same
proportion as the net income of such Restricted Subsidiary is excluded from the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof) and (ii) any premiums, fees and expenses (and any
amortization thereof) payable in connection with the offering of the Notes, all
as determined on a consolidated basis (without taking into account Unrestricted
Subsidiaries) in conformity with GAAP. For purposes of the preceding sentence,
Preferred Stock dividends shall be deemed to be an amount equal to the actual
dividends paid divided by one minus the combined federal, state, local and
foreign income tax rate applicable to the Company and its Subsidiaries
(expressed as a decimal).
"Consolidated Net Worth" means, at any date of determination, stockholders'
equity as set forth on the most recently available quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of the Company or any of its Restricted Subsidiaries, each item to
be determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
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"Credit Agreement" means (i) the Revolving Credit Agreement, dated as of
February 7, 1997, among the Company, the lenders party thereto from time to
time, the issuing banks referred to therein and Mellon Bank, N.A., as Agent,
together with any agreements, instruments and documents executed or delivered
pursuant to or in connection with such credit agreement (including without
limitation any Guarantees and security documents), in each case as such credit
agreement or such agreements, instruments or documents may be amended (including
any amendment and restatement thereof), supplemented, extended, renewed,
replaced or otherwise modified from time to time (including any agreement
extending the maturity of, refinancing or otherwise restructuring all or any
portion of the Indebtedness under such agreement or any successor agreement, as
such agreement may be amended, renewed, extended, substituted, replaced,
restated and otherwise modified from time to time) and any refinancing,
replacement or substitution thereof or therefor, or in respect of or for any
previous refinancing, replacement or substitution and (ii) the Note Backup
Agreement.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) any Indebtedness under the
Credit Agreement (except that any Indebtedness which represents a partial
refinancing of Indebtedness theretofore outstanding pursuant to the Credit
Agreement, rather than a complete refinancing thereof, shall only constitute
Designated Senior Indebtedness if such partial refinancing meets the
requirements of clause (ii) below) and (ii) any other Indebtedness constituting
Senior Indebtedness that, at the date of determination, has an aggregate
principal amount outstanding of at least $25 million and that is specifically
designated by the Company, in the instrument creating or evidencing such Senior
Indebtedness as "Designated Senior Indebtedness."
"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in "Limitation on Asset Sales" and
"Repurchase of Notes upon a Change of Control" covenants described below and
such Capital Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Company's
repurchase of such Notes as are required to be repurchased pursuant to the
"Limitation on Asset Sales" and "Repurchase of Notes upon a Change of Control"
covenants described below.
"fair market value" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of December 21, 1998 , including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations contained or referred to in
the Indenture shall be computed in conformity with GAAP applied on a consistent
basis, except that calculations made for purposes of determining compliance with
the terms of the covenants and with other provisions of the Indenture shall be
made without giving effect to (i) the amortization of any
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expenses incurred in connection with the offering of the Notes and (ii) except
as otherwise provided, the amortization of any amounts required or permitted by
Accounting Principles Board Opinion Nos. 16 and 17.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of business), to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including an "Incurrence" of Acquired Indebtedness; provided that neither the
accrual of interest nor the accretion of original issue discount shall be
considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication):
(i) all indebtedness of such Person for borrowed money;
(ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(iii) all obligations of such Person in respect of letters of credit
or other similar instruments (including reimbursement obligations with
respect thereto, but excluding obligations with respect to letters of
credit (including trade letters of credit) securing obligations (other than
obligations described in (i) or (ii) above or (v), (vi) or (vii) below)
entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if drawn upon, to the
extent such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement);
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, which purchase price is due more
than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services,
except Trade Payables and other accrued current liabilities incurred in the
ordinary course of business;
(v) all Capitalized Lease Obligations;
(vi) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
provided that the amount of such Indebtedness shall be the lesser of (A)
the fair market value of such asset at such date of determination and (B)
the amount of such Indebtedness;
(vii) all Indebtedness of other Persons Guaranteed by such Person to
the extent such Indebtedness is Guaranteed by such Person;
(viii) all obligations to redeem or repurchase Preferred Stock issued
by such Person; and
(ix) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, provided (A) that
the amount outstanding at any time of any Indebtedness issued with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP, (B) that money borrowed and set
aside at the time of the
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Incurrence of any Indebtedness in order to prefund the payment of the interest
on such Indebtedness shall not be deemed to be "Indebtedness" so long as such
money is held to secure the payment of such interest, (C) that the amount of
Indebtedness at any time of any Disqualified Stock shall be the maximum fixed
redemption or repurchase price in respect thereof, and (D) that Indebtedness
shall not include (x) indemnities for or guarantees of any obligations of any
Restricted Subsidiary under agreements entered into by such Restricted
Subsidiary in the ordinary course of business, provided that such obligations do
not constitute Indebtedness; (y) contingent obligations arising in connection
with the acquisition of any business or Person, based on the future performance
of such business or Person, except to the extent such obligations are not paid
at the time such contingency is resolved under GAAP and are recorded as a
liability on the books of the Company, and its Subsidiaries, and (z) any
liability for federal, state, local or other taxes.
"Interest Coverage Ratio" means, on any Transaction Date, the ratio of (i)
the aggregate amount of Consolidated EBITDA for the then most recent four fiscal
quarters prior to such Transaction Date for which reports have been filed with
the Commission or provided to the Trustee (the "Four Quarter Period") to (ii)
the aggregate Consolidated Interest Expense during such Four Quarter Period. In
making the foregoing calculation, (A) pro forma effect shall be given to any
Indebtedness Incurred or repaid during the period (the "Reference Period")
commencing on the first day of the Four Quarter Period and ending on the
Transaction Date (other than Indebtedness Incurred or repaid under a revolving
credit or similar arrangement to the extent of the commitment thereunder (or
under any predecessor revolving credit or similar arrangement) in effect on the
last day of such Four Quarter Period unless any portion of such Indebtedness is
projected, in the reasonable judgment of the senior management of the Company,
to remain outstanding for a period in excess of 12 months from the date of the
Incurrence thereof), in each case as if such Indebtedness had been Incurred or
repaid on the first day of such Reference Period; (B) Consolidated Interest
Expense attributable to interest on any Indebtedness (whether existing or being
Incurred) computed on a pro forma basis and bearing a floating interest rate
shall be computed as if the rate in effect on the Transaction Date (taking into
account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months or, if
shorter, at least equal to the remaining term of such Indebtedness) had been the
applicable rate for the entire period; (C) pro forma effect shall be given to
Asset Dispositions and Asset Acquisitions (including giving pro forma effect to
the application of proceeds of any Asset Disposition) that occur during such
Reference Period as if they had occurred and such proceeds had been applied on
the first day of such Reference Period; and (D) pro forma effect shall be given
to asset dispositions and asset acquisitions (including giving pro forma effect
to the application of proceeds of any asset disposition) that have been made by
any Person that has become a Restricted Subsidiary or has been merged with or
into the Company or any Restricted Subsidiary during such Reference Period and
that would have constituted Asset Dispositions or Asset Acquisitions had such
transactions occurred when such Person was a Restricted Subsidiary as if such
asset dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such Reference Period; provided
that to the extent that clause (C) or (D) of this sentence requires that pro
forma effect be given to an Asset Acquisition or Asset Disposition, such pro
forma calculation shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division or line of business of
the Person, that is acquired or disposed for which financial information is
available.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement; but excluding advances to customers or suppliers in the
ordinary course of business that are, in conformity with GAAP, recorded as
accounts receivable, prepaid expenses or deposits on the balance sheet of the
Company or its Restricted Subsidiaries) or capital contribution to (by means of
any transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition of
Capital Stock, bonds, notes, debentures or other similar instruments issued by,
such Person and shall include (i) the designation of a Restricted Subsidiary as
an Unrestricted Subsidiary and (ii) the fair market value of the
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Capital Stock (or any other Investment), held by the Company or any of its
Restricted Subsidiaries, of (or in) any Person that has ceased to be a
Restricted Subsidiary, including without limitation, by reason of any
transaction permitted by clause (iii) of the "Limitation on the Issuance and
Sale of Capital Stock of Restricted Subsidiaries" covenant. For purposes of the
definition of "Unrestricted Subsidiary" and the "Limitation on Restricted
Payments" covenant described below, (i) "Investment" shall include the fair
market value of the assets (net of liabilities (other than liabilities to the
Company or any of its Restricted Subsidiaries)) of any Restricted Subsidiary at
the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary, (ii) the fair market value of the assets (net of liabilities (other
than liabilities to the Company or any of its Restricted Subsidiaries)) of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary shall be considered a reduction in
outstanding Investments and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer. Notwithstanding the foregoing, payments by the Company or any
Restricted Subsidiary for contingent obligations arising in connection with the
acquisition of any business or Person that becomes (or prior to December 21,
1998 became) a Restricted Subsidiary, the payment of which was based on the
future performance of such business or Person, will not constitute an
Investment; provided that any such payment is taken into account in the event
such Person ceases to be a Restricted Subsidiary prior to such payment.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof or any agreement to
give any security interest).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or cash equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary as a reserve against any liabilities
associated with such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as determined in conformity with GAAP and (b) with respect
to any issuance or sale of Capital Stock, the proceeds of such issuance or sale
in the form of cash or cash equivalents, including payments in respect of
deferred payment obligations (to the extent corresponding to the principal, but
not interest, component thereof) when received in the form of cash or cash
equivalents (except to the extent such obligations are financed or sold with
recourse to the Company or any Restricted Subsidiary) and proceeds from the
conversion of other property received when converted to cash or cash
equivalents, net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
"Note Backup Agreement" means the Note Backup Agreement, dated as of
February 7, 1997, among the Company and the lenders party thereto from time to
time, the issuing bank referred to therein and Mellon Bank, N.A., as Agent, as
amended together with any agreements, instruments and documents executed or
delivered pursuant to or in connection with such agreement (including without
limitation any Guarantees and security documents), in each case as such
agreement or such agreements, instruments or documents may be amended (including
any amendment and restatement thereof), supplemented, extended, renewed,
replaced or otherwise modified from time to time (including any agreement
extending the maturity of, refinancing or
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otherwise restructuring all or any portion of the Indebtedness under such
agreement or any successor agreement, as such agreement may be amended, renewed,
extended, substituted, replaced, restated and otherwise modified from time to
time) and any refinancing, replacement or substitution thereof or therefor, or
in respect of or for any previous refinancing, replacement or substitution.
"Offer to Purchase" means an offer to purchase Notes by the Company from
the Holders commenced by mailing a notice to the Trustee and each Holder
stating:
(i) the covenant pursuant to which the offer is being made and that
all Notes validly tendered will be accepted for payment on a pro rata
basis;
(ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Payment Date");
(iii) that any Note not tendered will continue to accrue interest
pursuant to its terms;
(iv) that, unless the Company defaults in the payment of the purchase
price, any Note accepted for payment pursuant to the Offer to Purchase
shall cease to accrue interest on and after the Payment Date;
(v) that Holders electing to have a Note purchased pursuant to the
Offer to Purchase will be required to surrender the Note, together with the
form entitled "Option of the Holder to Elect Purchase" on the reverse side
of the Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day immediately
preceding the Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; and
(vii) that Holders whose Notes are being purchased only in part will
be issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered; provided that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or integral multiples
thereof.
On the Payment Date, the Company shall (i) accept for payment on a pro rata
basis Notes or portions thereof tendered pursuant to an Offer to Purchase; (ii)
deposit with the Paying Agent money sufficient to pay the purchase price of all
Notes or portions thereof so accepted; and (iii) deliver, or cause to be
delivered, to the Trustee all Notes or portions thereof so accepted together
with an Officers' Certificate specifying the Notes or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail to the Holders
of Notes so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Note equal in
principal amount to any unpurchased portion of the Note surrendered; provided
that each Note purchased and each new Note issued shall be in a principal amount
of $1,000 or integral multiples thereof. The Company will publicly announce the
results of an Offer to Purchase as soon as practicable after the Payment Date.
The Trustee shall act as the Paying Agent for an Offer to Purchase. The Company
will comply with Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable, in the event that the Company is required to repurchase Notes
pursuant to an Offer to Purchase.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in:
(i) the Company or a Restricted Subsidiary or a Person which will,
upon the making of such Investment, become a Restricted Subsidiary or be
merged or consolidated with or into or transfer or convey all or
substantially all its assets to, the Company or a Restricted Subsidiary;
provided that such person's primary business is related, ancillary or
complementary to the businesses of the Company and its Restricted
Subsidiaries on the date of such Investment;
(ii) Temporary Cash Investments;
(iii) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP;
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(iv) stock, obligations or securities received in satisfaction of
judgments;
(v) an Unrestricted Subsidiary consisting solely of an Investment in
another Unrestricted Subsidiary;
(vi) Interest Rate Agreements and Currency Agreements designed solely
to protect the Company or its Restricted Subsidiaries against fluctuations
in interest rates or foreign currency exchange rates;
(vii) loans or advances to employees of the Company or its Restricted
Subsidiaries to purchase Capital Stock (other than Disqualified Stock) of
the Company in an aggregate amount outstanding not to exceed $10 million;
and
(viii) any Person the primary business of which is related, ancillary
or complementary to the businesses of the Company and its Restricted
Subsidiaries on the date of such Investment; provided that the aggregate
amount of such Investments does not exceed $50 million plus the net
reduction in Investments made pursuant to this clause (viii) resulting from
distributions on or repayments of such Investments or from the Net Cash
Proceeds from any sale of any such Investment (except in each case to the
extent any such payment or proceeds is included in the calculation of
Adjusted Consolidated Net Income) or from such Person becoming a
Restricted Subsidiary (valued in each case as provided in the definition of
"Investments"), provided that the net reduction in any Investment shall not
exceed the amount of such Investment.
"Put and Call Agreement" means the Put and Call Agreement dated October 15,
1996, as amended, among Disclosure, Disclosure International Incorporated, The
Winthrop Corporation and Wright Investors Services International Limited as in
effect on December 21, 1998.
"Repurchase Program" means repurchases of Capital Stock of the Company
after December 21, 1998 and prior to December 31, 2003 in an aggregate amount
not to exceed $75 million.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Restructuring Charge" means the $77.4 million of pre-tax charges
(including an extraordinary item) recorded by the Company in the quarter ended
June 30, 1998 in connection with the restructuring and integration of the
Company's operations into three divisions.
"Senior Indebtedness" means the following obligations of the Company,
whether outstanding on December 21, 1998 or thereafter Incurred: (i) all
Indebtedness and all other monetary obligations (including, without limitation,
expenses, fees, principal, interest, reimbursement obligations under letters of
credit and indemnities payable in connection therewith) of the Company under (or
in respect of) the Credit Agreement or any Interest Rate Agreement or Currency
Agreement relating to the Indebtedness under the Credit Agreement and (ii) all
other Indebtedness and all other monetary obligations of the Company (other than
the Notes), including principal and interest on such Indebtedness, unless such
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such Indebtedness is issued, is pari passu with, or
subordinated in right of payment to, the Notes; provided that the term "Senior
Indebtedness" shall not include (a) any Indebtedness of the Company that, when
Incurred, was without recourse to the Company, (b) any Indebtedness of the
Company to a Subsidiary of the Company, or to a joint venture in which the
Company has an interest, (c) any Indebtedness of the Company, to the extent not
permitted by the "Limitation on Indebtedness" covenant or the "Limitation on
Senior Subordinated Indebtedness" covenant described below, (d) any repurchase,
redemption or other obligation in respect of Disqualified Stock, (e) any
Indebtedness to any employee of the Company or any of its Subsidiaries, (f) any
liability for taxes owed or owing to the Company or (g) any Trade Payables.
"Senior Subordinated Obligations" means any principal of, premium, if any,
interest, or other amounts due, on the Notes payable pursuant to the terms of
the Notes or upon acceleration, including any amounts received upon the exercise
of the rights of rescission or other rights of action (including claims for
damages) or otherwise, to the extent relating to the purchase price of the Notes
or amounts corresponding to such principal, premium, if any, or interest on the
Notes.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
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consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, and its successors.
"Stated Maturity" means, (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following:
(i) direct obligations of the United States of America or any agency
thereof or obligations fully and unconditionally guaranteed by the United
States of America or any agency thereof;
(ii) time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof issued
by a bank or trust company which is organized under the laws of the United
States of America, any state thereof or any foreign country recognized by
the United States of America, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50 million (or the
foreign currency equivalent thereof) and has outstanding debt which is
rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor;
(iii) repurchase obligations with a term of not more than 30 days for
securities of the type described in clause (i) above entered into with an
institution meeting the qualifications described in clause (ii) above;
(iv) commercial paper, maturing not more than 270 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the
Company) organized and in existence under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's or "A-1" (or
higher) according to S&P;
(v) securities with maturities of six months or less from the date of
acquisition issued or fully and unconditionally guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by S&P or Moody's; and
(vi) any mutual fund investing exclusively in investments of the type
described in clauses (i) through (v) above.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below; and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of,
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the Company or any Restricted Subsidiary; provided that (A) any Guarantee by the
Company or any Restricted Subsidiary of any Indebtedness of the Subsidiary being
so designated shall be deemed an "Incurrence" of such Indebtedness and an
"Investment" by the Company or such Restricted Subsidiary (or both, if
applicable) at the time of such designation; (B) either (I) the Subsidiary to be
so designated has total assets of $1,000 or less or (II) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under the
"Limitation on Restricted Payments" covenant described below and (C) if
applicable, the Incurrence of Indebtedness and the Investment referred to in
clause (A) of this proviso would be permitted under the "Limitation on
Indebtedness" and "Limitation on Restricted Payments" covenants described below.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that (i) no Default or Event of Default shall
have occurred and be continuing at the time of or after giving effect to such
designation and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately after such designation would, if Incurred at such time,
have been permitted to be Incurred (and shall be deemed to have been Incurred)
for all purposes of the Indenture. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the Trustee
a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Dollar Equivalent" means, with respect to any monetary amounts in a
currency other than the U.S. dollar, at any time of determination thereof, the
amount of U.S. dollars obtained by converting such foreign currency involved in
such computation into U.S. dollars at the spot rate for the purchase of U.S.
dollars with the applicable foreign currency as quoted by Reuters at
approximately 11:00 a.m. (New York time) on a date not more than two Business
Days prior to such determination.
"Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
COVENANTS
Limitation on Indebtedness
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Notes and Indebtedness
existing on December 21, 1998 ); provided that the Company or any Restricted
Subsidiary may Incur Indebtedness if, after giving effect to the Incurrence of
such Indebtedness and the receipt and application of the proceeds therefrom, the
Interest Coverage Ratio would be greater than 2.0:1.
Notwithstanding the foregoing, the Company and any Restricted Subsidiary
(except as specified below) may Incur each and all of the following:
(i) Indebtedness pursuant to the Credit Agreement (other than the Note
Backup Agreement) outstanding at any time in an aggregate principal amount
not to exceed $225 million, less any amount of such Indebtedness
permanently repaid as provided under the "Limitation on Asset Sales"
covenant described below;
(ii) Indebtedness owed (A) to the Company evidenced by an
unsubordinated promissory note or (B) to any Restricted Subsidiary;
provided that any event which results in any such Restricted Subsidiary
ceasing to be a Restricted Subsidiary or any subsequent transfer of such
Indebtedness (other than to the Company or another Restricted Subsidiary)
shall be deemed, in each case, to constitute an Incurrence of such
Indebtedness not permitted by this clause (ii);
(iii) Indebtedness issued in exchange for, or the net proceeds of
which are used to refinance or refund, then outstanding Indebtedness (other
than Indebtedness Incurred under clause (i), (ii), (iv), (vi), (vii),
(viii) or (ix) of this paragraph) and any refinancings thereof in an amount
not to exceed the
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amount so refinanced or refunded (plus premiums, accrued interest, fees and
expenses); provided that Indebtedness the proceeds of which are used to
refinance or refund the Notes or Indebtedness that is pari passu with, or
subordinated in right of payment to, the Notes shall only be permitted
under this clause (iii) if (A) in case the Notes are refinanced in part or
the Indebtedness to be refinanced is pari passu with the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is outstanding, is expressly made
pari passu with, or subordinate in right of payment to, the remaining
Notes, (B) in case the Indebtedness to be refinanced is subordinated in
right of payment to the Notes, such new Indebtedness, by its terms or by
the terms of any agreement or instrument pursuant to which such new
Indebtedness is issued or remains outstanding, is expressly made
subordinate in right of payment to the Notes at least to the extent that
the Indebtedness to be refinanced is subordinated to the Notes and (C) such
new Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, does not mature prior to the Stated Maturity of the
Indebtedness to be refinanced or refunded, and the Average Life of such new
Indebtedness is at least equal to the remaining Average Life of the
Indebtedness to be refinanced or refunded; and provided further that in no
event may Indebtedness of the Company that is pari passu with or
subordinated in rights of payment to the Notes be refinanced by means of
any Indebtedness of any Restricted Subsidiary pursuant to this clause
(iii);
(iv) Indebtedness (A) in respect of performance, surety or appeal
bonds provided in the ordinary course of business, (B) under Currency
Agreements and Interest Rate Agreements; provided that such agreements (a)
are designed solely to protect the Company or its Restricted Subsidiaries
against fluctuations in foreign currency exchange rates or interest rates
and (b) do not increase the Indebtedness of the obligor outstanding at any
time other than as a result of fluctuations in foreign currency exchange
rates or interest rates or by reason of fees, indemnities and compensation
payable thereunder; and (C) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or
from Guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of the Company or any of its Restricted
Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted
Subsidiary (other than Guarantees of Indebtedness Incurred by any Person
acquiring all or any portion of such business, assets or Restricted
Subsidiary for the purpose of financing such acquisition), in a principal
amount not to exceed the gross proceeds actually received by the Company or
any Restricted Subsidiary in connection with such disposition;
(v) Indebtedness, to the extent the net proceeds thereof are promptly
(A) used to purchase Notes tendered in an Offer to Purchase made as a
result of a Change of Control or (B) deposited to defease the Notes as
described below under "Defeasance";
(vi) Guarantees of the Notes and Guarantees of Indebtedness of the
Company by any Restricted Subsidiary provided the Guarantee of such
Indebtedness is permitted by and made in accordance with the "Limitation on
Issuance of Guarantees by Restricted Subsidiaries" covenant described
below;
(vii) Indebtedness pursuant to the Note Backup Agreement outstanding
at any time in an aggregate principal amount outstanding at any time not to
exceed $8.3 million, less any amount of such Indebtedness permanently
repaid as provided under the "Limitation on Asset Sales" covenant described
below;
(viii) Indebtedness in respect of Capitalized Lease Obligations in an
aggregate principal amount outstanding at any time not to exceed $20
million, less any amount of such Indebtedness permanently repaid as
provided under the "Limitation on Asset Sales" covenant described below;
and
(ix) Indebtedness (in addition to Indebtedness permitted under clauses
(i) through (viii) above) in an aggregate principal amount outstanding at
any time not to exceed $25 million (or the U.S. Dollar Equivalent thereof),
less any amount of such Indebtedness permanently repaid as provided under
the "Limitation on Asset Sales" covenant described below.
(b) Notwithstanding any other provision of this "Limitation on
Indebtedness" covenant, the maximum amount of Indebtedness that the Company or a
Restricted Subsidiary may Incur pursuant to this "Limitation
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on Indebtedness" covenant shall not be deemed to be exceeded, with respect to
any outstanding Indebtedness due solely to the result of fluctuations in the
exchange rates of currencies.
(c) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, (1) Indebtedness Incurred under the
Credit Agreement on or prior to December 21, 1998 shall be treated as Incurred
pursuant to clause (i) of the second paragraph of this "Limitation on
Indebtedness" covenant, (2) Guarantees, Liens or obligations with respect to
letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included and (3) any Liens
granted pursuant to the equal and ratable provisions referred to in the
"Limitation on Liens" covenant described below shall not be treated as
Indebtedness. For purposes of determining compliance with this "Limitation on
Indebtedness" covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses (other than Indebtedness referred to in clause (1) of the preceding
sentence), the Company, in its sole discretion, shall classify, and from time to
time may reclassify, such item of Indebtedness and only be required to include
the amount and type of such Indebtedness in one of such clauses.
Limitation on Senior Subordinated Indebtedness
The Company shall not Incur any Indebtedness that is subordinate in right
of payment to any Senior Indebtedness unless such Indebtedness is pari passu
with, or subordinated in right of payment to, the Notes; provided that the
foregoing limitation shall not apply to distinctions between categories of
Senior Indebtedness of the Company that exist by reason of any Liens or
Guarantees arising or created in respect of some but not all such Senior
Indebtedness.
Limitation on Liens
The Company shall not Incur any Indebtedness secured by a Lien ("Secured
Indebtedness") which is not Senior Indebtedness unless contemporaneously
therewith effective provision is made to secure the Notes equally and ratably
with (or, if the Secured Indebtedness is subordinated in right of payment to the
Notes, prior to) such Secured Indebtedness for so long as such Secured
Indebtedness is secured by a Lien.
Limitation on Restricted Payments
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any distribution
on or with respect to its Capital Stock (other than (x) dividends or
distributions payable solely in shares of its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to acquire shares of
such Capital Stock, (y) pro rata dividends or distributions on Common Stock of
Restricted Subsidiaries held by minority stockholders and (z) dividends on
Preferred Stock of the Company or any Restricted Subsidiary, provided such
Preferred Stock was permitted to be issued under the "Limitation on
Indebtedness" covenant) held by Persons other than the Company or any of its
Restricted Subsidiaries, (ii) purchase, redeem, retire or otherwise acquire for
value any shares of Capital Stock of (A) the Company or an Unrestricted
Subsidiary (including options, warrants or other rights to acquire such shares
of Capital Stock) held by any Person or (B) a Restricted Subsidiary (including
options, warrants or other rights to acquire such shares of Capital Stock) held
by any Affiliate of the Company (other than a Wholly Owned Restricted
Subsidiary) or any holder (or any Affiliate of such holder) of 5% or more of the
Capital Stock of the Company, (iii) make any voluntary or optional principal
payment, or voluntary or optional redemption, repurchase, defeasance, or other
acquisition or retirement for value, of Indebtedness of the Company that is
subordinated in right of payment to the Notes or (iv) make any Investment, other
than a Permitted Investment, in any Person (such payments or any other actions
described in clauses (i) through (iv) above being collectively "Restricted
Payments") if, at the time of, and after giving effect to, the proposed
Restricted Payment:
(A) a Default or Event of Default shall have occurred and be
continuing,
(B) the Company could not Incur at least $1.00 of Indebtedness under
the first paragraph of the "Limitation on Indebtedness" covenant or
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(C) the aggregate amount of all Restricted Payments (the amount, if
other than in cash, to be determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a Board
Resolution) made after December 21, 1998 shall exceed the sum of
(1) 50% of the aggregate amount of the Adjusted Consolidated Net
Income (or, if the Adjusted Consolidated Net Income is a loss, minus
100% of the amount of such loss) (determined by excluding income
resulting from transfers of assets by the Company or a Restricted
Subsidiary to an Unrestricted Subsidiary) accrued on a cumulative basis
during the period (taken as one accounting period) beginning on October
1, 1998 and ending on the last day of the last fiscal quarter preceding
the Transaction Date for which reports have been filed with the
Commission or provided to the Trustee plus
(2) the aggregate Net Cash Proceeds received by the Company after
December 21, 1998 from the issuance and sale permitted by the Indenture
of its Capital Stock (other than Disqualified Stock) to a Person who is
not a Subsidiary of the Company, including an issuance or sale permitted
by the Indenture of Indebtedness of the Company for cash subsequent to
December 21, 1998 upon the conversion of such Indebtedness into Capital
Stock (other than Disqualified Stock) of the Company, or from the
issuance to a Person who is not a Subsidiary of the Company of any
options, warrants or other rights to acquire Capital Stock of the
Company (in each case, exclusive of any Disqualified Stock or any
options, warrants or other rights that are redeemable at the option of
the holder, or are required to be redeemed, prior to the Stated Maturity
of the Notes) plus
(3) an amount equal to the net reduction in Investments (other than
reductions in Permitted Investments) in any Person resulting from
payments of interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of assets, in each case to the Company or
any Restricted Subsidiary or from the Net Cash Proceeds from the sale of
any such Investment (except, in each case, to the extent any such
payment or proceeds are included in the calculation of Adjusted
Consolidated Net Income), or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided
in the definition of "Investments"), not to exceed, in each case, the
amount of Investments previously made by the Company or any Restricted
Subsidiary in such Person or Unrestricted Subsidiary plus
(4) $25 million.
The foregoing provision shall not be violated by reason of:
(i) the payment of any dividend within 60 days after the date of
declaration thereof if, at said date of declaration, such payment would
comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of
payment to the Notes including premium, if any, and accrued and unpaid
interest, with the proceeds of, or in exchange for, Indebtedness Incurred
under clause (iii) of the second paragraph of part (a) of the "Limitation
on Indebtedness" covenant;
(iii) the repurchase, redemption or other acquisition of Capital Stock
of the Company or an Unrestricted Subsidiary (or options, warrants or other
rights to acquire such Capital Stock) in exchange for, or out of the
proceeds of a substantially concurrent offering of, shares of Capital Stock
(other than Disqualified Stock) of the Company (or options, warrants or
other rights to acquire such Capital Stock);
(iv) the making of any principal payment or the repurchase,
redemption, retirement, defeasance or other acquisition for value of
Indebtedness of the Company which is subordinated in right of payment to
the Notes in exchange for, or out of the proceeds of, a substantially
concurrent offering of, shares of the Capital Stock (other than
Disqualified Stock) of the Company (or options, warrants or other rights to
acquire such Capital Stock);
(v) payments or distributions, to dissenting stockholders pursuant to
applicable law, pursuant to or in connection with a consolidation, merger
or transfer of assets that complies with the provisions of the Indenture
applicable to mergers, consolidations and transfers of all or substantially
all of the property and assets of the Company;
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(vi) Investments acquired in exchange for Capital Stock (other than
Disqualified Stock) of the Company;
(vii) payments under the Repurchase Program; or
(viii) other Restricted Payments in an aggregate amount not to exceed
$10 million;
provided that, except in the case of clauses (i) and (iii), no Default or Event
of Default shall have occurred and be continuing or occur as a consequence of
the actions or payments set forth therein.
Except as set forth in the next sentence, each Restricted Payment and
issuance of Capital Stock described in the preceding paragraph shall be included
in calculating whether the conditions of clause (C) of the first paragraph of
this "Limitation on Restricted Payments" covenant have been met with respect to
any subsequent Restricted Payments. The following Restricted Payments described
in the preceding paragraph shall not be included in such calculation:
(x) a Restricted Payment described in clause (ii),
(y) an exchange of Capital Stock for Capital Stock or Indebtedness
described in clause (iii) or (iv), and
(z) an Investment described in clause (vi) or (viii).
In the event the proceeds of an issuance of Capital Stock of the Company
are used for the redemption, repurchase or other acquisition of the Notes, or
Indebtedness that is pari passu with the Notes, then the Net Cash Proceeds of
such issuance shall be included in clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant only to the extent such proceeds
are not used for such redemption, repurchase or other acquisition of
Indebtedness. For purposes of determining compliance with this "Limitation on
Restricted Payments" covenant, in the event that a Restricted Payment meets the
criteria of more than one of the types of Restricted Payments described in the
above clauses, the Company, in its sole discretion, may order and classify, and
from time to time may reclassify, such Restricted Payment if it would have been
permitted at the time such Restricted Payment was made and at the time of such
reclassification.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned by the
Company or any other Restricted Subsidiary, (ii) pay any Indebtedness owed to
the Company or any other Restricted Subsidiary, (iii) make loans or advances to
the Company or any other Restricted Subsidiary or (iv) transfer any of its
property or assets to the Company or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(i) existing on December 21, 1998 in the Credit Agreement, the
Indenture or any other agreements in effect on December 21, 1998, and any
extensions, refinancings, renewals or replacements of such agreements;
provided that the encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements are no less favorable in any
material respect to the Holders than those encumbrances or restrictions
that are then in effect and that are being extended, refinanced, renewed or
replaced;
(ii) existing under or by reason of applicable law;
(iii) existing with respect to any Person or the property or assets of
such Person acquired by the Company or any Restricted Subsidiary, existing
at the time of such acquisition and not incurred in contemplation thereof,
which encumbrances or restrictions are not applicable to any Person or the
property or assets of any Person other than such Person or the property or
assets of such Person so acquired;
(iv) in the case of clause (iv) of the first paragraph of this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant, (A) that restrict in a customary
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manner the subletting, assignment or transfer of any property or asset that
is a lease, license, conveyance or contract or similar property or asset,
(B) existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the Company or
any Restricted Subsidiary not otherwise prohibited by the Indenture or (C)
arising or agreed to in the ordinary course of business, not relating to
any Indebtedness, and that do not, individually or in the aggregate,
detract from the value of property or assets of the Company or any
Restricted Subsidiary in any manner material to the Company or any
Restricted Subsidiary;
(v) with respect to a Restricted Subsidiary and imposed pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary; or
(vi) contained in the terms of any Indebtedness or any agreement
pursuant to which such Indebtedness was issued if (A) the encumbrance or
restriction applies only in the event of a payment default or a default
with respect to a financial covenant contained in such Indebtedness or
agreement, (B) the encumbrance or restriction is not materially more
disadvantageous to the Holders of the Notes than is customary in comparable
financings (as determined by the Company) and (C) the Company determines
that any such encumbrance or restriction will not materially affect the
Company's ability to make principal or interest payments on the Notes.
Nothing contained in this "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant shall prevent the Company or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in the "Limitation on Liens" covenant or (2)
restricting the sale or other disposition of property or assets of the Company
or any of its Restricted Subsidiaries that secure Indebtedness of the Company or
any of its Restricted Subsidiaries.
Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries
The Company will not sell, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell, any shares of Capital Stock of a
Restricted Subsidiary (including options, warrants or other rights to purchase
shares of such Capital Stock) except:
(i) to the Company or a Wholly Owned Restricted Subsidiary;
(ii) issuances of director's qualifying shares or sales to foreign
nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to
the extent required by applicable law;
(iii) if, immediately after giving effect to such issuance or sale,
such Restricted Subsidiary would no longer constitute a Restricted
Subsidiary and any Investment in such Person remaining after giving effect
to such issuance or sale would have been permitted to be made under the
"Limitation on Restricted Payments" covenant if made on the date of such
issuance or sale; or
(iv) (x) issuances or sales of Common Stock of a Restricted
Subsidiary, provided that the Company or such Restricted Subsidiary applies
the Net Cash Proceeds, if any, of any such sale in accordance with clause
(A) or (B) of the "Limitation on Asset Sales" covenant described below and
(y) issuances or sales of Preferred Stock of a Restricted Subsidiary if
such Restricted Subsidiary would be entitled to Incur such Indebtedness
pursuant to the "Limitation on Indebtedness" covenant and such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture to
the Indenture providing for a Guarantee (a "Subsidiary Guarantee") of
payment of the Notes.
Limitation on Issuances of Guarantees by Restricted Subsidiaries
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company which is pari passu
with or subordinate in right of payment to the Notes ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a Subsidiary Guarantee of payment of the Notes by such Restricted
Subsidiary and (ii) such Restricted Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided
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that this paragraph shall not be applicable to any Guarantee of any Restricted
Subsidiary that existed at the time such Person became a Restricted Subsidiary
and was not Incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary. If the Guaranteed Indebtedness is (A) pari
passu with the Notes, then the Guarantee of such Guaranteed Indebtedness shall
be pari passu with, or subordinated to, the Subsidiary Guarantee or (B)
subordinated to the Notes, then the Guarantee of such Guaranteed Indebtedness
shall be subordinated to the Subsidiary Guarantee at least to the extent that
the Guaranteed Indebtedness is subordinated to the Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Capital Stock in, or all or substantially all the assets
of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture) or (ii) the release or discharge of the Guarantee
which resulted in the creation of such Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such Guarantee.
Limitation on Transactions with Shareholders and Affiliates
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or assets,
or the rendering of any service) with any holder (or any Affiliate of such
holder) of 5% or more of any class of Capital Stock of the Company or with any
Affiliate of the Company or any Restricted Subsidiary, except upon fair and
reasonable terms no less favorable to the Company or such Restricted Subsidiary
than could be obtained, at the time of such transaction or, if such transaction
is pursuant to a written agreement, at the time of the execution of the
agreement providing therefor, in a comparable arm's-length transaction with a
Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to:
(i) transactions (A) approved by a majority of the disinterested
members of the Board of Directors or (B) for which the Company or a
Restricted Subsidiary delivers to the Trustee a written opinion of a
nationally recognized investment banking firm stating that the transaction
is fair to the Company or such Restricted Subsidiary from a financial point
of view;
(ii) any transaction solely between the Company and any of its Wholly
Owned Restricted Subsidiaries or solely between Wholly Owned Restricted
Subsidiaries;
(iii) management and administrative services provided by the Company
or any Restricted Subsidiary to any Restricted Subsidiary or any Person in
which the Company or any Restricted Subsidiary has an Investment;
(iv) the payment of reasonable and customary regular fees to directors
of the Company who are not employees of the Company;
(v) any payments or other transactions pursuant to any tax-sharing
agreement between the Company and any other Person with which the Company
files a consolidated tax return or with which the Company is part of a
consolidated group for tax purposes;
(vi) any payment made under the Put and Call Agreement; or
(vii) any Restricted Payments not prohibited by the "Limitation on
Restricted Payments" covenant.
Notwithstanding the foregoing, any transaction or series of related transactions
covered by the first paragraph of this "Limitation on Transactions with
Shareholders and Affiliates" covenant and not covered by clauses (ii) through
(vii) of this paragraph, (a) the aggregate amount of which exceeds $3 million in
value, must be approved or determined to be fair in the manner provided for in
clause (i)(A) or (B) above and (b) the aggregate amount of which exceeds $5
million in value, must be determined to be fair in the manner provided for in
clause (i)(B) above.
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Limitation on Asset Sales
The Company will not, and will not permit any Restricted Subsidiary to,
consummate any Asset Sale, unless (i) the consideration received by the Company
or such Restricted Subsidiary is at least equal to the fair market value of the
assets sold or disposed of and (ii) at least 75% of the consideration received
consists of cash or Temporary Cash Investments or the assumption of Indebtedness
of the Company or any Restricted Subsidiary (other than Indebtedness to the
Company or any Restricted Subsidiary), provided that the Company or such
Restricted Subsidiary is irrevocably and unconditionally released from all
liability under such Indebtedness.
In the event and to the extent that the Net Cash Proceeds received by the
Company or any of its Restricted Subsidiaries from one or more Asset Sales
occurring on or after December 21, 1998 in any period of 12 consecutive months
exceed $10 million, then the Company shall or shall cause the relevant
Restricted Subsidiary to:
(i) within twelve months after the date Net Cash Proceeds so received
exceed $10 million
(A) apply an amount equal to such excess Net Cash Proceeds to
permanently repay Senior Indebtedness of the Company, or any Restricted
Subsidiary providing a Subsidiary Guarantee or Indebtedness of any other
Restricted Subsidiary, in each case owing to a Person other than the
Company or any of its Restricted Subsidiaries or
(B) invest an equal amount, or the amount not so applied pursuant
to clause (A) (or enter into a definitive agreement committing to so
invest within 12 months after the date of such agreement), in property
or assets (other than current assets) of a nature or type or that are
used in a business (or in a company having property and assets of a
nature or type, or engaged in a business) similar or related to the
nature or type of the property and assets of, or the business of, the
Company and its Restricted Subsidiaries existing on the date of such
investment and
(ii) apply (no later than the end of the 12-month period referred to
in clause (i)) such excess Net Cash Proceeds (to the extent not applied
pursuant to clause (i)) as provided in the following paragraph of this
"Limitation on Asset Sales" covenant.
The amount of such excess Net Cash Proceeds required to be applied (or to be
committed to be applied) during such 12-month period as set forth in clause (i)
of the preceding sentence and not applied as so required by the end of such
period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least $5 million, the Company
must commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate principal amount of Notes equal to the Excess Proceeds on such date,
at a purchase price equal to 100% of the principal amount of the Notes, plus, in
each case, accrued interest (if any) to the Payment Date.
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
The Company must commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Notes then outstanding, at
a purchase price equal to 101% of the principal amount thereof, plus accrued
interest (if any) to the Payment Date; provided, however, that the Company shall
not be required to commence such an Offer to Purchase if the Notes have, on the
30th day after such Change of Control, a rating of at least BBB- (or equivalent
or successor rating) by S&P and a rating of at least Baa3 (or equivalent or
successor rating) by Moody's.
There can be no assurance that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
may be contained in other securities of the Company which might be outstanding
at the time). The above covenant requiring the Company to repurchase the Notes
will, unless consents are obtained, require the Company to repay all
indebtedness then outstanding which by its terms would prohibit such Note
repurchase, either prior to or concurrently with such Note repurchase.
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COMMISSION REPORTS AND REPORTS TO HOLDERS
Whether or not the Company is then required to file reports with the
Commission, the Company shall file with the Commission all such reports and
other information as it would be required to file with the Commission by
Sections 13(a) or 15(d) under the Securities Exchange Act of 1934 if it were
subject thereto. The Company shall supply the Trustee and each Holder or shall
supply to the Trustee for forwarding to each such Holder, without cost to such
Holder, copies of such reports and other information.
EVENTS OF DEFAULT
The following events are defined as "Events of Default" in the Indenture:
(a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise, whether or not such payment is
prohibited by the provisions described under "-- Ranking";
(b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30
days, whether or not such payment is prohibited by the provisions described
under "-- Ranking";
(c) default in the performance or breach of the provisions of the
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the assets of the Company or the failure to make or
consummate an Offer to Purchase in accordance with the "Limitation on Asset
Sales" or "Repurchase of Notes upon a Change of Control" covenant;
(d) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in the Indenture or under the Notes
(other than a default specified in clause (a), (b) or (c) above) and such
default or breach continues for a period of 30 consecutive days after
written notice by the Trustee or the Holders of 25% or more in aggregate
principal amount of the Notes;
(e) there occurs with respect to any issue or issues of Indebtedness
of the Company or any Significant Subsidiary having an outstanding
principal amount of $10 million or more in the aggregate for all such
issues of all such Persons, whether such Indebtedness now exists or shall
hereafter be created, (I) an event of default that has caused the holder
thereof to declare such Indebtedness to be due and payable prior to its
Stated Maturity and such Indebtedness has not been discharged in full or
such acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the
final (but not any interim) fixed maturity and such defaulted payment shall
not have been made, waived or extended within 30 days of such payment
default;
(f) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company or any Significant Subsidiary and shall not be
paid or discharged, and there shall be any period of 60 consecutive days
following entry of the final judgment or order that causes the aggregate
amount for all such final judgments or orders outstanding and not paid or
discharged against all such Persons to exceed $10 million during which a
stay of enforcement of such final judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Company or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B) appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) the winding up or liquidation of the affairs
of the Company or any Significant Subsidiary and, in each case, such decree
or order shall remain unstayed and in effect for a period of 60 consecutive
days; or
(h) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of
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the Company or any Significant Subsidiary or for all or substantially all
of the property and assets of the Company or any Significant Subsidiary or
(C) effects any general assignment for the benefit of creditors.
If an Event of Default (other than an Event of Default specified in clause
(g) or (h) above that occurs with respect to the Company) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes, then outstanding, by written notice to
the Company (and to the Trustee if such notice is given by the Holders), may,
and the Trustee at the request of such Holders shall, declare the principal of,
premium, if any, and accrued interest on the Notes to be immediately due and
payable. Upon a declaration of acceleration, such principal of, premium, if any,
and accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (e)
above has occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (e) shall be remedied or cured by the
Company or the relevant Significant Subsidiary or waived by the holders of the
relevant Indebtedness within 60 days after the declaration of acceleration with
respect thereto. If an Event of Default specified in clause (g) or (h) above
occurs with respect to the Company, the principal of, premium, if any, and
accrued interest on the Notes then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. The Holders of at least a majority in principal
amount of the outstanding Notes by written notice to the Company and to the
Trustee, may waive all past defaults and rescind and annul a declaration of
acceleration and its consequences if (i) all existing Events of Default, other
than the nonpayment of the principal of, premium, if any, and interest on the
Notes that have become due solely by such declaration of acceleration, have been
cured or waived and (ii) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction. For information as to the waiver of
defaults, see "-- Modification and Waiver."
The Holders of at least a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the Trustee
in personal liability, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of Holders of Notes not joining in the giving
of such direction and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes. A Holder
may not pursue any remedy with respect to the Indenture or the Notes unless: (i)
the Holder gives the Trustee written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of outstanding
Notes make a written request to the Trustee to pursue the remedy; (iii) such
Holder or Holders offer the Trustee indemnity satisfactory to the Trustee
against any costs, liability or expense; (iv) the Trustee does not comply with
the request within 60 days after receipt of the request and the offer of
indemnity; and (v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Notes do not give the Trustee a
direction that is inconsistent with the request. However, such limitations do
not apply to the right of any Holder of a Note to receive payment of the
principal of, premium, if any, or interest on, such Note or to bring suit for
the enforcement of any such payment, on or after the due date expressed in the
Notes, which right shall not be impaired or affected without the consent of the
Holder.
The Indenture requires certain officers of the Company to certify, on or
before a date not more than 90 days after the end of each fiscal year, that a
review has been conducted of the activities of the Company and its Restricted
Subsidiaries and the Company's and its Restricted Subsidiaries' performance
under the Indenture and that the Company has fulfilled all obligations
thereunder, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default and the nature and status thereof. The
Company will also be obligated to notify the Trustee of any default or defaults
in the performance of any covenants or agreements under the Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its property
and assets (as an entirety or substantially an entirety in one
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transaction or a series of related transactions) to, any Person or permit any
Person to merge with or into the Company unless:
(i) the Company shall be the continuing Person, or the Person (if
other than the Company) formed by such consolidation or into which the
Company is merged or that acquired or leased such property and assets of
the Company shall be a corporation organized and validly existing under the
laws of the United States of America or any jurisdiction thereof and shall
expressly assume, by a supplemental indenture, executed and delivered to
the Trustee, all of the obligations of the Company on all of the Notes and
under the Indenture;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a pro
forma basis, the Company or any Person becoming the successor obligor of
the Notes shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such
transaction;
(iv) immediately after giving effect to such transaction on a pro
forma basis the Company, or any Person becoming the successor obligor of
the Notes, as the case may be, could Incur at least $1.00 of Indebtedness
under the first paragraph of the "Limitation on Indebtedness" covenant;
provided that this clause (iv) shall not apply to a consolidation, merger
or sale of all (but not less than all) of the assets of the Company if all
Liens and Indebtedness of the Company or any Person becoming the successor
obligor on the Notes, as the case may be, and its Restricted Subsidiaries
outstanding immediately after such transaction would have been permitted
(and all such Liens and Indebtedness, other than Liens and Indebtedness of
the Company and its Restricted Subsidiaries outstanding immediately prior
to the transaction, shall be deemed to have been Incurred) for all purposes
of the Indenture; and
(v) the Company delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance with
clauses (iii) and (iv)) and Opinion of Counsel, in each case stating that
such consolidation, merger or transfer and such supplemental indenture
complies with this provision and that all conditions precedent provided for
herein relating to such transaction have been complied with;
provided, however, that clauses (iii) and (iv) above do not apply if, in the
good faith determination of the Board of Directors of the Company, whose
determination shall be evidenced by a Board Resolution, the principal purpose of
such transaction is to change the state of incorporation of the Company and any
such transaction shall not have as one of its purposes the evasion of the
foregoing limitations.
DEFEASANCE
Defeasance and Discharge. The Indenture provides that the Company will be
deemed to have paid and will be discharged from any and all obligations in
respect of the Notes on the 123rd day after the deposit referred to below, and
the provisions of the Indenture will no longer be in effect with respect to the
Notes (except for, among other matters, certain obligations to register the
transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes,
to maintain paying agencies and to hold monies for payment in trust) if, among
other things:
(A) the Company has deposited with the Trustee, in trust, money and/or
U.S. Government Obligations that through the payment of interest and
principal in respect thereof in accordance with their terms will provide
money in an amount sufficient to pay the principal of, premium, if any, and
accrued interest on the Notes on the Stated Maturity of such payments in
accordance with the terms of the Indenture and the Notes,
(B) the Company has delivered to the Trustee (i) either (x) an Opinion
of Counsel to the effect that Holders will not recognize income, gain or
loss for federal income tax purposes as a result of the Company's exercise
of its option under this "Defeasance" provision and will be subject to
federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such deposit, defeasance and
discharge had not occurred, which Opinion of Counsel must be based upon
(and accompanied by a copy of) a ruling of the Internal Revenue Service to
the same effect unless there
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has been a change in applicable federal income tax law after the Closing
Date such that a ruling is no longer required or (y) a ruling directed to
the Trustee received from the Internal Revenue Service to the same effect
as the aforementioned Opinion of Counsel and (ii) an Opinion of Counsel to
the effect that the creation of the defeasance trust does not violate the
Investment Company Act of 1940 and after the passage of 123 days following
the deposit, the trust fund will not be subject to the effect of Section
547 of the United States Bankruptcy Code or Section 15 of the New York
Debtor and Creditor Law,
(C) immediately after giving effect to such deposit on a pro forma
basis, no Event of Default, or event that after the giving of notice or
lapse of time or both would become an Event of Default, shall have occurred
and be continuing on the date of such deposit or during the period ending
on the 123rd day after the date of such deposit, and such deposit shall not
result in a breach or violation of, or constitute a default under, any
other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound,
(D) the Company is not prohibited from making payments in respect of
the Notes by the provisions described under "-- Ranking", and
(E) if at such time the Notes are listed on a national securities
exchange, the Company has delivered to the Trustee an Opinion of Counsel to
the effect that the Notes will not be delisted as a result of such deposit,
defeasance and discharge.
Defeasance of Certain Covenants and Certain Events of Default. The
Indenture further provides that the provisions of the Indenture will no longer
be in effect with respect to clauses (iii) and (iv) under "Consolidation, Merger
and Sale of Assets" and all the covenants described herein under "Covenants,"
clause (c) under "Events of Default" with respect to such clauses (iii) and (iv)
under "Consolidation, Merger and Sale of Assets," clause (d) under "Events of
Default" with respect to such other covenants and clauses (e) and (f) under
"Events of Default" shall be deemed not to be Events of Default upon, among
other things, the deposit with the Trustee, in trust, of money and/or U.S.
Government Obligations that through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued interest on the
Notes on the Stated Maturity of such payments in accordance with the terms of
the Indenture and the Notes, the satisfaction of the provisions described in
clauses (B)(ii), (C), (D) and (E) of the preceding paragraph and the delivery by
the Company to the Trustee of an Opinion of Counsel to the effect that, among
other things, the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and defeasance of certain
covenants and Events of Default and will be subject to federal income tax on the
same amount and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred.
Defeasance and Certain Other Events of Default. In the event the Company
exercises its option to omit compliance with certain covenants and provisions of
the Indenture with respect to the Notes as described in the immediately
preceding paragraph and the Notes are declared due and payable because of the
occurrence of an Event of Default that remains applicable, the amount of money
and/or U.S. Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on the Notes at the time of their Stated Maturity
but may not be sufficient to pay amounts due on the Notes at the time of the
acceleration resulting from such Event of Default. However, the Company will
remain liable for such payments.
MODIFICATION AND WAIVER
The Indenture may be amended, without the consent of any Holder, to: (i)
cure any ambiguity, defect or inconsistency in the Indenture; provided that such
amendments do not adversely affect the interests of the Holders in any material
respect; (ii) comply with the provisions described under "Consolidation, Merger
and Sale of Assets"; (iii) comply with any requirements of the Commission in
connection with the qualification of the Indenture under the Trust Indenture
Act; (iv) evidence and provide for the acceptance of appointment by a successor
Trustee; or (v) make any change that, in the good faith opinion of the Board of
Directors, does not materially and adversely affect the rights of any Holder.
Modifications and amendments of the Indenture may be made by the Company and the
Trustee with the consent of the Holders of not less than a majority in aggregate
principal amount of the outstanding Notes; provided, however, that no such
modification or
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amendment may, without the consent of each Holder affected thereby, (i) change
the Stated Maturity of the principal of, or any installment of interest on, any
Note, (ii) reduce the principal amount of, or premium, if any, or interest on,
any Note, (iii) change the place or currency of payment of principal of, or
premium, if any, or interest on, any Note, (iv) impair the right to institute
suit for the enforcement of any payment on or after the Stated Maturity (or, in
the case of a redemption, on or after the Redemption Date) of any Note, (v)
waive a default in the payment of principal of, premium, if any, or interest on
the Notes, (vi) modify the subordination provisions in a manner adverse to the
Holders or (vii) reduce the percentage or aggregate principal amount of
outstanding Notes the consent of whose Holders is necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS, OR
EMPLOYEES
The Indenture provides that no recourse for the payment of the principal
of, premium, if any, or interest on any of the Notes or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture, or in any of
the Notes or because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator, stockholder, officer, director, employee
or controlling person of the Company or of any successor Person thereof. Each
Holder, by accepting the Notes, waives and releases all such liability.
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of a Default,
the Trustee will not be liable except for the performance of such duties as are
specifically set forth in such Indenture. If an Event of Default has occurred
and is continuing, the Trustee will use the same degree of care and skill in its
exercise of the rights and powers vested in it under the Indenture as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights of
the Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions; provided, however, that if it acquires any
conflicting interest, it must eliminate such conflict or resign.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the New Notes will initially be issued in the
form of one or more registered New Notes in global form without interest coupons
(each a "Global Note"). Each Global Note will be deposited with the Trustee as
custodian for, and registered in the name of a nominee of, DTC.
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a Global
Note will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants). Holders may hold their interests in a
Restricted Global Note directly through DTC if they are participants in such
system, or indirectly through organizations which are participants in such
system.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture.
Payments of the principal of, and interest on, a Global Note will be made
to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither the Company, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
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The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records of
DTC or its nominee. The Company also expects that payments by participants to
owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for such customers. Such payments will be the
responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds.
The Company expects that DTC will take any action permitted to be taken by
a holder of Notes (including the presentation of Notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in a Global Note is credited and only in respect of such portion
of the aggregate principal amount of Notes as to which such participant or
participants has or have given such direction. However, if there is an Event of
Default under the Notes, DTC will exchange the Global Note for notes in
registered form without interest coupons ("Certificated Notes "), which it will
distribute to its participants.
The Company understands that: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies and certain other organizations that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly ("indirect participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in a Global Note among participants of DTC, it
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Notes and a successor depositary is not appointed by the Company
within 90 days, the Company will issue Certificated Notes in exchange for the
Global Notes. Holders of an interest in a Global Note may receive Certificated
Notes in accordance with the DTC's rules and procedures in addition to those
provided for under the Indenture.
REGISTRATION RIGHTS
The Company entered into the Registration Rights Agreement with the
Placement Agents, for the benefit of the Holders of Old Notes, pursuant to which
the Company agreed to use its best efforts, at its cost, to file and cause to
become effective a registration statement with respect to a registered offer to
exchange the Old Notes for an issue of senior subordinated notes of the Company
(the "Registered Notes") with terms identical to the Old Notes (except that the
Registered Notes will not bear legends restricting the transfer thereof). The
Registration Statement, of which this Prospectus is part, constitutes the
registration statement for purposes of the Registration Rights Agreement. Upon
the Registration Statement being declared effective, the Company shall offer the
New Notes in return for surrender of the Old Notes. The Exchange Offer will
remain open for not less than 20 business days after the date notice of the
Exchange Offer is mailed to Holders of the Old Notes. For each Old Note
surrendered to the Company under the Exchange Offer, the Holder of such Old Note
will receive a New Note of equal principal amount. Interest on each New Note
shall accrue from the last Interest Payment Date on which interest was paid on
the Old Notes so surrendered or, if no interest has been paid on such Old Notes,
from December 21, 1998. In the event that applicable
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interpretations of the staff of the Commission do not permit the Company to
effect the Exchange Offer, or under certain other circumstances, the Company
shall, at its cost, use its best efforts to cause to become effective a shelf
registration statement (the "Shelf Registration Statement") with respect to
resales of the Old Notes and to keep such Shelf Registration Statement effective
until the expiration of the time period referred to in Rule 144(k) under the
Securities Act after the December 21, 1998, or such shorter period that will
terminate when all Old Notes covered by the Shelf Registration Statement have
been sold pursuant to the Shelf Registration Statement. The Company shall, in
the event of such a shelf registration, provide to each Holder copies of the
prospectus, notify each Holder of Old Notes when the Shelf Registration
Statement for the Old Notes has become effective and take certain other actions
as are required to permit resales of the Old Notes. A Holder that sells its Old
Notes pursuant to the Shelf Registration Statement generally will be required to
be named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement that are applicable
to such a Holder (including certain indemnification obligations).
In the event that the Exchange Offer is not consummated and a Shelf
Registration Statement is not declared effective on or prior to June 21, 1999,
the annual interest rate borne by the Old Notes will be increased by .5% per
annum until the Exchange Offer is consummated or the Shelf Registration
Statement is declared effective.
If the Company effects the Exchange Offer, the Company will be entitled to
close the Exchange Offer 20 business days after the commencement thereof,
provided that it has accepted all Old Notes theretofore validly surrendered in
accordance with the terms of the Exchange Offer. Old Notes not tendered in the
Exchange Offer shall bear interest at 9 1/4% per annum and be subject to all of
the terms and conditions specified in the Indenture and to the transfer
restrictions set forth in the legend on the certificate for such Old Notes."
This summary of certain provisions of the Registration Rights Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the Registration Statement
of which this Prospectus is a part.
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following summary describes certain material United States federal
income tax considerations associated with the exchange of the Old Notes for the
New Notes pursuant to the Exchange Offer and the ownership and disposition of
the Notes. The summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), and regulations, rulings and judicial decisions as of the date
hereof, all of which may be repealed, revoked or modified with possible
retroactive effect. This summary is limited to investors who will hold the Notes
as capital assets within the meaning of Section 1221 of the Code and does not
deal with holders that may be subject to special tax rules (including, but not
limited to, insurance companies, tax-exempt organizations, financial
institutions, dealers in securities or currencies, holders whose functional
currency is not the U.S. dollar, holders who will hold the Notes as a hedge
against currency risks or as part of a straddle, synthetic security, conversion
transaction or other integrated investment comprised of the Notes and one or
more other investments or, except to the extent discussed below, Non-United
States Holders (as defined below). The summary is applicable only to purchasers
of Notes in the Offering who acquire the Notes at the initial offering price and
does not address other purchasers.
This summary is for general information only and does not address all
aspects of federal income taxation that may be relevant to holders of the Notes
in light of their particular circumstances, and it does not address any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction. Prospective investors should consult their own tax advisors as to
the particular tax consequences of the exchange of Old Notes for New Notes and
the ownership and disposition of the Notes, including the applicability and
effect of any United States Federal, state, local and foreign income and other
tax laws.
As used herein, the term "United States Holder" means a beneficial owner of
Notes that is (i) a citizen or resident of the United States for U.S. federal
income tax purposes, (ii) a corporation created or organized under the laws of
the United States, any State thereof or the District of Columbia, (iii) an
estate the income of which is subject to United States federal income tax
without regard to its source or (iv) a trust if a court within the United States
is able to exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all substantial
decisions of the trust. A "Non-United States Holder" is any beneficial holder
that is not a United States Holder.
UNITED STATES HOLDERS AND NON-UNITED STATES HOLDERS
There will be no United States Federal income tax consequences to a United
States Holder or Non-United States Holder exchanging an Old Note for a New Note
pursuant to the Exchange Offer and such Holder will have the same adjusted basis
and holding period in the New Note as it had in the Old Note immediately before
the exchange.
UNITED STATES HOLDERS
Stated Interest on Notes
Stated interest on a Note generally will be taxable to a United States
Holder as ordinary income at the time it accrues or is received in accordance
with the United States Holder's method of accounting for U.S. federal income tax
purposes.
Sale, Exchange or Retirement of Notes
Upon the sale, exchange, redemption, retirement or other disposition of a
Note, a United States Holder generally will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange, redemption,
retirement or other disposition (not including amounts attributable to accrued
but unpaid interest, which will be taxable as such) and such holder's adjusted
tax basis in the Note. A United States Holder's adjusted tax basis in a Note
will, in general, be the United States Holder's cost therefor. Such gain or loss
will be capital gain or loss, and, under recently adopted amendments to the
Code, net capital gain (i.e., generally capital gain in excess of capital loss)
recognized by an individual United States Holder upon the disposition of a Note
that has been held for more than one year generally will be subject to tax at a
maximum rate of 20% or, in the case of a Note that has been held for one year or
less, at ordinary income tax rates. The deductibility of capital losses is
subject to limitations.
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Market Discount
United States Holders, other than original purchasers of the Old Notes in
the offering, should be aware that the sale of the New Notes may be affected by
the market discount provisions of the Code.
Market Discount Rules. The market discount rules generally provide that if
a United States Holder of a Note purchased the Note, subsequent to the original
offering, at a "market discount" (i.e., at an amount less than the adjusted
issue price of the Note as determined on the date of such purchase) in excess of
a statutorily-defined de minimis amount, and thereafter recognizes gain upon a
disposition (including a partial redemption) of the New Note received in
exchange for an Old Note, the lesser of such gain or the portion of the market
discount that accrued while the Old Note and New Note were held by such United
States Holder will be treated as ordinary interest income at the time of
disposition. The rules also provide that a United States Holder who acquires a
Note at a market discount may be required to defer a portion of any interest
expense that may otherwise be deductible on any indebtedness incurred or
maintained to purchase or carry such Note until the United States Holder
disposes of such Note in taxable transaction. If a Holder of such a Note elects
to include market discount in income currently, both of the foregoing rules
would not apply.
NON-UNITED STATES HOLDERS
Under present U.S. federal income tax law, subject to the discussion of
backup withholding and information reporting below:
(a) payments of principal and interest on the Notes to any Non-United
States Holder will not be subject to U.S. federal income or withholding tax
provided that (i) the Non-United States Holder does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote, (ii) the Non-United
States Holder is not a bank receiving interest pursuant to a loan agreement
entered into in the ordinary course of its trade or business, (iii) the
Non-United States Holder is not a controlled foreign corporation that is
related to the Company (directly or indirectly) through stock ownership,
(iv) such interest payments are not effectively connected with a United
States trade or business and (v) the certification set forth in Section
871(h) or Section 881(c) of the Code has been fulfilled with respect to the
beneficial owner. Such certification will be satisfied if the beneficial
owner of the Note certifies on IRS Form W-8 or a substantially similar
substitute form, under penalties of perjury, that it is not a United States
person and provides its name and address, and (i) such beneficial owner
files such form with the withholding agent or (ii) in the case of a Note
held by a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "financial institution") and holds the Note, such
financial institution certifies to the Company or its agent under penalties
of perjury that such statement has been received from the beneficial owner
by it or by a financial institution between it and the beneficial owner and
furnishes the withholding agent with a copy thereof; and
(b) a Non-United States Holder will not be subject to U.S. federal
income tax on gain realized on the sale, exchange, redemption retirement or
other disposition of a Note, unless (i) the gain is effectively connected
with a trade or business carried on by such holder within the United States
or, if a treaty applies, attributable to the United States permanent
establishment maintained by the holder, or (ii) the holder is an individual
who is present in the United States for 183 days or more in the taxable
year of disposition and certain other requirements are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, payments of interest and the proceeds of the sale, exchange,
redemption, retirement or other disposition of the Notes payable by a U.S.
paying agent or other U.S. intermediary will be subject to information
reporting. In addition, backup withholding at a rate of 31 percent will apply to
these payments if the holder fails to provide an accurate taxpayer
identification number (in the case of a United States Holder) or the
certification described above (in the case of a Non-United States Holder) or
other evidence of exempt status or fails to report all interest and dividends
required to be shown on its U.S. federal income tax returns. Certain United
States Holders (including, among others, corporations) and Non-United States
Holders that comply with certain certification requirements are not subject to
backup withholding. Any amount paid as
90
<PAGE> 92
backup withholding will be creditable against the holder's U.S. federal income
tax liability provided that the required information is timely furnished to the
IRS. Prospective investors should consult their tax advisors as to their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that for a period of 180 days after
the Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of the Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such document
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
Following consummation of the Exchange Offer, the company may, in its sole
discretion, commence one or more additional exchange offers to holders of Old
Notes who did not exchange their Old Notes for New Notes in the Exchange Offer
on terms which may differ from those contained in the Registration Rights
Agreement. This Prospectus, as it may be amended of supplemented from time to
time, may be used by the Company in connection with any such additional exchange
offers. Such additional exchange offers will take place from time to time until
all outstanding Old Notes have been exchanged for New Notes.
LEGAL MATTERS
The legality of the New Notes offered hereby is being passed upon for the
Company by Skadden, Arps, Slate, Meagher & Flom LLP and by Michael R. Kargula,
Executive Vice President, General Counsel and Secretary of the Company.
EXPERTS
The consolidated statements of financial position of Primark Corporation
and subsidiaries as of December 31, 1996 and 1997, and the related consolidated
statements of income, common shareholder's equity and cash flows for each of the
three years in the period ended December 31, 1997 included in this Prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein, and are included in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
91
<PAGE> 93
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the SEC.
Such reports, proxy statements and other information can be inspected and copied
at the Public Reference Section of the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World
Trade Center, Suite 1300, New York, New York 10048. Copies of such reports,
proxy statements and other information can also be obtained from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of prescribed rates, or in certain cases by accessing the SEC's
World Wide Web site of http://www.sec.gov. The public may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The Company's common stock is quoted on the NYSE and the Pacific Exchange under
the symbol "PMK," and such reports, proxy statements and other information
concerning the Company also can be inspected at the offices of the NYSE, 20
Broad Street, New York, New York 10005, and the Pacific Exchange, 301 Pine
Street, San Francisco, California 94104.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows the Company to incorporate by reference the information
filed by the Company with the SEC, which means that the Company can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
Prospectus, and information that the Company later files with the SEC will
automatically update and supersede this information. The Company incorporates by
reference into this Prospectus the following documents or information filed with
the SEC:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (the "1997 10-K"), filed with the SEC on March 30, 1998,
as amended by the amendment to the 1997 10-K filed with the SEC on April 8,
1998;
2. The Company's Quarterly Reports on Form 10-Q filed with the SEC on
May 12, 1998, August 13, 1998 and November 13, 1998;
3. The Company's Current Reports on Form 8-K filed with the SEC on
March 3, 1998, March 6, 1998, March 20, 1998, April 8, 1998, July 7, 1998
and October 6, 1998; and
4. All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the
Registration Statement of which this Prospectus is part and prior to the
effectiveness thereof or subsequent to the date of this Prospectus and
prior to the termination of the offering made hereby.
As noted above, any statement contained in this Prospectus, or in any
documents incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a subsequent statement contained in this
Prospectus or in any subsequently filed document which also is or is deemed to
be incorporated by reference in this Prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available without charge upon
written or oral request from the Stephen H. Curran, Executive Vice President and
Chief Financial Officer of the Company at the Company's principal executive
offices located at 1000 Winter Street, Suite 4300N, Waltham, Massachusetts
02451, telephone number (781) 466-6611.
------------------------
This Exchange Offer is not being made to, nor will the Company accept
surrenders for exchange from, holders of outstanding Old Notes in any
jurisdiction in which this Exchange Offer or the acceptance thereof would not be
in compliance with the securities or blue sky laws of such jurisdiction.
92
<PAGE> 94
PRIMARK CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Statements of Financial Position at September
30, 1998 and at December 31, 1997 Unaudited............... F-2
Consolidated Statements of Income for the Three and Nine
Months Ended September 30, 1998 and 1997 Unaudited........ F-3
Consolidated Statements of Retained Earnings for the Three
and Nine Months Ended September 30, 1998 and 1997
Unaudited................................................. F-4
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1998 and 1997 Unaudited............... F-5
Notes to the Consolidated Financial Statements at September
30, 1998 Unaudited........................................ F-6
Report of Independent Auditors.............................. F-11
Consolidated Statements of Income for the Years Ended 1997,
1996 and 1995............................................. F-12
Consolidated Statements of Cash Flows for the Years Ended
1997, 1996 and 1995....................................... F-13
Consolidated Statements of Financial Position for the Years
Ended 1997, 1996 and 1995................................. F-14
Consolidated Statements of Common Shareholders' Equity for
the Years Ended 1997, 1996 and 1995....................... F-15
Notes to the Consolidated Financial Statements at December
31, 1997.................................................. F-16
</TABLE>
F-1
<PAGE> 95
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents, at cost (which approximates
market value).......................................... $ 30,022 $ 12,780
Billed receivables less allowance for doubtful accounts
of $2,833 and $2,756, respectively..................... 89,731 70,084
Unbilled and other receivables.......................... 11,603 9,546
Federal and state income tax benefit.................... -- 21,304
Other current assets.................................... 27,690 24,036
Net assets of discontinued operations (Note 2).......... 13,198 197,330
-------- ----------
172,244 335,080
-------- ----------
DEFERRED CHARGES AND OTHER ASSETS
Goodwill, less accumulated amortization of $77,021 and
$41,834, respectively.................................. 517,547 556,737
Capitalized data and other intangible assets, less
accumulated amortization of $27,487 and $20,710,
respectively........................................... 39,360 47,512
Capitalized software, less accumulated amortization of
$16,168 and $20,162, respectively...................... 30,077 48,645
Other................................................... 4,454 8,980
-------- ----------
591,438 661,874
-------- ----------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Computer equipment...................................... 59,374 63,169
Leasehold improvements.................................. 16,594 17,631
Other................................................... 26,530 9,806
-------- ----------
102,498 90,606
Less-accumulated depreciation........................... (54,852) (43,751)
-------- ----------
47,646 46,855
-------- ----------
$811,328 $1,043,809
======== ==========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable........................................... $ 93,565 $ 27,602
Accounts Payable........................................ 14,592 14,125
Accrued employee payroll and benefits................... 26,849 24,585
Taxes payable........................................... 61,222 10,717
Deferred income......................................... 78,366 69,931
Current portion of long-term debt, including capital
lease obligations...................................... 817 11,301
Other accrued expenses.................................. 58,253 43,814
-------- ----------
333,664 202,075
-------- ----------
LONG-TERM DEBT AND OTHER LIABILITIES
Long-term debt, including capital lease obligations..... 8,842 331,260
Deferred income taxes................................... 16,261 21,133
Other................................................... 15,740 18,370
-------- ----------
40,843 370,763
-------- ----------
Total liabilities.................................. 374,507 572,838
COMMITMENTS AND CONTINGENCIES (NOTE 8)
COMMON SHAREHOLDERS' EQUITY
Common stock and additional paid-in-capital............. 88,862 275,370
Retained earnings....................................... 350,454 198,658
Cumulative foreign translation adjustment............... (2,495) (3,057)
-------- ----------
Total common shareholders' equity.................. 436,821 470,971
-------- ----------
Total liabilities and shareholders' equity......... $811,328 $1,043,809
======== ==========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-2
<PAGE> 96
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
OPERATING REVENUES....................................... $108,534 $99,113 $321,819 $294,726
OPERATING EXPENSES
Cost of services..................................... 45,020 37,361 129,221 116,783
Selling, general and administrative.................. 40,284 37,418 120,933 115,957
Depreciation......................................... 4,328 4,306 12,831 13,187
Amortization of goodwill............................. 3,820 3,957 11,755 11,823
Amortization of other intangible assets.............. 2,991 4,233 12,164 12,108
Restructuring Charge................................. -- -- 68,677 6,800
-------- ------- -------- --------
Total operating expenses........................ 96,443 87,275 355,581 276,658
-------- ------- -------- --------
Operating income................................ 12,091 11,838 (33,762) 18,068
-------- ------- -------- --------
OTHER INCOME AND (DEDUCTIONS)
Interest expense..................................... (2,064) (4,090) (7,618) (11,805)
Foreign currency gain (loss)......................... 636 (12) 996 2,325
Investment and other income (deductions) -- net...... (70) 288 1,840 (377)
-------- ------- -------- --------
Total other income and (deductions)............. (1,498) (3,814) (4,782) (9,857)
-------- ------- -------- --------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES.... 10,593 8,024 (38,544) 8,211
INCOME TAX EXPENSE (BENEFIT)............................. 4,682 4,637 (100) 8,533
-------- ------- -------- --------
INCOME FROM CONTINUING OPERATIONS........................ 5,911 3,387 (38,444) (322)
-------- ------- -------- --------
DISCONTINUED OPERATIONS
Discontinued operations, net of income tax
(benefit)/expense of $103,000, $(560,000),
$(700,000) and $(892,000) respectively............ 1,835 4,216 7,947 13,074
Gain on disposal of discontinued operations, net of
income tax expense of $7,683,000, $0, $108,735,000
and $0, respectively.............................. 14,189 -- 187,414 --
-------- ------- -------- --------
Total Discontinued Operations................... 16,024 4,216 195,361 13,074
-------- ------- -------- --------
INCOME BEFORE EXTRAORDINARY LOSS......................... 21,935 7,603 156,917 12,752
EXTRAORDINARY ITEM-LOSS ON EARLY EXTINGUISHMENT OF DEBT,
net of income tax benefit of $3,614,000 and $1,379,000
respectively........................................... -- -- (5,121) (1,955)
-------- ------- -------- --------
NET INCOME APPLICABLE TO COMMON STOCK.................... $ 21,935 $ 7,603 $151,796 $ 10,797
======== ======= ======== ========
EARNINGS PER COMMON SHARE -- BASIC
Income from continuing operations.................... $ 0.27 $ 0.13 $ (1.52) $ (0.01)
Discontinued operations.............................. 0.73 0.16 7.71 0.49
Extraordinary item................................... -- -- (0.20) (0.07)
-------- ------- -------- --------
Total earnings per share........................ $ 0.99 $ 0.29 $ 5.99 $ 0.41
======== ======= ======== ========
EARNINGS PER COMMON SHARE -- ASSUMING DILUTION
Income from continuing operations.................... $ 0.26 $ 0.12 $ -- $ --
Discontinued operations.............................. 0.70 0.15 -- --
Extraordinary item................................... -- -- -- --
-------- ------- -------- --------
Total earnings per share........................ $ 0.96 $ 0.28 $ -- $ --
======== ======= ======== ========
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING
Basic................................................ 22,088 25,931 25,343 26,415
Effect of Dilutive Securities........................ 709 1,417 -- --
-------- ------- -------- --------
Diluted.............................................. 22,797 27,348 25,343 26,415
-------- ------- -------- --------
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-3
<PAGE> 97
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Balance -- Beginning of period..................... $328,519 $182,137 $198,658 $178,943
Add -- Net Income.................................. 21,935 7,603 151,796 10,797
-------- -------- -------- --------
Balance -- End of period........................... $350,454 $189,740 $350,454 $189,740
======== ======== ======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-4
<PAGE> 98
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1998 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................. $ 151,796 $ 10,797
Adjustments to reconcile net income to net cash flows
from operating activities:
Discontinued operations................................ (7,947) (13,074)
Gain on Sale of subsidiary............................. (187,414)
Loss on extinguishment of intangible assets............ 60,650 18,749
Extraordinary loss on early extinguishment of debt..... 5,121 1,955
Cash provided by (contributed to) discontinued
operations............................................ (9,270) (9,149)
Depreciation and amortization.......................... 36,750 40,656
Other charges and credits -- net....................... (5,455) (5,549)
Changes in operating working capital, excluding the
effect of acquisitions:
Increase in billed, unbilled and other
receivables-net................................. (21,121) (5,028)
(Increase) decrease in other current assets....... (3,392) 4,482
Decrease (increase) in accounts payable........... 1,581 (6,427)
Increase in accrued payroll and benefits.......... 1,587 87
(Decrease) increase in income and other taxes
payable -- net.................................. 8,164 (5,745)
Increase in deferred income....................... 8,032 2,062
Increase in other current liabilities............. 13,228 4,596
---------- ----------
Net cash provided from operating
activities................................ 52,310 38,412
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of short-term notes payable................... 665,135 157,746
Repayment of short-term notes payable.................. (599,172) (154,795)
Issuance of long-term debt............................. -- 100,000
Repayment of long-term debt............................ (332,504) --
Common stock repurchased and retired................... (195,417) (26,633)
Common stock issuance.................................. 8,909 3,928
Debt issue costs and other............................. (939) (2,831)
Call Premium........................................... (4,900) --
---------- ----------
Net cash provided from financing
activities................................ (458,888) 77,415
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................................... (14,486) (17,576)
Capitalized software................................... (12,591) (14,121)
Purchase of subsidiaries -- net of acquired cash....... (4,826) (88,090)
Proceeds from sale of subsidiary....................... 502,000 --
Tax paid on sale of subsidiary......................... (43,000) --
Other -- net........................................... 171 1,087
Cash provided by (contributed to) discontinued
operations............................................ (3,495) (5,911)
---------- ----------
Net cash used for investing activities....... 423,773 (124,611)
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH..................... 47 (344)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS........ 17,242 (9,128)
CASH AND CASH EQUIVALENTS, JANUARY 1,....................... 12,780 25,276
---------- ----------
CASH AND CASH EQUIVALENTS, SEPTEMBER 30,.................... $ 30,022 $ 16,148
========== ==========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-5
<PAGE> 99
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying balance sheets and related
interim statements of income and cash flows include all adjustments (consisting
only of normal recurring items) necessary for their fair presentation in
conformity with generally accepted accounting principles. Preparing financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues, and expenses. Examples
include provision for bad debts and the length of asset lives. Actual results
may differ from these estimates. Interim results are not necessarily indicative
of results for a full year. The information included in this Form 10-Q should be
read in conjunction with Management's Discussion and Analysis and financial
statements and notes thereto included in the Primark Corporation 1997 Annual
Report on Form 10-K.
2. DISCONTINUED OPERATIONS
The accompanying consolidated financial statements reflect the operating
results of TASC and TIMCO separately from the Company's continuing operations
for all periods presented. Interest expense has been allocated to discontinued
operations based upon the ratio of net assets to total consolidated net assets.
The net assets of discontinued operations represents the net book value of the
Company's investment in TASC and TIMCO and consists principally of working
capital, fixed assets, goodwill and other non-current assets and liabilities.
A) Sale of TASC
On April 1, 1998, the Company completed the sale of TASC and its affiliated
weather information companies to Litton Industries for $432 million in cash plus
an estimated equity adjustment of $11.5 million. The equity adjustment is based
upon changes in TASC's consolidated equity account, less certain inter-company
transactions, from September 30, 1997 through the date of the closing. On July
27, 1998, Litton sent notification that it was contesting specific components of
the equity adjustment totaling $4.2 million. Both Litton and the Company are in
the process of establishing the protocol to resolve all disputed amounts.
The Company recorded a gain on the sale of $173.2 million which includes
the $11.5 million equity adjustment, transaction costs of $5.4 million, taxes of
$101.1 million and the net book value of TASC's assets. The cash, net of all
transaction costs and taxes, to be received by the Company from the foregoing
sale will be approximately $337.0 million.
B) Sale of TIMCO
On September 22, 1998, the Company completed the sale of all of the
outstanding common stock of its heavy aircraft maintenance unit, the Triad
International Maintenance Corporation (TIMCO), to Aviation Sales Maintenance,
Repair & Overhaul Company (AVS), a division of Aviation Sales Company. The
transaction was executed in accordance with a Stock Purchase Agreement dated
August 10, 1998 for a cash purchase price of $70 million. Pursuant to the Stock
Purchase Agreement, a working capital adjustment of $1.3 million, based upon
TIMCO's closing balance sheet as of September 22, 1998, has been recorded as a
receivable at September 30, 1998. The $1.3 million was received by wire in
November, 1998.
The Company recorded a gain on the sale of $14.2 million which includes the
$1.3 million working capital adjustment, transaction costs of $850,000, taxes of
$8.7 million and the net book value of TIMCO's assets. The cash, net of all
closing adjustments and taxes to be received by the Company from the foregoing
sale will be approximately $52.0 million.
F-6
<PAGE> 100
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
DISCONTINUED OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
QUARTER ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------- ----------------
1998 1997 1998 1997
---- ---- ---- ----
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Income/(Loss)
TASC...................................... $ -- $4,211 $3,755 $13,428
TIMCO..................................... 1,835 5 4,192 (354)
------ ------ ------ -------
Total................................ $1,835 $4,216 $7,947 $13,074
------ ------ ------ -------
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C> <C> <C>
Net Assets
TASC............................... $11,500 $155,376
TIMCO.............................. 1,698 41,954
------- --------
Total......................... $13,198 $197,330
======= ========
</TABLE>
3. RESTRUCTURING AND INTEGRATION CHARGES
Effective June 1, 1998, the Company was reorganized in order to
strategically focus solely on its information services businesses. In connection
with this reorganization, the Company recorded a pre-tax charge of $77.4
million, of which $8.7 million is recorded as an Extraordinary Item (see
Refinancing Footnote) and the remaining $68.7 million is recorded within
operating expenses for direct and other reorganization related costs.
The charge included the write-off of intangible assets for (i) $25.0
million of previously capitalized software related to the planned integration of
several product offerings on common software platforms, (ii) $1.5 million of
data that has been determined to be duplicative and will not be used as a result
of the software platform integration previously discussed, (iii) write-off of
$23.9 million of goodwill associated with software and data written off which
was established as part of purchase accounting, (iv) write-off of $7.2 million
of goodwill related to DAFSA, and (v) write-off of $3.1 million of a trademark
no longer used in the restructured organization.
An additional $8.0 million of the restructuring charge relates primarily to
the integration of domestic and international sales offices and efficiencies
gained from technological advancements that will result in the phased reduction
of approximately 61 employees.
There was no utilization of the restructure accrual in the third quarter.
The remaining accrual is expected to be utilized within one year. Details of the
unutilized restructuring and integration costs as of September 30, 1998 are as
follows (000's):
<TABLE>
<CAPTION>
SECOND QUARTER UTILIZED SEPTEMBER 30,
1998 PROVISION TO DATE 1998 PROVISION
-------------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Abandonment of leased facilities, including
leasehold improvements.......................... $5,156 $ -- $5,156
Salaries and termination benefits................. 2,871 185 2,686
------ ---- ------
Total........................................ $8,027 $185 $7,842
====== ==== ======
</TABLE>
Cash flow expenditures, net of tax recovery, will be funded by the
Company's cash flows from operating activities. The overall restructuring plan,
when fully implemented, will reduce amortization and other costs by
F-7
<PAGE> 101
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
over $7.0 million, net of tax, for each of the next several years. The 1997
restructuring charges relating specifically to DAFSA and Disclosure have been
fully utilized in prior quarters.
4. REFINANCING
On April 1, 1998, the Company amended the terms of its revolving credit
facility and term loan agreement. Under the terms of the revised agreement,
which became effective April 1, 1998, the Company used the proceeds from the
sale of TASC to (i) prepay all amounts outstanding on the Company's $112 million
senior callable bonds, including a 4.375% premium aggregating $4.9 million, (ii)
prepay $220 million of the Company's outstanding term loan together with accrued
interest thereon, and (iii) prepay approximately $500,000 of the Company's other
indebtedness.
In conjunction with the above, the Company replaced its outstanding $75
million credit facility with a $225 million revolving credit facility which
expires in 2002. Interest on the borrowings under the new revolving credit
facility is payable at rates ranging from 0.375% to 1.00% above the current
prevailing LIBOR rate of interest. Pursuant to the credit facility negotiations,
the Company incurred fees of $125,000 upon the sale of TASC and $325,000 for
increasing the amounts allowed to be drawn on the line for the repurchase of
Company shares as part of the "Dutch Auction" self-tender offer.
As a result of the prepayment of debt and amended terms of the revolving
credit facility, the Company wrote off the associated deferred financing costs,
and paid a call premium of $4.9 million related to the prepayment of the $112
million of senior callable bonds. This resulted in an extraordinary loss of $8.7
million, or $5.1 million on an after tax basis for the quarter ended June 30,
1998. As of September 30, 1998, $93,565,000 is outstanding under the revolving
credit facility.
5. REPURCHASE OF COMMON STOCK
On May 20, 1998, the Company announced a "Dutch Auction" self-tender offer,
which expired on June 17, 1998. The Company purchased 4,540,000 shares at $34
per share under this arrangement. Total cost of these shares was $154.6 million,
including legal and accounting fees. On July 3, 1998, the Company implemented an
open market purchase program to buy up to 2,000,000 shares of its common stock
from time to time, depending on market conditions. As of September 30, 1998,
1,518,500 shares had been repurchased at a total cost of $40.8 million. On
October 2, 1998, the Company purchased additional 50,000 shares at a total cost
of $1,454,000. Year to date, the Company has purchased a total of 6,108,500
shares at a total cost of $196.6 million, representing approximately 22.5% of
its total outstanding common stock. On November 10, 1998, the Company announced
that the Board of Directors approved the expansion of the open market purchase
program by an additional 2,000,000 shares, bringing the total potential buyback
to 8,540,000 shares, or approximately 31% of the Company's total outstanding
before the "Dutch Auction." The Company is using proceeds from the sale of TASC
and TIMCO as well as its revolving credit facility to fund the common stock
repurchases.
6. EARNINGS PER SHARE
In March 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 128, Earnings Per Share, which became effective for fiscal years ending
after December 15, 1997. The prior years' earnings per share have been
retroactively restated in accordance with this statement. Basic earnings per
share was determined by dividing net income by the weighted average shares of
common stock outstanding during the year. Diluted earnings per share reflects
the dilution due to stock options based on the treasury stock method.
SFAS No. 128, states that if there is a loss from continuing operations, a
company should not include options and other potential common shares in the
denominator of a dilutive per-share computation even if including these
potential common shares in other dilutive per-share computations may be dilutive
to their comparable basic per-share amounts. Therefore, the "Earnings Per Common
Share -- Basic and Dilutive"
F-8
<PAGE> 102
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
included within the Company's Statements of Income exclude the dilutive effect
of options and other potential common shares for the nine months ended September
30, 1998 and 1997, respectively.
If options and other potential common shares were included, weighted
average common and common equivalent shares outstanding and the related dilutive
earnings per common share would have been as follows (in thousands except per
share amounts):
PRO-FORMA WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
----------------
1998 1997
---- ----
<S> <C> <C>
Basic....................................................... 25,343 26,415
Effect of Dilutive Securities............................... 1,042 1,163
------ ------
Diluted..................................................... 26,385 27,578
------ ------
</TABLE>
PRO-FORMA EARNINGS PER COMMON SHARE -- ASSUMING DILUTION BENEFIT
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
----------------
1998 1997
---- ----
<S> <C> <C>
Income from continuing operations........................... $(1.46) $(0.01)
Discontinued operations..................................... 7.40 0.47
Extraordinary item.......................................... (0.19) (0.07)
------ ------
Total earnings per share............................... $ 5.75 $ 0.39
------ ------
</TABLE>
7. NEWLY ISSUED ACCOUNTING STANDARDS
Effective January 1, 1998, the Company adopted the provisions of the
American Institute of Certified Public Accountants (AICPA) Statements of
Positions (SOP) No. 97-2, "Software Revenue Recognition," and No. 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." Adoption of these pronouncements did not have a material effect
on the reported results of operations or financial position.
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
130, "Reporting Comprehensive Income," which was issued by the Financial
Accounting Standards Board (FASB) in June of 1997. This standard requires
companies to report and display comprehensive income and its components in a
full set of general-purpose financial statements beginning with this year's
Annual Report on Form 10-K. The following table provides a reconciliation of net
income to comprehensive income.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1998 1997 1998 1997
---- ---- ---- ----
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Net Income.................................... $21,935 $ 7,603 $151,796 $10,797
Cumulative Translation Adjustment............. 1,239 4,694 562 2,328
Tax Benefit of Option Exercise................ 83 406 2,568 778
------- ------- -------- -------
Comprehensive Income.......................... $23,257 $12,703 $154,926 $13,903
</TABLE>
Also in June of 1997, the FASB issued SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information," which will be applicable
beginning with this year's Annual Report on Form 10-K.
F-9
<PAGE> 103
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for fiscal years beginning after
June 15, 1999. The new standard requires that all companies record derivatives
on the balance sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. Management is currently assessing the impact of SFAS No.
133 on the financial statements of the Company.
8. CONTINGENCIES
There have been no other significant developments with respect to the
Company's contingent liabilities which were disclosed in the Company's 1997
Annual Report on Form 10-K. Management cannot predict the final disposition of
such issues, but believes that adequate provision has been made in the financial
statements and that the ultimate resolution of any outstanding issues will not
have a material adverse effect on the Company's financial condition.
F-10
<PAGE> 104
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS OF PRIMARK CORPORATION:
We have audited the accompanying consolidated statements of financial
position of Primark Corporation and its subsidiaries as of December 31, 1997 and
1996 and the related consolidated statements of income, cash flows and common
shareholders' equity for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Primark Corporation and its
subsidiaries at December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
--------------------------------------
Deloitte & Touche LLP
Boston, Massachusetts
February 10, 1998
(March 30, 1998 as to Note 14 to the Consolidated Financial Statements)
F-11
<PAGE> 105
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
IN THOUSANDS EXCEPT PER SHARE AMOUNTS FOR YEARS ENDED DECEMBER 31 1997 1996 1995
- ----------------------------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
OPERATING REVENUES............................................ $397,875 $277,063 $184,779
-------- -------- --------
OPERATING EXPENSES
Cost of services.............................................. 157,327 104,479 66,063
Selling, general and administrative........................... 151,559 111,463 71,921
Depreciation.................................................. 17,371 12,318 8,176
Amortization of goodwill...................................... 15,805 10,616 6,803
Amortization of other intangible assets....................... 17,029 10,348 10,930
Restructuring charge (Note 4)................................. 6,800 -- --
-------- -------- --------
Total operating expenses............................ 365,891 249,224 163,893
-------- -------- --------
OPERATING INCOME.............................................. 31,984 27,839 20,886
-------- -------- --------
OTHER INCOME AND (DEDUCTIONS)
Investment income............................................. 1,085 2,675 967
Interest expense.............................................. (15,986) (12,468) (8,377)
Foreign currency gain (loss).................................. 1,831 1,836 (2,620)
Other......................................................... 1,039 66 (845)
-------- -------- --------
Total other income and (deductions)................. (12,031) (7,891) (10,875)
-------- -------- --------
Income From Continuing Operations Before Income Taxes......... 19,953 19,948 10,011
Income Tax Expense............................................ 12,963 7,432 4,630
-------- -------- --------
Income From Continuing Operations............................. 6,990 12,516 5,381
-------- -------- --------
DISCONTINUED OPERATIONS (NOTE 3)
Discontinued operations, net of income tax expense of $11,988,
$14,005 and $10,482, respectively........................... 14,680 16,192 13,469
Gain on disposal of discontinued operations, net of income tax
expense of $5,407........................................... -- 8,400 --
-------- -------- --------
Total Discontinued Operations....................... 14,680 24,592 13,469
-------- -------- --------
Income Before Extraordinary Loss.............................. 21,670 37,108 18,850
Extraordinary Loss On Early Extinguishment Of Debt (Note 6),
net of income tax benefit of $1,379 in 1997 and $288 in
1995........................................................ (1,955) -- (534)
-------- -------- --------
Net Income.................................................... 19,715 37,108 18,316
Dividends On Preferred Stock.................................. -- (359) (1,434)
-------- -------- --------
Net Income Applicable To Common Stock......................... $ 19,715 $ 36,749 $ 16,882
======== ======== ========
BASIC EARNINGS PER COMMON SHARE (NOTE 8)
Income from continuing operations............................. $ 0.26 $ 0.49 $ 0.21
Discontinued operations....................................... 0.56 0.99 0.70
Extraordinary loss............................................ (0.07) -- (0.03)
-------- -------- --------
Net income.................................................... $ 0.75 $ 1.48 $ 0.88
======== ======== ========
EARNINGS PER COMMON SHARE -- ASSUMING DILUTION (NOTE 8)
Income from continuing operations............................. $ 0.25 $ 0.46 $ 0.19
Discontinued operations....................................... 0.53 0.92 0.65
Extraordinary loss............................................ (0.07) -- (0.02)
-------- -------- --------
Net income.................................................... $ 0.71 $ 1.38 $ 0.82
======== ======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-12
<PAGE> 106
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
IN THOUSANDS FOR YEARS ENDED DECEMBER 31 1997 1996 1995
- ---------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................. $ 19,715 $ 37,108 $ 18,316
Adjustments to reconcile net income to net cash flows from
operating activities:
Discontinued operations............................... (14,680) (24,592) (13,469)
Extraordinary loss on early extinguishment of debt.... 3,334 -- 822
Cash provided by discontinued operations.............. 21,244 13,915 10,735
Depreciation and amortization......................... 50,205 33,282 25,909
Deferred income taxes................................. (3,310) 1,174 (835)
Other charges and credits -- net...................... (9,161) 11,268 1,674
Changes in operating working capital, excluding the effect
of acquisitions:
(Increase) decrease in billed, unbilled and other
receivables -- net.................................. (5,366) (27,531) 8,155
Decrease in other current assets...................... 1,743 303 717
Decrease in accounts payable.......................... (2,896) (1,954) (4,210)
Increase in accrued payroll and benefits.............. 2,515 3,310 5,023
(Decrease) increase in income and other taxes
payable -- net...................................... (5,506) 5,056 (516)
(Decrease) increase in deferred income................ (1,787) 10,848 (6,459)
Increase in other current liabilities................. 1,974 3,520 3,443
--------- --------- ---------
Net change in operating working capital............... (9,323) (6,448) 6,153
--------- --------- ---------
Net cash provided from operating activities........... 58,024 65,707 49,305
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of short-term notes payable....................... 225,304 2,598 318,601
Repayment of short-term notes payable...................... (197,702) (2,598) (318,601)
Issuance of long-term debt................................. 100,000 -- 125,000
Repayment of long-term debt................................ (5,000) -- --
Common stock repurchased and retired....................... (56,238) -- --
Common stock issuance...................................... 12,235 8,264 106,528
Debt issue costs and other................................. (3,853) (711) (7,073)
Financing activities of discontinued operations............ -- (2,804) (4,100)
--------- --------- ---------
Net cash provided from financing activities................ 74,746 4,749 220,355
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures....................................... (23,965) (19,412) (9,803)
Capitalized software....................................... (19,971) (16,916) (5,704)
Purchase of subsidiaries -- net of acquired cash........... (88,089) (71,084) (199,734)
Proceeds from sale of subsidiary........................... 3,494 14,300 --
Other -- net............................................... (4,514) (8,503) (2,465)
Investing activities of discontinued operations............ (11,459) (4,374) (9,002)
--------- --------- ---------
Net cash used for investing activities..................... (144,504) (105,989) (226,708)
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.................... (762) 927 57
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS....... (12,496) (34,606) 43,009
CASH AND CASH EQUIVALENTS, JANUARY 1....................... 25,276 59,882 16,873
--------- --------- ---------
CASH AND CASH EQUIVALENTS, DECEMBER 31..................... $ 12,780 $ 25,276 $ 59,882
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION --
CASH PAID FOR:
Income taxes, including amounts paid for discontinued
operations............................................... $ 12,834 $ 12,863 $ 10,616
Interest................................................... $ 25,512 $ 20,664 $ 20,351
========= ========= =========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-13
<PAGE> 107
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
IN THOUSANDS AT DECEMBER 31 1997 1996
- --------------------------- ---------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents, at cost (which approximates
market value)............................................. $ 12,780 $ 25,276
Billed receivables less allowance for doubtful accounts of
$2,756 and $2,234, respectively........................... 70,084 54,466
Unbilled and other receivables.............................. 9,546 10,662
Federal and state income tax benefit........................ 21,304 2,308
Other current assets........................................ 24,036 12,466
Net assets of discontinued operations....................... 197,330 --
---------- --------
Total current assets........................................ 335,080 105,178
---------- --------
DEFERRED CHARGES AND OTHER ASSETS
Goodwill, less accumulated amortization of $41,834 and
$26,502, respectively..................................... 556,737 492,835
Capitalized data and other intangible assets, less
accumulated amortization of $20,710 and $13,393,
respectively.............................................. 47,512 41,283
Capitalized software, less accumulated amortization of
$20,162 and $10,787, respectively......................... 48,645 35,004
Net assets of discontinued operations....................... -- 192,435
Other....................................................... 8,980 9,907
---------- --------
Total deferred charges and other assets..................... 661,874 771,464
---------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Computer equipment.......................................... 63,169 49,924
Leasehold improvements...................................... 17,631 14,294
Other....................................................... 9,806 7,947
---------- --------
90,606 72,165
Less -- Accumulated depreciation............................ (43,751) (28,006)
---------- --------
Net property, plant and equipment........................... 46,855 44,159
---------- --------
Total assets....................................... $1,043,809 $920,801
========== ========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable............................................... $ 27,602 $ --
Accounts payable............................................ 14,125 16,691
Accrued employee payroll and benefits....................... 24,585 19,806
Federal income taxes payable................................ -- 9,071
Foreign and other taxes payable............................. 10,717 12,262
Deferred income............................................. 69,931 62,576
Current portion of long-term debt, including capital lease
obligations............................................... 11,301 6,518
Other....................................................... 43,814 38,761
---------- --------
Total current liabilities.......................... 202,075 165,685
---------- --------
Long-Term Debt and Other Liabilities
Long-term debt, including capital lease obligations......... 331,260 241,822
Deferred income taxes....................................... 21,133 16,189
Other....................................................... 17,463 21,010
---------- --------
Total long-term debt and other liabilities.................. 369,856 279,021
---------- --------
Total liabilities.................................. 571,931 444,706
---------- --------
MINORITY INTEREST........................................... 907 265
---------- --------
COMMITMENTS AND CONTINGENCIES (NOTE 13)
COMMON SHAREHOLDERS' EQUITY
Common stock and additional paid-in-capital................. 275,370 296,546
Retained earnings........................................... 198,658 178,943
Cumulative foreign translation adjustment................... (3,057) 341
---------- --------
Total common shareholders' equity.................. 470,971 475,830
---------- --------
Total liabilities and common shareholders'
equity........................................... $1,043,809 $920,801
========== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-14
<PAGE> 108
PRIMARK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
IN THOUSANDS FOR YEARS ENDED DECEMBER 31 1997 1996 1995
- ---------------------------------------- --------- -------- --------
<S> <C> <C> <C>
Common Stock, without par value-authorized 100,000,000
shares, issued 26,800,399; 27,067,951 and 24,435,968
shares, respectively, at $0.02 stated value
Balance -- beginning of year................................ $ 541 $ 489 $ 398
Issued for employee stock purchase and option plans......... 36 2 --
Retirement of common stock.................................. (41) -- --
Purchase of subsidiary...................................... -- 44 --
Conversion of preferred stock to common..................... -- 6 --
Issued in public offering................................... -- -- 91
-------- -------- --------
Balance -- end of year...................................... 536 541 489
-------- -------- --------
Additional Paid-in Capital
Balance -- beginning of year................................ 296,005 226,005 113,696
Tax benefit relating to stock option plans.................. 22,827 3,218 4,177
Issued for employee stock purchase and option plans......... 12,198 1,557 3,076
Retirement of common stock.................................. (56,196) -- --
Purchase of subsidiary...................................... -- 59,906 --
Conversion of preferred stock to common -- net of costs..... -- 4,738 --
Gain on treasury shares..................................... -- 581 439
Issued in public offering................................... -- -- 104,617
-------- -------- --------
Balance -- end of year...................................... 274,834 296,005 226,005
-------- -------- --------
Retained Earnings
Balance -- beginning of year................................ 178,943 141,846 124,964
Net income.................................................. 19,715 37,108 18,316
Dividends on preferred stock................................ -- (359) (1,434)
Change in year-end of subsidiaries.......................... -- 348 --
-------- -------- --------
Balance -- end of year...................................... 198,658 178,943 141,846
-------- -------- --------
Treasury Stock, at average cost, 0; 0 and 1,119,287 shares,
respectively, held in treasury
Balance -- beginning of year................................ -- (14,814) (13,145)
Repurchased................................................. -- -- (6,944)
Conversion of preferred stock to common..................... -- 10,878 --
Reissued for stock purchase and option plans................ -- 3,936 5,275
-------- -------- --------
Balance -- end of year...................................... -- -- (14,814)
-------- -------- --------
Unearned Compensation
Balance -- beginning of year................................ -- (709) (1,674)
Amortization of unearned compensation....................... -- 709 965
-------- -------- --------
Balance -- end of year...................................... -- -- (709)
-------- -------- --------
Cumulative Foreign Currency Translation Adjustment
Balance -- beginning of year................................ 341 1,245 450
Translation adjustment...................................... (5,221) (1,378) 1,262
Income tax benefit (expense) on adjustment.................. 1,823 474 (467)
-------- -------- --------
Balance -- end of year...................................... (3,057) 341 1,245
-------- -------- --------
Total Common Shareholders' Equity................. $470,971 $475,830 $354,062
======== ======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-15
<PAGE> 109
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. BUSINESS
The Company is a global information services company with businesses
strategically focused on supplying financial, economic and market research
information to financial and corporate markets.
b. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Primark
Corporation and its majority-owned subsidiaries (the "Company"). All significant
intercompany transactions and balances have been eliminated. Investments in
companies of less than 50 percent are accounted for using the equity method.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Effective January 1996, Datastream International Limited and its affiliates
and Vestek Systems, Inc. changed their year-end reporting period from November
30 to December 31. The change was made to provide more timely information and
enhance comparability. The operating results for December 1995 were credited
directly to retained earnings.
Certain reclassifications have been made to prior years' statements to
conform to the 1997 presentation. Prior periods have been restated to separately
present continuing operations from discontinued operations (Note 3).
c. FOREIGN CURRENCY TRANSLATION
The functional currency for most of the Company's foreign operations is the
applicable local currency. Foreign currency accounts are translated into U.S.
dollars using current exchange rates in effect at the balance sheet date for
assets and liabilities, and weighted average monthly exchange rates during the
period for revenues and expenses. Adjustments resulting from translating foreign
functional currency financial statements into U.S. dollars are reported as a
separate component of shareholders' equity. Gains and losses resulting from
transactions and certain balance sheet accounts denominated in currencies other
than the applicable functional currency are included in income. The net effect
of changes in cash are separately identified in the consolidated statements of
cash flows.
d. DERIVATIVE FINANCIAL INSTRUMENTS
The Company enters into currency exchange and interest rate swap agreements
to minimize interest rate and foreign exchange risk. Gains and losses related to
qualifying accounting hedges of firm commitments are deferred and recognized in
income when the hedged transaction occurs. Gains and losses from financial
instruments that do not qualify for hedge accounting are marked to market and
recognized as a gain or loss in the current period. The Company does not hold or
issue derivative financial instruments for trading purposes.
e. REVENUE RECOGNITION
Revenue derived from subscription contracts is generally billed in advance
of services provided. Amounts billed in advance are recorded as deferred income
and recognized ratably over the periods in which services are performed.
F-16
<PAGE> 110
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
f. CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent cash and short-term, highly liquid
investments with original maturities of three months or less.
g. GOODWILL
Goodwill represents the excess of the purchase price over the fair value of
net identifiable assets acquired and is amortized on a straight line basis over
estimated useful lives ranging from 20 to 40 years. The Company regularly
evaluates the net carrying value of all long-lived assets, including intangibles
and goodwill, for recoverability based upon the undiscounted future cash flows
associated with these assets. Management believes there have been no impairments
of these assets.
h. CAPITALIZED SOFTWARE
Costs related to the conceptual formulation and design of software
developed for internal use are expensed as incurred. Costs incurred subsequent
to establishment of technological feasibility are capitalized and amortized over
periods ranging from 3 to 5 years. Costs to support or service software are
expensed as incurred. The Company does not develop software for sale or lease.
i. CAPITALIZED DATA AND OTHER INTANGIBLES
Costs incurred to update and maintain the Company's database assets are
expensed as incurred. Costs associated with the purchase of historical data not
currently part of the Company's database assets, as well as the cost of
initiating a new database product, are capitalized. Other intangible assets and
liabilities consist of non-compete covenants, trademarks and unfavorable lease
commitments. Data and other intangibles are amortized on a straight line basis
over periods ranging from 3 to 20 years.
j. PROPERTY AND EQUIPMENT
Computer equipment and other property are recorded at cost and depreciated
on a straight line basis over their estimated useful lives, ranging from 3 to 10
years. Leasehold improvements are amortized over the shorter of the remaining
life of the lease or the estimated useful life of the improvement.
k. INCOME TAXES
Income tax expense is based on reported earnings before income taxes.
Deferred income taxes reflect the impact of temporary differences between assets
and liabilities recognized for financial reporting purposes and such amounts
recognized for tax purposes. Deferred tax balances are adjusted to reflect
changes in tax rates expected to be in effect during the periods in which the
temporary differences reverse. As temporary differences reverse, the related
deferrals are recorded to income.
l. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
Share." This standard requires dual presentation of basic and diluted earnings
per share ("EPS") on the face of the income statement and requires a
reconciliation of the numerators and denominators of basic and diluted EPS
calculations (Note 8). The EPS of prior periods have been restated to present
basic and diluted EPS.
F-17
<PAGE> 111
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
m. ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. The impact of recording
stock-based compensation under the fair value method is disclosed in Note 10.
n. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" and SFAS No. 131 "Disclosures about Segments of an Enterprise and
Related Information." The Company will adopt these statements during fiscal year
1998 and does not expect that the adoption will have a material impact on the
consolidated financial statements.
2. ACQUISITIONS
During the three years ending December 31, 1997, the Company made the
acquisitions set forth below, each of which has been accounted for as a
purchase. Accordingly, the purchase price has been allocated to the identifiable
net assets acquired. The excess of the purchase price over the estimated fair
value of net assets acquired has been allocated to goodwill and is amortized on
a straight line basis over periods ranging from 25 to 40 years. Future
adjustments to the total purchase price allocation, if any, are not expected to
materially affect the Company's financial statements. The consolidated financial
statements include the operating results of each business from the date of
acquisition.
a. FISCAL 1997
<TABLE>
<CAPTION>
SUMMARY OF ACQUISITION COSTS (000S) WEFA BASELINE
- ----------------------------------- ------- --------
<S> <C> <C>
Cash........................................................ $45,000 $40,963
Acquisition Fees............................................ 204 233
------- -------
Total Consideration......................................... $45,204 $41,196
Acquired Cash............................................... (308) (2)
------- -------
Consideration Paid.......................................... $44,896 $41,194
------- -------
Net Excess of Purchase Price over Fair Value................ $44,979 $39,431
======= =======
</TABLE>
WEFA
On February 7, 1997, the Company acquired all of the outstanding stock of
WEFA Holdings, Inc. ("WEFA") for $45,000,000 in cash. Headquartered in
Pennsylvania, WEFA is an international provider of value added economic
information and consulting services to Fortune 500 companies, governments,
universities, and financial institutions.
BASELINE
On January 6, 1997, the Company purchased all of the outstanding stock of
Baseline Financial Services, Inc. ("Baseline") pursuant to the terms of a Stock
Purchase Agreement dated November 24, 1996, between the Company, Bowne & Co.,
and another owner for $40,963,000 in cash. Headquartered in New York City,
Baseline provides institutional investors with visual valuation graphics of
financial market information.
F-18
<PAGE> 112
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS -- (CONTINUED)
b. FISCAL 1996
<TABLE>
<CAPTION>
THE YANKEE
SUMMARY OF ACQUISITION COSTS (000S) ICV WORLDSCOPE GROUP DAFSA
- ----------------------------------- -------- ---------- ---------- ------
<S> <C> <C> <C> <C>
Cash.................................................. $ 40,316 $5,000 $33,000 $9,000
Stock Issued.......................................... 59,950 -- -- --
Notes Issued.......................................... 8,250 -- -- --
Receivables Forgiven.................................. -- 3,889 -- --
Guaranteed Payment.................................... -- -- 5,000 --
Acquisition Fees...................................... 3,765 237 119 199
-------- ------ ------- ------
Total Consideration................................... 112,281 9,126 38,119 9,199
Acquired Cash......................................... (16,309) (353) (1,600) --
Purchase Price Adjustment............................. -- -- -- (1,316)
-------- ------ ------- ------
Consideration Paid.................................... $ 95,972 $8,773 $36,519 $7,883
-------- ------ ------- ------
Excess of Purchase Price over Fair Value.............. $112,348 $3,926 $34,583 $6,793
======== ====== ======= ======
</TABLE>
ICV
On October 24, 1996, the Company acquired all the outstanding stock of ICV
Limited. The purchase price, excluding fees, consisted of $24,007,000 in net
cash, 2,200,000 shares of Primark common stock at a $27.25 market value and
$8,250,000 in six year notes (the "ICV Purchase Notes"), issued by the Company
to the sellers (Note 6b). ICV supplies a variety of real-time data and news
products to equity traders and investors in London and throughout the United
Kingdom. In accordance with the terms of the purchase agreement, the Company
registered the 2,200,000 shares of its common stock in 1998.
WORLDSCOPE
On October 15, 1996, the Company acquired an additional 30% ownership
interest in Worldscope for $5,000,000 in cash, giving Primark a controlling
ownership interest of 80%. Prior to the transaction, Worldscope was a 50%
partnership accounted for under the equity method. In connection with the
transaction, Primark and the previous 50% owner each forgave working capital
advances equal to $3,889,000. The sellers of the 30% interest in Worldscope have
a non-expiring option to sell their remaining 20% ownership to Primark, in
increments of 5% or 15%. The price of a 5% increment would be at 5 times the
most recent 12 months of revenue multiplied by the 5% ownership. The price of a
15% increment would be at 4 times revenue multiplied by the 15% ownership. As of
October 15, 2006, Primark will have the right to purchase an additional 15% of
Worldscope.
THE YANKEE GROUP
On August 9, 1996, the Company acquired all the outstanding stock of Yankee
Group Research, Inc. (the "Yankee Group"), pursuant to the terms of a stock
purchase agreement by and between the Company and the shareholders of the Yankee
Group. The purchase price included cash payments of $31,000,000 on August 9,
1996; $2,000,000 in September of 1997, a guaranteed payment of $5,000,000 due in
August 1998 and future contingent payments to the former Yankee shareholders
based upon future operating results, ranging from $0 to a maximum of
$27,000,000. Future contingent payments, if any, are due in the year 2000 and
will be recorded as goodwill when incurred. The Yankee Group provides market
research on telecommunications and computer systems.
F-19
<PAGE> 113
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS -- (CONTINUED)
DAFSA
On June 18, 1996, Datastream International (France) SA acquired all of the
outstanding stock of Groupe DAFSA ("DAFSA"), for $7,883,000 in cash, net of
purchase price adjustments. DAFSA supplies company account information on all
listed companies in France and ownership information on French companies through
print and CD-ROM.
c. FISCAL 1995
Disclosure
On June 29, 1995, the Company acquired all the outstanding stock of
Disclosure Incorporated and certain of its affiliates including I/B/E/S
International Inc. and a 50% ownership of Worldscope for a total purchase price
of $200,000,000 in cash. The Company obtained $215,000,000 of external
financing, of which $185,000,000 was used to finance the cash consideration paid
in the acquisition. The Company incurred fees of approximately $6,076,000
associated with the acquisition. The excess of the purchase price over the
estimated fair value of total net assets acquired of approximately $193,713,000
was recorded to goodwill. Disclosure is a provider of "as reported" and
abstracted financial information, primarily derived from Securities and Exchange
Commission filings and supplemented with information from companies, stock
exchanges and other sources, both in the United States and worldwide. I/B/E/S is
a source of earnings estimates for investors, financial institutions and
portfolio managers on a global basis.
d. PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information reflects the
consolidated results of operations of the Company for the years ended December
31, 1997 and 1996 as though the acquisitions had occurred on January 1, 1997 and
1996. This information has been prepared for comparative purposes only and does
not necessarily represent actual operating results that may be achieved in the
future or that would have occurred had the acquisitions been consummated on
January 1, 1997 or 1996.
<TABLE>
<CAPTION>
PRO FORMA INFORMATION (000S EXCEPT EPS) 1997 1996
- --------------------------------------- -------- --------
<S> <C> <C>
Operating revenues.......................................... $400,228 $375,147
Income from continuing operations........................... $ 6,946 $ 4,681
Net income applicable to common stock....................... $ 19,671 $ 28,914
EPS from continuing operations:
Basic.................................................. $ 0.26 $ 0.18
Diluted................................................ $ 0.25 $ 0.17
======== ========
</TABLE>
3. DISCONTINUED OPERATIONS AND DISPOSITIONS
a. DISCONTINUED OPERATIONS
The accompanying consolidated financial statements reflect the operating
results of TASC, TIMCO and PSLC separately from the Company's continuing
operations for all periods presented. Consolidated interest expense has been
allocated to discontinued operations based upon their ratio of net assets to
total consolidated net assets. Net assets of discontinued operations represent
the net book value of the Company's investment in
F-20
<PAGE> 114
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. DISCONTINUED OPERATIONS AND DISPOSITIONS -- (CONTINUED)
TASC and TIMCO and consist principally of working capital, fixed assets and
other non-current assets and liabilities.
<TABLE>
<CAPTION>
DISCONTINUED OPERATIONS (000S) 1997 1996 1995
- ------------------------------ -------- -------- -------
<S> <C> <C> <C>
Income/(loss):
TASC................................................... $ 14,950 $ 13,028 $ 9,749
TIMCO.................................................. (270) 2,411 2,717
PSLC................................................... $ -- 753 1,003
-------- -------- -------
Total............................................. $ 14,680 $ 16,192 $13,469
======== ======== =======
Gain on disposal:
PSLC................................................... $ -- $ 8,400 $ --
-------- -------- -------
Total............................................. $ -- $ 8,400 $ --
======== ======== =======
Net Assets:
TASC................................................... $155,376 $152,505
TIMCO.................................................. 41,954 39,930
-------- --------
Total............................................. $197,330 $192,435
======== ========
</TABLE>
TASC
On December 8, 1997, the Company entered into an agreement to sell its
subsidiary, TASC, Inc. subject to shareholder approval (Note 14), for $432
million in cash, subject to adjustment, including changes in the TASC
consolidated equity account through the date of closing. The sale of TASC
represents disposal of essentially all of the Company's applied technology
segment. On a consolidated basis, TASC had revenues of $437.9, $383.7, and
$346.2 million for the years ended December 31, 1997, 1996 and 1995,
respectively. The purchaser has agreed to indemnify the Company from and against
all expenses and liabilities Primark may incur related to an outstanding claim
against TASC.
TIMCO
In June 1997, the Company adopted a formal plan to sell its non-core
transportation services segment consisting of Triad International Maintenance
Corporation ("TIMCO"). TIMCO reported revenues of $113.3, $106.4 and $79.2
million for the years ended December 31, 1997, 1996 and 1995, respectively. The
Company anticipates that the sale of TIMCO will be completed by June 30, 1998.
PSLC
On September 30, 1996, the Company sold all of the outstanding stock of
Primark Storage Leasing Corporation ("PSLC"), for $14,300,000 in cash. The
disposal of PSLC resulted in an after-tax gain of approximately $8,400,000 and
eliminated $28,700,000 of non-recourse debt from the Company's balance sheet.
The purchaser has agreed to indemnify the Company from and against all expenses
and liabilities that Primark may incur with respect to any adverse environmental
condition relating to PSLC's natural gas storage fields.
F-21
<PAGE> 115
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. DISCONTINUED OPERATIONS AND DISPOSITIONS -- (CONTINUED)
b. DISPOSITIONS
On January 7, 1997, the Company completed the sale of its investment in the
Weather Network pursuant to the terms of a sale agreement dated December 5, 1996
for 2,100,000 pounds sterling ($3,500,000). The $2,500,000 pre-tax gain on the
sale has been included in other income.
4. RESTRUCTURING CHARGES
a. DISCLOSURE
During the first quarter of 1997, the Company recorded a $1,800,000 pre-tax
charge, or $0.04 per share, at Disclosure to take advantage of new information
technology, reorganization of Disclosure's document business and other actions
aimed at reducing costs and enhancing efficiency. The restructuring provision
included estimated costs for employee severance and other benefits of $981,200,
asset write-downs of $713,600 and idle facility related costs of $105,200. As
part of the restructuring, 114 employees were eliminated. The spending for these
accrued restructuring costs was completed in June 1997.
b. DAFSA
During the second quarter of 1997, the Company recorded a restructuring
charge of $5,000,000 related to the integration and downsizing of operations at
DAFSA. Due to DAFSA's unprofitable condition, tax benefits associated with
losses incurred during 1997, including the restructuring charge, were not
recognized. Consequently, the restructuring charge resulted in a $0.18 reduction
of earnings per share in 1997.
When the Company acquired DAFSA in June of 1996, approximately $1,500,000
of integration costs were recorded in determining the purchase accounting. The
subsequent restructuring charge is the result of a plan to further integrate
DAFSA's personnel, space and product with those of the Company's other
subsidiaries. The $6,500,000 total restructuring provision includes estimated
costs for exiting a line of business of $1,700,000, the future rent cost of
abandoned space of $1,000,000, employee severance and other benefits of
$1,400,000, asset write-downs of $1,200,000 and legal, professional and other
related costs of $1,200,000. The accrual for abandoned space will be utilized
over the remaining life of the lease. As of December 31, 1997, $4,800,000 of
restructuring costs had been incurred, of which $1,500,000 related to exiting a
line of business, $1,100,000 related to employee severance and other benefits,
$1,200,000 related to asset write-downs and abandoned lease space and $1,000,000
related to legal, professional and other related costs. As part of the
restructuring, 31 employees of DAFSA have been terminated and an additional 9
employees will be terminated in 1998. The restructuring plan, when fully
implemented, is expected to significantly improve DAFSA's operating margins.
F-22
<PAGE> 116
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LEASES
The Company leases a variety of assets principally under non-cancelable
operating lease agreements, including office facilities, real property, and
computer and office equipment. These leases expire at various dates through
2008. Total rent expense for all operating leases was $15,105,000, $11,563,000,
and $7,649,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
<TABLE>
<CAPTION>
FUTURE MINIMUM LEASE COMMITMENTS (000S) CAPITAL OPERATING
- --------------------------------------- ------- ---------
<S> <C> <C>
1998........................................................ $1,390 $13,899
1999........................................................ 534 12,321
2000........................................................ 370 11,259
2001........................................................ 136 10,523
2002........................................................ -- 10,109
Thereafter.................................................. -- 30,171
------ -------
Total minimum lease payments................................ 2,430 $88,282
=======
Amounts representing interest and other..................... (133)
------
Present value of net minimum payments....................... 2,297
Current portion............................................. (1,242)
------
Long-term obligations....................................... $1,055
======
</TABLE>
6. SHORT-TERM AND LONG-TERM DEBT
On February 7, 1997, the Company entered into a $300,000,000 refinancing
arrangement to replace some of the funds expended for recent acquisitions and
enhance liquidity for future opportunities. The new arrangement, comprised of a
$75,000,000 revolving credit facility (the "Credit Facility") and a $225,000,000
term loan (the "Term Loan") replaced an outstanding $75,000,000 revolving credit
facility and a $125,000,000 term loan and provided $8,382,000 as a note backup
agreement. The Company incurred costs of $2,831,000 in conjunction with the
arrangement, which will be amortized over the term of the debt. The write-off of
unamortized debt issue costs related to the original financing generated an
extraordinary after-tax loss of $1,955,000 in the first quarter of 1997. The
Company recognized an extraordinary after-tax loss of $534,000 for the write-off
of unamortized debt issue costs associated with the June 1995 refinancing of its
$75,000,000 revolving credit facility. Deferred debt issue costs are amortized
over the terms of the related debt, ranging from 3 to 18 years.
a. SHORT-TERM DEBT
<TABLE>
<CAPTION>
SHORT-TERM BANK BORROWINGS (000S) 1997 1996 1995
- --------------------------------- ------- ------- -------
<S> <C> <C> <C>
Outstanding borrowings at December 31....................... $27,602 $ -- $ --
Available for future borrowings at December 31.............. $47,398 $74,650 $75,000
Weighted average effective interest rate on average bank
borrowings................................................ 7.7% 8.3% 8.0%
Aggregate borrowings:
Maximum outstanding.................................... $32,695 $ 1,871 $64,324
Average outstanding.................................... $ 5,115 $ 17 $22,661
======= ======= =======
</TABLE>
The Credit Facility expires on October 15, 2000 and bears interest on
outstanding borrowings based upon performance pricing which results in rates
ranging from 0.50% to 1.00% above the current prevailing LIBOR rate. Commitment
fees are payable quarterly at rates ranging from 0.20% to 0.30% per annum on the
average daily unused portion of the facility. The Credit Facility contains
various restrictive covenants, which, among other things, require the Company to
maintain certain minimum levels of consolidated net worth and specific
F-23
<PAGE> 117
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. SHORT-TERM AND LONG-TERM DEBT -- (CONTINUED)
consolidated liquidity and long-term solvency ratios. The Credit Facility is
secured by a pledge of the outstanding common stock of certain of Primark's
subsidiaries.
b. LONG-TERM DEBT
The Company's outstanding long-term debt, including capital lease
obligations, are shown below.
<TABLE>
<CAPTION>
LONG-TERM DEBT DECEMBER 31 (000S) 1997 1996
- --------------------------------- -------- --------
<S> <C> <C>
Primark 8.75% Senior Notes $112,000,000 due 2000............ $111,455 $111,291
Primark bank Term Loan due through 2004..................... 220,000 125,000
ICV Purchase Notes due 2002................................. 7,750 8,250
Capital lease obligations and other......................... 3,356 3,799
-------- --------
Total debt and capital lease obligations.................... 342,561 248,340
Less current maturities..................................... (11,301) (6,518)
-------- --------
Long-term debt and capital lease obligations................ $331,260 $241,822
======== ========
</TABLE>
Required principal payments on long-term debt and notes payable over the
next five years, excluding the Senior Notes and capital lease and other
obligations, are $15,000,000 in 1998, $20,000,000 in 1999, $30,000,000 in 2000,
$35,000,000 in 2001, and $53,250,000 in 2002.
Primark's 8.75% Senior Notes due 2000 ("Senior Notes") are carried at their
principal amount due at maturity less the unamortized discount. Interest on the
Senior Notes is payable semi-annually on April 15 and October 15. The Senior
Notes are unsecured obligations of the Company, contain no mandatory sinking
fund or redemption requirements, and are redeemable in whole or in part at the
option of the Company at redemption prices ranging from 104.375% to 100.00% in
1999 and thereafter, plus accrued interest. The Indenture pursuant to which the
Senior Notes were issued contains various restrictive covenants. Under the most
restrictive covenants, the Company is restricted from paying cash dividends on
its common stock, repurchasing its common stock or making certain other payments
which in the aggregate exceed the sum of: (i) $10,000,000; (ii) 50% of the
Company's consolidated net income (cumulative from the date of issuance of the
Senior Notes); plus (iii) 100% of the net proceeds received from sales of the
Company's common stock for cash.
The Term Loan is due through June 30, 2004. Principal payments are due
semi-annually on June 30 and December 31. Interest on outstanding borrowings
under the Term Loan is payable at rates ranging from 0.50% to 1.25% above the
current prevailing LIBOR rate of interest. The Term Loan contains various
restrictive covenants which, among other things, require the Company to maintain
certain minimum levels of consolidated net worth and specific consolidated
liquidity and long-term solvency ratios. The Term Loan is secured by a pledge of
the outstanding common stock of certain of the Company's subsidiaries.
On October 24, 1996, the Company entered into five loan note agreements
totaling $8,250,000 in connection with the purchase of ICV (Note 2b). The ICV
Purchase Notes are due October 24, 2002. Interest on the ICV Purchase Notes is
payable quarterly at the current prevailing LIBOR rate. In November 1997, the
Company paid $500,000 of the ICV Purchase Notes. On February 7, 1997, the
Company entered into a $8,382,000 Note Backup Agreement (the "Note Agreement")
which expires on November 8, 2002. Under the terms of the Note Agreement,
standby letters of credit were issued to provide credit enhancement for the
payment of the Notes. Interest on outstanding borrowings under the Note
Agreement is based upon performance pricing and payable at rates ranging from
0.75% to 1.25% above the current prevailing LIBOR rate of interest. Letter of
credit fees are based upon performance pricing and are payable quarterly at a
rate of
F-24
<PAGE> 118
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. SHORT-TERM AND LONG-TERM DEBT -- (CONTINUED)
0.25% per annum on the average daily unused portion of the facility. As of
December 31, 1997, the Company had no outstanding borrowings under the Note
Agreement.
7. FINANCIAL INSTRUMENTS
a. FOREIGN EXCHANGE RISK MANAGEMENT
The Company enters into forward exchange and currency option contracts to
reduce the exposure of foreign currency fluctuations associated with certain
firm commitments and anticipated cash flows. The Company's principal strategy is
to protect the net cash flow from foreign customers' contracts. As these
contracts are typically under two years in length, most of the derivative
financial instruments are similarly two years or less in duration. The Company
principally enters into contracts to deliver foreign currencies for U.S. dollars
at agreed-upon exchange rates. Other contracts include the purchase of British
pounds and Irish Punts for U.S. dollars. Counterparties to these agreements are
major international financial institutions. The tables below illustrate the U.S.
dollar equivalent of foreign exchange contracts at December 31, 1997 and 1996
along with unrecorded gross unrealized gains and losses.
<TABLE>
<CAPTION>
DECEMBER 31 (000S) 1997
- ------------------ ----------------------------------
GROSS GROSS
UNREALIZED UNREALIZED
NOTIONAL GAINS LOSSES
AMOUNT DEFERRED DEFERRED
-------- ---------- ----------
<S> <C> <C> <C>
FORWARD EXCHANGE CONTRACTS:
Japanese Yen........................................... $ 2,684 $ 57 $(19)
U.S. Dollars/U.K. Pound Sterling....................... 5,087 -- --
U.S. Dollars/Irish Punt................................ 5,895 -- --
Deutsche Mark.......................................... 518 -- --
Swiss Franc............................................ 1,061 15 --
French Franc........................................... 172 3 --
Swedish Krona.......................................... 3,588 54 (21)
Other.................................................. 3,264 254 (9)
------- ---- ----
$22,269 $383 $(49)
======= ==== ====
OPTION CONTRACTS PURCHASED:
Japanese Yen........................................... $ 2,903 $193 $ --
U.S. Dollars/U.K. Pound Sterling....................... 10,665 56 (63)
Deutsche Mark.......................................... 5,562 22 (16)
Swiss Franc............................................ 1,563 14 --
Other.................................................. 2,048 105 (2)
------- ---- ----
$22,741 $390 $(81)
======= ==== ====
OPTION CONTRACTS SOLD:
Japanese Yen........................................... $ 1,495 $ 3 $ --
U.S. Dollars/U.K. Pound Sterling....................... 3,520 -- (28)
Deutsche Mark.......................................... 2,781 12 --
Swiss Franc............................................ 735 1 --
------- ---- ----
$ 8,531 $ 16 $(28)
======= ==== ====
</TABLE>
F-25
<PAGE> 119
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. FINANCIAL INSTRUMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31 (000S) 1996
- ------------------ ----------------------------------
GROSS GROSS
UNREALIZED UNREALIZED
NOTIONAL GAINS LOSSES
AMOUNT DEFERRED DEFERRED
-------- ---------- ----------
<S> <C> <C> <C>
FORWARD EXCHANGE CONTRACTS:
Japanese Yen........................................... $ 2,593 $120 $ (7)
U.S. Dollars/U.K. Pound Sterling....................... 3,956 -- (43)
Deutsche Mark.......................................... 3,804 17 --
Swiss Franc............................................ 2,451 90 --
French Franc........................................... 1,452 5 (1)
Swedish Krona.......................................... 4,432 53 (11)
Other.................................................. 5,460 26 (35)
------- ---- ----
$24,148 $311 $(97)
======= ==== ====
OPTION CONTRACTS PURCHASED:
Japanese Yen........................................... $ 4,302 $123 $ --
U.S. Dollars/U.K. Pound Sterling....................... 11,900 134 --
Deutsche Mark.......................................... 9,547 86 --
Swiss Franc............................................ 5,531 167 --
French Franc........................................... 4,465 37 --
Other.................................................. 3,248 15 (16)
------- ---- ----
$38,993 $562 $(16)
======= ==== ====
OPTION CONTRACTS SOLD:
Japanese Yen........................................... $ 645 $ 3 $ --
U.S. Dollars/U.K. Pound Sterling....................... 11,105 82 --
Deutsche Mark.......................................... 2,616 8 --
Swiss Franc............................................ 569 -- --
French Franc........................................... 1,064 3 --
Other.................................................. 431 1 --
------- ---- ----
$16,430 $ 97 $ --
======= ==== ====
</TABLE>
b. INTEREST RATE SWAP AGREEMENT
On August 1, 1995, the Company entered into an interest rate swap agreement
with a major bank, having a notional principal amount of $18,333,000. The swap
agreement effectively changed the interest rate of a portion of Primark's
long-term debt from a floating rate to a 6.1% fixed rate. This swap agreement
expires in December of 1999. As of December 31, 1997, the notional principal
amount outstanding was $8,333,000. Though the Company is exposed to credit and
market risk in the event of future non-performance by the bank, management does
not anticipate that such an event will occur.
F-26
<PAGE> 120
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. FINANCIAL INSTRUMENTS -- (CONTINUED)
c. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying and estimated fair values of certain of the Company's
financial instruments are shown below.
<TABLE>
<CAPTION>
CARRYING VALUE ESTIMATED FAIR VALUE
------------------- ---------------------
DECEMBER 31 (000S) 1997 1996 1997 1996
- ------------------ -------- -------- --------- ---------
<S> <C> <C> <C> <C>
Forwards............................................ $ 753 $ 1,301 $ 1,087 $ 1,515
Options............................................. $ 195 $ 343 $ 492 $ 986
Interest rate swaps................................. $ -- $ -- $ (23) $ (45)
8.75% Senior Notes.................................. $111,455 $111,291 $115,220 $114,100
======== ======== ======== ========
</TABLE>
Estimated fair values of these financial instruments were based upon quotes
obtained from investment and commercial bankers using comparable securities. The
fair values of currency forward contracts and currency options were estimated
based on quoted market prices of contracts with similar terms. Other financial
instruments have been excluded as their carrying value approximates their market
value.
8. EARNINGS PER SHARE
In February of 1997, the FASB released SFAS No. 128, "Earnings per Share",
effective for fiscal periods ending after December 15, 1997. The statement
simplifies the standards for computing EPS and makes them comparable to
international EPS standards. The statement replaces primary EPS with basic EPS.
Basic EPS is computed by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock. Diluted EPS is computed similarly to
fully diluted EPS previously presented. In accordance with the standard, all
prior period EPS data has been restated.
Options to purchase 785,000; 227,000 and 19,000 shares of common stock were
outstanding for the years ended 1997, 1996 and 1995 respectively but were
excluded in the computation of diluted EPS because the options' exercise price
was greater than the average market price of common shares. The conversion of
preferred stock outstanding during 1995 and the first quarter of 1996 was
excluded from the computation of
F-27
<PAGE> 121
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. EARNINGS PER SHARE -- (CONTINUED)
diluted EPS as its effect was anti-dilutive. A reconciliation of the numerators
and denominators of the basic and diluted EPS computations for income from
continuing operations is shown below.
<TABLE>
<CAPTION>
INCOME SHARES EARNINGS
(000S EXCEPT PER SHARE) (NUMERATOR) (DENOMINATOR) PER SHARE
- ----------------------- ----------- ------------- ---------
<S> <C> <C> <C>
December 31, 1997
Basic EPS:
Income available to common shareholders............... $ 6,990 26,348 $0.26
Effect of Dilutive Securities Options................. -- 1,596
------- ------
Diluted EPS:
Income available to common shareholders and
assumed conversions................................. $ 6,990 27,944 $0.25
December 31, 1996
------- ------
Basic EPS:
Income from continuing operations..................... $12,516
Less: preferred stock dividends....................... (359)
-------
Income available to common shareholders............... $12,157 24,813 $0.49
Effect of Dilutive Securities Options................. -- 1,758
------- ------
Diluted EPS:
Income available to common shareholders and assumed
conversions......................................... $12,157 26,571 $0.46
December 31, 1995
Basic EPS:
Income from continuing operations..................... $ 5,381
Less: preferred stock dividends............................ (1,434)
-------
Income available to common shareholders............... $ 3,947 19,150 $0.21
Effect of Dilutive Securities Options................. -- 1,531
------- ------
Diluted EPS:
Income available to common shareholders and assumed
conversions......................................... $ 3,947 20,681 $0.19
======= ====== =====
</TABLE>
F-28
<PAGE> 122
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. SHAREHOLDERS' EQUITY
a. COMMON STOCK
On May 28, 1997, the shareholders of the Company approved a resolution that
amended the Company's Articles of Incorporation to increase the number of
authorized shares of common stock from 65,000,000 to 100,000,000. Changes in the
number of shares of the Company's common stock are shown below.
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996 1995
- ----------- ---------- ---------- ----------
<S> <C> <C> <C>
Common Stock Issued...................................... 26,800,399 27,067,951 24,435,968
Common Stock Held
In Treasury:
Balance -- beginning of period........................... -- (1,119,287) (1,392,789)
Treasury shares acquired................................. -- -- (279,154)
Treasury shares reissued:
Employee stock purchase plan............................. -- 79,683 203,647
Exercise of stock options................................ -- 217,715 349,009
Conversion of Preferred Stock............................ -- 821,889 --
---------- ---------- ----------
Balance -- end of period................................. -- -- (1,119,287)
---------- ---------- ----------
Common Stock Outstanding................................. 26,800,399 27,067,951 23,316,681
========== ========== ==========
</TABLE>
In December of 1997, the Company received 722,000 shares of its common
stock to satisfy the exercise price of stock options and payment of withholding
taxes due on option exercises totaling $29,604,000. These shares were retired
upon receipt. The Company drew on its revolving credit facility to satisfy the
withholding tax payment. Primark will receive a compensation deduction related
to the option exercises and anticipates a tax refund of approximately
$25,000,000.
In April 1997, the Company's Board of Directors authorized the repurchase
of up to 2,200,000 shares of the Company's common stock from time to time
through open market and/or privately negotiated transactions. During the second
quarter of 1997, the Company repurchased 1,349,000 shares of its outstanding
common stock in the open market at a total cost of $26,633,000. On May 13, 1997
and June 5, 1997, the Company retired 1,145,300 and 203,700 shares,
respectively.
On October 24, 1996, the Company issued 2,200,000 shares of its common
stock as part of the purchase price for ICV Limited (Note 2b).
On May 2, 1996, the Company received notification to convert the total
outstanding shares of Primark Series A, 8.5% Cumulative Convertible Preferred
Stock into shares of Primark common stock. The 674,943 preferred shares plus
accrued and unpaid dividends were converted into 1,164,276 shares of Primark
common stock based upon the stated conversion rate of $14.49. The preferred
shares were held entirely by the Profit Sharing and Stock Ownership Plan of
TASC, a discontinued subsidiary (Note 3).
On December 5, 1995, the Company completed an equity offering in which it
sold 4,068,200 shares of its common stock and offered an additional 288,000
shares for certain selling shareholders. The sale of common stock together with
option proceeds related to the selling shareholders provided the Company
$107,784,000, net of commissions and expenses. A portion of the proceeds was
used to pay down the outstanding balance of $48,166,000 on the Company's
revolving credit agreement and to prepay $15,000,000 on a loan held by TASC, a
discontinued subsidiary (Note 3).
In December of 1995, 92,000 shares of the Company's common stock were
delivered to satisfy the exercise price of stock options and 168,000 shares were
withheld from the exercise of stock options to satisfy the related tax
withholding requirements.
F-29
<PAGE> 123
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. SHAREHOLDERS' EQUITY -- (CONTINUED)
b. RIGHTS AGREEMENT
In May of 1997, the Board of Directors of the Company executed a new Rights
Agreement (the "Rights Agreement") to extend the benefits of the rights
agreement adopted in 1988. The Company's Rights Agreement is designed to deter
coercive or unfair takeover tactics, and to prevent a buyer from gaining control
of the Company without offering a fair price to all of its shareholders. The
Rights Agreement generally becomes effective when an "Acquiring Person" (as
defined in the agreement) beneficially owns 15% or more of the outstanding
shares of Primark's common stock. In general, upon a "Triggering Event" (as
defined in the agreement), each Right represents the right to purchase one share
of Common Stock of the Company at a price per share of $138.00, subject to
adjustment. The Rights, which do not have voting privileges, are redeemable
under certain circumstances at $0.01 per Right and will expire on January 25,
2008, unless previously redeemed. At December 31, 1997, common stock reserved
for issuance under the Rights Agreement was 26,800,399 shares.
10. RETIREMENT AND BENEFIT PLANS
a. EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
The Primark Corporation Savings and Stock Ownership Plan was amended and
revised effective January 1, 1997 ("ESSOP") to provide for 401(K) contributions,
employer matching contributions and certain other changes. Prior to the
amendment, the plan, which covers all employees of Primark and certain
subsidiaries, was pre-funded in 1989 with 965,000 shares of the Company's common
stock which were allocated to participants, based upon a percentage of
compensation, through 1996. Under the current 401(K) provisions of the ESSOP,
the Company matches 50% of an employee's contribution up to a maximum of 3% of
each participant's compensation. Participating employees' future benefits are
based on their vested portion of contributions, plus their pro rata share of
fund investment gains or losses. Under the 401(K) provisions, the Company
contributed $1,629,000 during 1997. No contributions were made to the ESSOP
during 1996 and 1995.
b. FOREIGN PLANS
Substantially all employees in foreign countries who are not U.S. citizens
are covered by various retirement benefit arrangements, some of which are
considered to be defined benefit pension plans for accounting purposes. Benefits
are based primarily on years of service and employees' salaries near retirement.
In general, plans are funded based upon legal requirements, tax considerations,
local practices and investment opportunities. Plan assets are generally held in
restricted trusts or foundations that are segregated from the assets of the plan
sponsor, and consist primarily of common stock and fixed income securities. The
components of net periodic pension cost for foreign defined benefit pension
plans are shown below.
<TABLE>
<CAPTION>
DECEMBER 31 (000S) 1997 1996 1995
- ------------------ ------ ------ ------
<S> <C> <C> <C>
Service cost of benefits earned during the period........... $1,348 $1,181 $1,039
Interest cost of projected benefit obligation............... 1,367 1,186 887
Actual return on plan assets................................ (3,072) (883) (974)
Net amortization and deferral............................... 1,358 (523) (370)
------ ------ ------
Net pension expense......................................... $1,001 $ 961 $ 582
====== ====== ======
</TABLE>
F-30
<PAGE> 124
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. RETIREMENT AND BENEFIT PLANS -- (CONTINUED)
The following assumptions were used in accounting for foreign defined
benefit plans.
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996 1995
- ----------- ---- ----- -----
<S> <C> <C> <C>
Discount rate............................................... 7.8% 8.5% 8.5%
Rate of increase in future compensation..................... 5.0% 5.0% 5.0%
Rate of return on plan assets............................... 9.3% 10.0% 10.0%
==== ===== =====
</TABLE>
The funded status on the non-U.S. plans is shown below.
<TABLE>
<CAPTION>
DECEMBER 31 (000S) 1997 1996
- ------------------ -------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation................................... $(17,553) $(14,736)
-------- --------
Accumulated benefit obligation.............................. (17,553) (14,736)
-------- --------
Projected benefit obligation................................ (20,508) (16,578)
Plan assets at fair value................................... 19,661 15,639
-------- --------
Projected benefit obligation more than plan assets.......... (847) (939)
Unrecognized net loss....................................... 3,770 3,501
Unrecognized prior service cost............................. 127 156
Unrecognized net asset...................................... (1,735) (2,023)
-------- --------
Prepaid pension cost........................................ $ 1,315 $ 695
======== ========
</TABLE>
c. EMPLOYEE STOCK PURCHASE AND STOCK OPTION PLANS
Established in 1992, the Primark Corporation Employee Stock Purchase Plan
is available for all employees of Primark and certain subsidiaries. Under this
plan employees may purchase, through periodic payroll deductions, up to a
maximum of 3,000,000 shares of the Company's common stock at 85% of the lower of
the average market price of such shares either at the beginning or end of each
six month offering period.
The Primark Corporation Stock Option Plan for Non-Employee Directors
provides for the granting of options to purchase shares of common stock to each
director who is not an employee. The Primark Corporation 1992 Stock Option Plan
provides for the granting of options to purchase common stock to officers and
certain key employees of Primark and its subsidiaries. This plan limits the
number of shares subject to option that may be granted to any participant in any
year to 100,000 shares. Stock options available for grant in any one year under
Primark Corporation's 1992 Stock Option Plan may not exceed 1.5% of the
Company's outstanding common stock as of January 1 each year, plus any excess of
available stock options not granted from previous years. At December 31, 1997,
options available for grant in 1998 included 449,513 stock options under Primark
Corporation's 1992 Stock Option Plan. Generally, options outstanding under the
Company's stock option plans: (i) are granted at prices equal to the fair market
value of the stock on the date of grant, (ii) vest within a three year period,
and (iii) expire ten years subsequent to award.
F-31
<PAGE> 125
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. RETIREMENT AND BENEFIT PLANS -- (CONTINUED)
Changes in the number of options granted under the Company's various stock
option plans are shown below.
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1......... 4,375,865 $12.51 4,213,718 $10.07 4,351,285 $ 8.75
Granted at market value.......... 1,056,875 24.89 464,932 34.38 680,286 16.26
Granted above market value....... 500,000 33.34 -- -- 3,500 24.88
Exercised........................ (1,692,663) 5.68 (251,068) 10.00 (804,109) 8.18
Canceled......................... (123,671) 23.36 (51,717) 23.09 (17,244) 11.78
---------- ------ --------- ------ --------- ------
Outstanding at December 31,...... 4,116,406 $20.71 4,375,865 $12.51 4,213,718 $10.07
---------- ====== --------- ====== ---------
Available for grant at
December 31,..................... 657,361 687,560 675,331
========== ========= =========
</TABLE>
The following table sets forth information regarding options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------- ----------------------
NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED
OUTSTANDING AVERAGE AVERAGE EXERCISABLE AVERAGE
RANGE OF AT REMAINING EXERCISE AT EXERCISE
EXERCISE PRICES 12/31/97 LIFE PRICE 12/31/97 PRICE
- --------------- ----------- --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 7.63-$12.88.............................. 956,503 4.37 $11.19 956,503 $11.19
$13.50-$14.00.............................. 964,813 6.30 $13.70 697,818 $13.73
$14.63-$24.25.............................. 827,300 8.65 $22.66 175,484 $19.06
$25.00-$30.31.............................. 872,825 9.00 $27.28 211,843 $25.59
$33.13-$39.75.............................. 494,965 8.61 $37.91 171,615 $39.53
--------- ---- ------ --------- ------
$ 7.63-$39.75.............................. 4,116,406 7.17 $20.71 2,213,263 $16.19
========= ==== ====== ========= ======
</TABLE>
The fair value of options on their grant date, including the valuation of
the option feature implicit in the Company's stock purchase plan, was measured
using the Black-Scholes option-pricing model. The fair value of options on their
grant date and key assumptions used to apply this model are shown below:
<TABLE>
<CAPTION>
DECEMBER 31 1997 1996 1995
- ----------- --------------- --------------- ---------------
<S> <C> <C> <C>
Grant date fair value..................... $ 12.21 $ 13.49 $ 7.12
Range of risk-free interest rates......... 5.51% to 6.82% 5.03% to 6.79% 5.77% to 7.59%
Range of expected life of option grants... 3 to 9 years 4 to 9 years 4 to 9 years
Expected volatility of underlying stock... 37.5% 30.9% 30.9%
=============== =============== ===============
</TABLE>
It should be noted that the option-pricing model used was designed to value
readily tradable stock options with relatively short lives. The options granted
to employees are not tradable and have contractual lives of up to ten years. In
addition, option valuation models require the input of highly subjective
assumptions including the expected stock price volatility. However, management
believes that the assumptions used and the model applied to value the awards
yields a reasonable estimate of the fair value of the grants made under the
circumstances.
F-32
<PAGE> 126
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. RETIREMENT AND BENEFIT PLANS -- (CONTINUED)
The Company uses the intrinsic value method to measure compensation expense
associated with grants of stock options to employees. Had compensation cost been
determined based upon the fair value at the grant date for awards under these
plans, reported net income and earnings per share would have been as follows:
<TABLE>
<CAPTION>
DECEMBER 31 (000S EXCEPT PER SHARE DATA) 1997 1996 1995
- ---------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Net income.................................................. $12,351 $33,428 $16,360
Basic EPS................................................... $ 0.47 $ 1.35 $ 0.85
EPS Assuming Dilution....................................... $ 0.44 $ 1.26 $ 0.79
------- ------- -------
Net income applicable to common stock....................... $12,351 $33,069 $14,926
Basic EPS................................................... $ 0.47 $ 1.33 $ 0.78
EPS Assuming Dilution....................................... $ 0.44 $ 1.24 $ 0.72
======= ======= =======
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure include only
the effects of grants made subsequent to January 1, 1995 and, accordingly, are
not indicative of future amounts.
11. INCOME TAXES
<TABLE>
<CAPTION>
DECEMBER 31 (000S) 1997 1996 1995
- ------------------ ------- ------- -------
<S> <C> <C> <C>
FEDERAL AND OTHER INCOME TAXES CONSISTED OF:
Current provision........................................... $ 7,250 $ 8,311 $ 3,607
Deferred provision (benefit) -- net......................... 5,713 (879) 1,023
------- ------- -------
Total Federal and other income tax expense.................. $12,963 $ 7,432 $ 4,630
------- ------- -------
RECONCILIATION BETWEEN STATUTORY AND ACTUAL INCOME TAXES:
Income from continuing operations........................... $ 6,990 $12,516 $ 5,381
Income tax expense.......................................... 12,963 7,432 4,630
------- ------- -------
Book pre-tax income......................................... $19,953 $19,948 $10,011
------- ------- -------
Statutory Federal income taxes at a rate of 35%............. $ 6,983 $ 6,982 $ 3,504
Adjustments to Federal income taxes:
Amortization of goodwill.................................... 4,737 3,390 2,163
Adjustment of Federal income taxes provided in prior
years..................................................... (1,375) (1,121) 10
Losses of foreign subsidiaries without current benefit...... 2,493 55 --
State income taxes -- net................................... 545 (176) (430)
Effect of foreign tax rates................................. (198) (335) (228)
Other -- net................................................ (222) (1,363) (389)
------- ------- -------
Total Federal and other income tax expense.................. $12,963 $ 7,432 $ 4,630
======= ======= =======
</TABLE>
The 1997 adjustment of Federal income taxes provided in prior years is
primarily due to the recognition of net operating losses and the true up of
prior year tax expense. The 1996 adjustment is primarily the result of the
Company settling seven open tax years at lower than anticipated levels.
F-33
<PAGE> 127
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. INCOME TAXES -- (CONTINUED)
The tax effects of significant temporary differences that gave rise to
deferred income tax assets and liabilities are shown below.
<TABLE>
<CAPTION>
DECEMBER 31 (000S) 1997 1996
- ------------------ -------- --------
<S> <C> <C>
Deferred tax assets:
State taxes................................................. $ 9,645 $ 3,991
Postretirement benefits..................................... 1,509 1,428
Fixed assets................................................ 1,212 763
Unfavorable lease reserve................................... 961 1,186
Net operating loss carry forwards........................... 7,545 7,063
Bad debts................................................... 486 703
Other....................................................... 7,839 2,928
-------- --------
Total deferred tax assets................................... 29,197 18,062
Valuation allowance......................................... (7,199) (6,411)
-------- --------
Net deferred tax assets..................................... 21,998 11,651
-------- --------
Deferred tax liabilities:
Intangibles................................................. (20,379) (9,695)
Fixed assets................................................ (866) (1,398)
Unearned revenue............................................ (2,014) (1,172)
Other....................................................... (9,854) (8,962)
-------- --------
Total deferred tax liabilities.............................. (33,113) (21,227)
-------- --------
Net deferred tax liabilities................................ $(11,115) $ (9,576)
-------- --------
Net current asset........................................... $ 10,018 $ 6,613
Net long-term liability..................................... $(21,133) $(16,189)
-------- --------
Net deferred tax liability.................................. $(11,115) $ (9,576)
======== ========
</TABLE>
The Company's operating loss carry forwards in France of $7,199,000 at
December 31, 1997, expire in the years 1998 through 2002.
12. SEGMENT AND GEOGRAPHIC INFORMATION
During 1997 and 1996, the Company realigned its business segments to
reflect its strategic emphasis in the information services industry. The
realignment included several acquisitions throughout 1996 and 1997 (Note 2) as
well as the discontinuance of two of its previously reported segments, applied
technology and transportation services during 1997 (Note 3). Accordingly, the
Company's continuing operations primarily reflect that of one industry segment,
information services, which provides services and related products principally
in the United States and the United Kingdom. Most of Primark's international
sales are generated through its affiliates, which are located throughout Europe,
Asia and the United States.
F-34
<PAGE> 128
PRIMARK CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. SEGMENT AND GEOGRAPHIC INFORMATION -- (CONTINUED)
The Company's operations by geographic region are presented in the
following table on a stand-alone basis. Information presented includes acquired
companies from their respective dates of acquisition (Note 2), and has been
restated to exclude discontinued operations (Note 3).
<TABLE>
<CAPTION>
GEOGRAPHIC REGIONS
(000S) 1997 1996 1995
- ------------------ ---------- -------- --------
<S> <C> <C> <C>
DOMESTIC
Operating Revenues.......................................... $ 173,150 $119,728 $ 63,679
Operating Income (Loss)(1) Non-affiliate.................... $ 19,857 $ 17,167 $ 9,045
Affiliate(2)................................................ $ (7,005) $ (6,374) $ (4,834)
Identifiable Assets......................................... $ 393,572 $297,193 $272,976
---------- -------- --------
UNITED KINGDOM
Operating Revenues Non-affiliate............................ $ 131,889 $ 76,979 $ 60,422
Affiliate(2)................................................ $ 39,894 $ 38,711 $ 33,621
Operating Income (Loss)(3) Non-affiliate.................... $ (18,933) $(17,568) $(16,137)
Affiliate (2)............................................... $ 39,894 $ 38,711 $ 33,621
Identifiable Assets......................................... $ 363,611 $353,098 $160,338
---------- -------- --------
OTHER INTERNATIONAL
Operating Revenues.......................................... $ 92,836 $ 80,356 $ 60,678
Operating Income (Loss)(1) Non-affiliate.................... $ 36,812 $ 34,970 $ 33,993
Affiliate(2)................................................ $ (32,889) $(32,337) $(28,787)
Identifiable Assets......................................... $ 58,063 $ 63,788 $ 47,027
---------- -------- --------
CORPORATE & OTHER (3)
Operating Revenues Affiliate(2)............................. $ (39,894) $(38,711) $(33,621)
Operating Income (Loss)(1).................................. $ (5,752) $ (6,730) $ (6,015)
Identifiable Assets......................................... $ 228,563 $206,722 $237,843
---------- -------- --------
CONSOLIDATED
Operating Revenues.......................................... $ 397,875 $277,063 $184,779
Operating Income (Loss)(1).................................. $ 31,984 $ 27,839 $ 20,886
Identifiable Assets......................................... $1,043,809 $920,801 $718,184
========== ======== ========
</TABLE>
- ---------------
(1) Includes, for 1997, restructuring charges of $6.8 million (Note 4).
(2) Affiliate transfers represent service fees received by Datastream's United
Kingdom operation from its international affiliates.
(3) Corporate and other includes corporate accounts, eliminations and
reclassifications, as well as the net assets of discontinued operations.
13. COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are involved in other administrative
proceedings and matters concerning issues arising in the ordinary course of
business. Management cannot predict the final disposition of such issues, but
believes that adequate provision has been made for the probable losses and the
ultimate resolution of these proceedings will not have a material adverse effect
on the Company's financial condition, results of operations or financial
liquidity.
F-35
<PAGE> 129
================================================================================
$150,000,000
PRIMARK CORPORATION
EXCHANGE OFFER
9 1/4% SENIOR SUBORDINATED NOTES DUE 2008
----------
PROSPECTUS
----------
, 1999
================================================================================
UNTIL , ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 130
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 561 through 571 of the Michigan Business Corporation Act (the
"MBCA") contain detailed provisions concerning the indemnification of directors,
officers, employees, and agents against judgments, penalties, fines and amounts
paid in settlement of litigation that they may incur in their capacity as such.
Section 561 through 571 of the MBCA, which are filed as Exhibit 99.1 to this
Registration Statement, are incorporated herein by reference.
Article VIII of the Articles of Incorporation of the Registrant provides
that the Registrant shall indemnify any person who is or was a director or
officer of the Registrant or is or was serving at the request of the Registrant
as director, officer, employee, or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with any threatened, pending or completed
action, suit, or proceeding to the full extent provided by the MBCA from time to
time in effect.
Section 6.1 of the By-laws of the Registrant provides that the Registrant
shall indemnify its officers, directors, employees, agents and other persons to
the fullest extent to which corporations are empowered to indemnify such persons
at law.
Article IX of the Articles of Incorporation of the Registrant provides that
a director of the Registrant shall not be personally liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Registrant or its stockholders, (ii) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law,
(iii) for a violation of Section 551(1) of the MBCA or (iv) for any transaction
from which the director derived any improper personal benefit.
The Company maintains a director's and officer's liability insurance policy
that covers its directors and officers for certain claims and actions incurred
in the course of their duties, including, under certain circumstances, alleged
violations of the Securities Act of 1933, as amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENTS
- ------- ---------
<C> <S>
1.1 Placement Agreement, dated December 16, 1998, among the
Registrant, Morgan Stanley & Co. Incorporated, A. G. Edwards
& Sons, Inc., BT Alex. Brown Incorporated, Chase Securities
Inc. and NationsBanc Montgomery Securities LLC.
1.2 Underwriting Agreement, dated as of March 4, 1998, among the
Registrant, BT Alex. Brown Incorporated and certain selling
shareholders appearing on Schedule I thereto (incorporated
by reference to the Registrant's March 6, 1998 Form 8-K).
2.1 Amended and Restated Partnership Agreement for
Worldscope/Disclosure International Partners; Irish
Partnership Interest Purchase and Sale Agreement; and
Partnership Interest Purchase and Sale Agreement; dated as
of October 15, 1996 (Exhibit 2.5 to the Registrant's 1996
Form 10-K).
2.2 Stock Purchase Agreement by and among the Registrant,
Primark Information Services UK Limited and Litton
Industries, Inc. and Litton U.K. Limited dated as of
December 8, 1997 (Exhibit 2.1 to the Registrant's Form 8-K
filed December 10, 1997).
</TABLE>
II-1
<PAGE> 131
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENTS
- ------- ---------
<C> <S>
2.3 Information Technology Services Agreement by and among the
Registrant, TASC, Inc. and Litton Industries, Inc. (Exhibit
2.2 to the Registrant's Form 8-K filed December 10, 1997).
3.1 Restated Articles of Incorporation of the Registrant.
3.2 By-laws of the Registrant, as amended (incorporated by
reference to the Registrant's September 30, 1990 Form 10-Q).
4.1 Registration Rights Agreement, dated as of December 16,
1998, among the Registrant, Morgan Stanley & Co.
Incorporated, A. G. Edwards & Sons, Inc., BT Alex. Brown
Incorporated, Chase Securities Inc. and NationsBanc
Montgomery Securities LLC.
4.2 Indenture, dated as of December 21, 1998, among the
Registrant and State Street Bank and Trust Company, as
Trustee for the 9 1/4% Senior Subordinated Notes Due 2008.
4.3 Rights Agreement dated May 29, 1997 between the Registrant
and Bank Boston, N.A., as Rights Agent, which includes, as
Exhibit A, the Rights Certificate and as Exhibit B, the
Summary of Rights to Purchase Common Stock (Exhibit 4.1 to
the Registrant's Form 8-A dated June 19, 1997).
4.4 Registration Rights Agreement dated January 7, 1997, between
the Registrant and Joseph E. Kasputys (Exhibit 4.1 to the
Registrant's 1996 Form 10-K).
*5.1 Opinion of Michael R. Kargula, Executive Vice President,
General Counsel and Secretary of the Registrant.
*5.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
10.1 Primark Corporation 1992 Stock Option Plan dated March 2,
1992 (Exhibit 10.26 to the Registrant's 1991 Form 10-K);
Amendment dated September 28, 1995 (Exhibit 10.22 to the
Registrant's 1995 Form 10-K).
10.2 Primark Corporation Stock Option Plan for Non-Employee
Directors, as amended, dated January 12, 1988 (Exhibit 10.57
to the Registrant's 1987 Form 10-K); Amendment dated
February 21, 1992 (Exhibit 10.24 to the Registrant's 1991
Form 10-K); Amendment dated September 28, 1992 (Exhibit 28.3
to the Registrant's September 30, 1992 Form 10-Q); Amendment
dated September 22, 1995 (Exhibit 10.2 to the Registrant's
1996 Form 10-K).
10.3 Primark Corporation Executive Share Option Scheme (Exhibit
10.26 to the Registrant's 1992 Form 10-K); Amendment dated
September 28, 1995 (Exhibit 10.24 to the Registrant's 1995
Form 10-K).
10.4 Primark Corporation Savings and Stock Ownership Plan, as
amended and restated, effective January 1, 1997; (Exhibit
4.4 to the Registrant's Registration Statement on Form S-8
dated December 10, 1996).
10.5 Primark Corporation 1992 Employee Stock Purchase Plan dated
March 2, 1992 (Exhibit 10.27 to the Registrant's 1991 Form
10-K); Amended and Restated Stock Purchase Plan and related
Prospectus as filed under the Securities Act of 1933
(Exhibit 10.27 to the Registrant's 1993 Form 10-K);
Amendment dated October 4, 1995 (Exhibit 10.26 to the
Registrant's 1995 Form 10-K).
10.6 Management Incentive Plan adopted by Board of Directors on
January 12, 1988 (Exhibit 10.64 to the Registrant's 1987
Form 10-K); Amendment dated February 21, 1992 (Exhibit 10.33
to the Registrant's 1991 Form 10-K).
10.7 Promissory notes dated September 30, 1988, issued to the
Registrant by executive officers (Exhibit 10.1 to the
Registrant's September 30, 1988 Form 10-Q).
</TABLE>
II-2
<PAGE> 132
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENTS
- ------- ---------
<C> <S>
10.8 Restricted Stock Award Agreements and Stock Option
Agreements (Exhibit 4(b) to the Registrant's Registration
Statement No. 2-3876).
10.9 Employment and Option agreements between the Registrant and
Joseph E. Kasputys dated January 7, 1997 (Exhibit 10.11 to
the Registrant's 1996 Form 10-K).
10.10 Supplemental Death Benefit and Retirement Income Plan
Agreement, as amended and restated, dated March 25, 1986
(Exhibit 19.1 to the Registrant's March 31, 1985 Form 10-Q);
Certified Copy of Resolution amending the Supplemental Death
Benefit and Retirement Income Plan Agreement (Exhibit 10.17
to the Registrant's 1991 Form 10-K); Amendment dated
September 28, 1992 (Exhibit 29.4 to the Registrant's
September 30, 1992 Form 10-Q).
10.11 Supplemental Medical Reimbursement Insurance Plan (Exhibit
10.15 to the Registrant's 1996 Form 10-K).
10.12 Form of Change of Control Compensation Agreement entered
into between the Registrant and selected executive officers
(Exhibit 10.60 to the Registrant's 1996 Form 10-K); Form of
Amendments dated September 29, 1997 (filed as Exhibit 10.3
to the Registrant's September 30, 1997 Form 10-Q).
10.13 Refinancing Agreements (Revolving Credit Agreement, Term
Loan Agreement, Pledge Agreement, Collateral Agency
Agreement, and Note Backup Agreement) dated as of February
7, 1997, by and among Primark Corporation, Lenders Parties,
Mellon Bank, N.A. and other related documents (Exhibit 10.17
to the Registrant's 1996 Form 10-K); Amendment dated May 1,
1997 (Exhibit 10.1 to the Registrant's June 30, 1997 Form
10-Q); Amendment dated June 30, 1997 (Exhibit 10.2 to the
Registrant's June 30, 1997 Form 10-Q); Amendment dated
December 1, 1997 (Exhibit 10.16.1 to the Registrant's 1997
Form 10-K); Amendment dated March 6, 1998 (Exhibit 10.16.2
to the Registrant's 1997 Form 10-K); Amendment dated May 8,
1998; Amendment dated June 15, 1998 (incorporated by
reference to the Registrant's Schedule 13E-4 dated June 26,
1998); Amendment dated September 10, 1998; Amendment dated
December 10, 1998.
10.14 Form of variable rate unsecured loan notes dated October 24,
1996 between the Registrant and the former shareholders of
ICV, Ltd. (Exhibit 10.18 to the Registrant's 1996 Form
10-K).
10.15 Credit Agreement dated October 23, 1996, by and among the
Registrant, Lenders Parties and Mellon Bank, N.A.; (Exhibit
10.1 to the Registrant's Form 8-K dated November 13, 1996);
Amendment dated October 23, 1996 (Exhibit 10.20 to the
Registrant's 1996 Form 10-K); Amendment dated December 18,
1996 (Exhibit 10.21 to the Registrant's 1996 Form 10-K);
Amendment dated January 9, 1997 (Exhibit 10.19 to the
Registrant's 1996 Form 10-K); as amended by the Note Backup
Agreement dated February 7, 1997 (Exhibit 10.17 to the
Registrant's 1996 Form 10-K).
10.16 Revolving Credit Agreement dated as of June 29, 1995,
between the Registrant, Lenders Parties, Mellon Bank, N.A.
and The First National Bank of Boston and other related
documents (Exhibit 10.1 to the Registrant's Form 8-K dated
July 3, 1995); Amendment dated October 23, 1996 (Exhibit
10.20 to the Registrant's 1996 Form 10-K); Amendment dated
December 18, 1996 (Exhibit 10.21 to the Registrant's 1996
Form 10-K); Amendment dated January 9, 1997 (Exhibit 10.19
to the Registrant's 1996 Form 10-K).
10.17 Term Loan Agreement dated as of June 29, 1995, between the
Registrant, Lenders Parties, Mellon Bank, N.A. and The First
National Bank of Boston and other related documents (Exhibit
10.2 to the Registrant's Form 8-K dated July 3, 1995);
Amendment dated October 23, 1996 (Exhibit 10.20 to the
Registrant's 1996 Form 10-K); Amendment dated December 18,
1996 (Exhibit 10.21 to the Registrant's 1996 Form 10-K).
12.1 Statement regarding the computation of ratio of earnings to
fixed charges for the Registrant.
21.1 Subsidiaries of the Registrant.
</TABLE>
II-3
<PAGE> 133
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENTS
- ------- ---------
<C> <S>
23.1 Consent of Deloitte & Touche LLP.
*23.2 Consent of Michael R. Kargula, Executive Vice President,
General Counsel and Secretary of the Registrant (included in
Exhibit 5.1).
*23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.2).
24.1 Powers of Attorney (included in signature page to
Registration Statement).
25.1 Statement of Eligibility and Qualification on Form T-1 of
State Street Bank and Trust Company, as Trustee under the
Indenture relating to the Registrant's 9 1/4% Senior
Subordinated Notes due 2008.
99.1 Sections 561-571 of the Michigan Business Corporation Act.
*99.2 Form of Letter of Transmittal.
*99.3 Form of Notice of Guaranteed Delivery.
*99.4 Form of Letter to Brokers.
*99.5 Form of Letter to Clients.
*99.6 Guidelines for certification of taxpayer identification
number on substitute Form W-9.
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 or this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(b) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(c) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(e) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-4
<PAGE> 134
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-5
<PAGE> 135
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Waltham,
Commonwealth of Massachusetts, on January 26, 1999.
PRIMARK CORPORATION
By: /s/ STEPHEN H. CURRAN
------------------------------------
Stephen H. Curran
Executive Vice President and
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Joseph E. Kasputys, Stephen H. Curran and
Michael R. Kargula, and each of them, with full power to act without the other,
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities (unless revoked in writing) to sign any and
all amendments (including post-effective amendments thereto) to this
Registration Statement to which this power of attorney is attached, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully as to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ JOSEPH E. KASPUTYS Chairman, President, Chief January 26, 1999
- ------------------------------------ Executive Officer and
Joseph E. Kasputys Director (Principal
Executive Officer)
/s/ STEPHEN H. CURRAN Executive Vice President and January 26, 1999
- ------------------------------------ Chief Financial Officer
Stephen H. Curran (Principal Accounting and
Financial Officer)
/s/ KEVIN J. BRADLEY Director January 26, 1999
- ------------------------------------
Kevin J. Bradley
/s/ JOHN C. HOLT Director January 26, 1999
- ------------------------------------
John C. Holt
/s/ STEVEN LAZARUS Director January 26, 1999
- ------------------------------------
Steven Lazarus
</TABLE>
II-6
<PAGE> 136
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ PATRICIA MCGINNIS Director January 26, 1999
- ----------------------------------------
Patricia McGinnis
/s/ JONATHAN NEWCOMB Director January 26, 1999
- ----------------------------------------
Jonathan Newcomb
/s/ CONSTANCE K. WEAVER Director January 26, 1999
- ----------------------------------------
Constance K. Weaver
</TABLE>
II-7
<PAGE> 137
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
- -------
<S> <C>
1.1 Placement Agreement, dated December 16, 1998, among the
Registrant, Morgan Stanley & Co. Incorporated, A. G. Edwards
& Sons, Inc., BT Alex. Brown Incorporated, Chase Securities
Inc. and NationsBanc Montgomery Securities LLC.
1.2 Underwriting Agreement, dated as of March 4, 1998, among the
Registrant, BT Alex. Brown Incorporated and certain selling
shareholders appearing on Schedule I thereto (incorporated
by reference to the Registrant's March 6, 1998 Form 8-K).
2.1 Amended and Restated Partnership Agreement for
Worldscope/Disclosure International Partners; Irish
Partnership Interest Purchase and Sale Agreement; and
Partnership Interest Purchase and Sale Agreement; dated as
of October 15, 1996 (Exhibit 2.5 to the Registrant's 1996
Form 10-K).
2.2 Stock Purchase Agreement by and among the Registrant,
Primark Information Services UK Limited and Litton
Industries, Inc. and Litton U.K. Limited dated as of
December 8, 1997 (Exhibit 2.1 to the Registrant's Form 8-K
filed December 10, 1997).
2.3 Information Technology Services Agreement by and among the
Registrant, TASC, Inc. and Litton Industries, Inc. (Exhibit
2.2 to the Registrant's Form 8-K filed December 10, 1997).
3.1 Restated Articles of Incorporation of the Registrant.
3.2 By-laws of the Registrant, as amended (incorporated by
reference to the Registrant's September 30, 1990 Form 10-Q).
4.1 Registration Rights Agreement, dated as of December 16,
1998, among the Registrant, Morgan Stanley & Co.
Incorporated, A. G. Edwards & Sons, Inc., BT Alex. Brown
Incorporated, Chase Securities Inc. and NationsBanc
Montgomery Securities LLC.
4.2 Indenture, dated as of December 21, 1998, among the
Registrant and State Street Bank and Trust Company, as
Trustee for the 9 1/4% Senior Subordinated Notes Due 2008.
4.3 Rights Agreement dated May 29, 1997 between the Registrant
and Bank Boston, N.A., as Rights Agent, which includes, as
Exhibit A, the Rights Certificate and as Exhibit B, the
Summary of Rights to Purchase Common Stock (Exhibit 4.1 to
the Registrant's Form 8-A dated June 19, 1997).
4.4 Registration Rights Agreement dated January 7, 1997, between
the Registrant and Joseph E. Kasputys (Exhibit 4.1 to the
Registrant's 1996 Form 10-K).
*5.1 Opinion of Michael R. Kargula, Executive Vice President,
General Counsel and Secretary of the Registrant.
*5.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
10.1 Primark Corporation 1992 Stock Option Plan dated March 2,
1992 (Exhibit 10.26 to the Registrant's 1991 Form 10-K);
Amendment dated September 28, 1995 (Exhibit 10.22 to the
Registrant's 1995 Form 10-K).
10.2 Primark Corporation Stock Option Plan for Non-Employee
Directors, as amended, dated January 12, 1988 (Exhibit 10.57
to the Registrant's 1987 Form 10-K); Amendment dated
February 21, 1992 (Exhibit 10.24 to the Registrant's 1991
Form 10-K); Amendment dated September 28, 1992 (Exhibit 28.3
to the Registrant's September 30, 1992 Form 10-Q); Amendment
dated September 22, 1995 (Exhibit 10.2 to the Registrant's
1996 Form 10-K).
10.3 Primark Corporation Executive Share Option Scheme (Exhibit
10.26 to the Registrant's 1992 Form 10-K); Amendment dated
September 28, 1995 (Exhibit 10.24 to the Registrant's 1995
Form 10-K).
10.4 Primark Corporation Savings and Stock Ownership Plan, as
amended and restated, effective January 1, 1997; (Exhibit
4.4 to the Registrant's Registration Statement on Form S-8
dated December 10, 1996).
</TABLE>
<PAGE> 138
<TABLE>
<CAPTION>
EXHIBIT
- -------
<S> <C>
10.5 Primark Corporation 1992 Employee Stock Purchase Plan dated
March 2, 1992 (Exhibit 10.27 to the Registrant's 1991 Form
10-K); Amended and Restated Stock Purchase Plan and related
Prospectus as filed under the Securities Act of 1933
(Exhibit 10.27 to the Registrant's 1993 Form 10-K);
Amendment dated October 4, 1995 (Exhibit 10.26 to the
Registrant's 1995 Form 10-K).
10.6 Management Incentive Plan adopted by Board of Directors on
January 12, 1988 (Exhibit 10.64 to the Registrant's 1987
Form 10-K); Amendment dated February 21, 1992 (Exhibit 10.33
to the Registrant's 1991 Form 10-K).
10.7 Promissory notes dated September 30, 1988, issued to the
Registrant by executive officers (Exhibit 10.1 to the
Registrant's September 30, 1988 Form 10-Q).
10.8 Restricted Stock Award Agreements and Stock Option
Agreements (Exhibit 4(b) to the Registrant's Registration
Statement No. 2-3876).
10.9 Employment and Option agreements between the Registrant and
Joseph E. Kasputys dated January 7, 1997 (Exhibit 10.11 to
the Registrant's 1996 Form 10-K).
10.10 Supplemental Death Benefit and Retirement Income Plan
Agreement, as amended and restated, dated March 25, 1986
(Exhibit 19.1 to the Registrant's March 31, 1985 Form 10-Q);
Certified Copy of Resolution amending the Supplemental Death
Benefit and Retirement Income Plan Agreement (Exhibit 10.17
to the Registrant's 1991 Form 10-K); Amendment dated
September 28, 1992 (Exhibit 29.4 to the Registrant's
September 30, 1992 Form 10-Q).
10.11 Supplemental Medical Reimbursement Insurance Plan (Exhibit
10.15 to the Registrant's 1996 Form 10-K).
10.12 Form of Change of Control Compensation Agreement entered
into between the Registrant and selected executive officers
(Exhibit 10.60 to the Registrant's 1996 Form 10-K); Form of
Amendments dated September 29, 1997 (filed as Exhibit 10.3
to the Registrant's September 30, 1997 Form 10-Q).
10.13 Refinancing Agreements (Revolving Credit Agreement, Term
Loan Agreement, Pledge Agreement, Collateral Agency
Agreement, and Note Backup Agreement) dated as of February
7, 1997, by and among Primark Corporation, Lenders Parties,
Mellon Bank, N.A. and other related documents (Exhibit 10.17
to the Registrant's 1996 Form 10-K); Amendment dated May 1,
1997 (Exhibit 10.1 to the Registrant's June 30, 1997 Form
10-Q); Amendment dated June 30, 1997 (Exhibit 10.2 to the
Registrant's June 30, 1997 Form 10-Q); Amendment dated
December 1, 1997 (Exhibit 10.16.1 to the Registrant's 1997
Form 10-K); Amendment dated March 6, 1998 (Exhibit 10.16.2
to the Registrant's 1997 Form 10-K); Amendment dated May 8,
1998; Amendment dated June 15, 1998 (incorporated by
reference to the Registrant's Schedule 13E-4 dated June 26,
1998); Amendment dated September 10, 1998; Amendment dated
December 10, 1998.
10.14 Form of variable rate unsecured loan notes dated October 24,
1996 between the Registrant and the former shareholders of
ICV, Ltd. (Exhibit 10.18 to the Registrant's 1996 Form
10-K).
10.15 Credit Agreement dated October 23, 1996, by and among the
Registrant, Lenders Parties and Mellon Bank, N.A.; (Exhibit
10.1 to the Registrant's Form 8-K dated November 13, 1996);
Amendment dated October 23, 1996 (Exhibit 10.20 to the
Registrant's 1996 Form 10-K); Amendment dated December 18,
1996 (Exhibit 10.21 to the Registrant's 1996 Form 10-K);
Amendment dated January 9, 1997 (Exhibit 10.19 to the
Registrant's 1996 Form 10-K); as amended by the Note Backup
Agreement dated February 7, 1997 (Exhibit 10.17 to the
Registrant's 1996 Form 10-K).
</TABLE>
<PAGE> 139
<TABLE>
<CAPTION>
EXHIBIT
- -------
<S> <C>
10.16 Revolving Credit Agreement dated as of June 29, 1995,
between the Registrant, Lenders Parties, Mellon Bank, N.A.
and The First National Bank of Boston and other related
documents (Exhibit 10.1 to the Registrant's Form 8-K dated
July 3, 1995); Amendment dated October 23, 1996 (Exhibit
10.20 to the Registrant's 1996 Form 10-K); Amendment dated
December 18, 1996 (Exhibit 10.21 to the Registrant's 1996
Form 10-K); Amendment dated January 9, 1997 (Exhibit 10.19
to the Registrant's 1996 Form 10-K).
10.17 Term Loan Agreement dated as of June 29, 1995, between the
Registrant, Lenders Parties, Mellon Bank, N.A. and The First
National Bank of Boston and other related documents (Exhibit
10.2 to the Registrant's Form 8-K dated July 3, 1995);
Amendment dated October 23, 1996 (Exhibit 10.20 to the
Registrant's 1996 Form 10-K); Amendment dated December 18,
1996 (Exhibit 10.21 to the Registrant's 1996 Form 10-K).
12.1 Statement regarding the computation of ratio of earnings to
fixed charges for the Registrant.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP.
*23.2 Consent of Michael R. Kargula, Executive Vice President,
General Counsel and Secretary of the Registrant (included in
Exhibit 5.1).
*23.3 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.2).
24.1 Powers of Attorney (included in signature page to
Registration Statement).
25.1 Statement of Eligibility and Qualification on Form T-1 of
State Street Bank and Trust Company, as Trustee under the
Indenture relating to the Registrant's 9 1/4% Senior
Subordinated Notes due 2008.
99.1 Sections 561-571 of the Michigan Business Corporation Act.
*99.2 Form of Letter of Transmittal.
*99.3 Form of Notice of Guaranteed Delivery.
*99.4 Form of Letter to Brokers.
*99.5 Form of Letter to Clients.
*99.6 Guidelines for certification of taxpayer identification
number on substitute Form W-9.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 1.1
$150,000,000
PRIMARK CORPORATION
9 1/4% SENIOR SUBORDINATED NOTES DUE 2008
PLACEMENT AGREEMENT
December 16, 1998
<PAGE> 2
December 16, 1998
Morgan Stanley & Co. Incorporated
A.G. Edwards & Sons, Inc.
BT Alex. Brown Incorporated
Chase Securities Inc.
NationsBanc Montgomery Securities LLC
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Primark Corporation, a Michigan corporation (the "COMPANY"),
proposes to issue and sell to the several purchasers named in Schedule I hereto
(the "PLACEMENT AGENTS") $150,000,000 principal amount of its 9 1/4% Senior
Subordinated Notes due 2008 (tHE "SECURITIES") to be issued pursuant to the
provisions of an Indenture dated as of December 21, 1998 (the "INDENTURE")
between the Company and State Street Bank and Trust Company, as Trustee (the
"TRUSTEE").
The Securities will be offered without being registered under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), to qualified
institutional buyers in compliance with the exemption from registration provided
by Rule 144A under the Securities Act and in offshore transactions in reliance
on Regulation S under the Securities Act ("REGULATION S").
The Placement Agents and their direct and indirect transferees
will be entitled to the benefits of a Registration Rights Agreement dated the
date hereof between the Company and the Placement Agents (the "REGISTRATION
RIGHTS AGREEMENT").
In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum (the "PRELIMINARY MEMORANDUM") and
will prepare a final offering memorandum (the "FINAL MEMORANDUM" and, with the
Preliminary Memorandum, each a "MEMORANDUM") including a description of the
terms of the Securities, the terms of the offering and a description of the
Company.
1. Representations and Warranties. The Company
represents and warrants to, and agrees with, you that:
(a) The Preliminary Memorandum does not contain and the
Final Memorandum, in the form used by the Placement Agents to confirm
sales and on the Closing Date (as defined in Section 4), will not
contain any untrue statement of a
<PAGE> 3
2
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and
warranties set forth in this paragraph do not apply to statements or
omissions in either Memorandum based upon information relating to any
Placement Agent furnished to the Company in writing by such Placement
Agent through you expressly for use therein.
(b) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in each Memorandum and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole (a "Material Adverse Effect").
(c) Each subsidiary of the Company as set forth on
Schedule II hereto (a "Material Subsidiary") has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to conduct its
business as described in each Memorandum and is duly qualified to
transact business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a Material
Adverse Effect; except as disclosed in each Memorandum, all of the
issued shares of capital stock of each Material Subsidiary of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and are owned directly or indirectly by the
Company. The Material Subsidiaries constitute the only "Significant
Subsidiaries" of the Company as defined in Rule 1-02(w) of Regulation
S-X.
(d) This Agreement has been duly authorized, executed and
delivered by the Company.
(e) The Securities have been duly authorized and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Placement Agents in
accordance with the terms of this Agreement, will be valid and binding
obligations of the Company, enforceable in accordance with their terms,
subject to applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity, and will
be entitled to the benefits of the Indenture and the Registration
Rights Agreement.
<PAGE> 4
3
(f) The Indenture has been duly authorized and, when
executed and delivered by the Company, will be a valid and binding
agreement of the Company, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity.
(g) The Registration Rights Agreement has been duly
authorized, executed and delivered by, and is a valid and binding
agreement of, the Company, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity and except
as rights to indemnification and contribution under the Registration
Rights Agreement may be limited under applicable law.
(h) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement,
the Indenture, the Registration Rights Agreement and the Securities
will not contravene any provision of applicable law or the certificate
of incorporation or by-laws of the Company or any agreement or other
instrument binding upon the Company or any of its Material Subsidiaries
that is material to the Company and its subsidiaries, taken as a whole,
or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any Material Subsidiary,
and no consent, approval, authorization or order of, or qualification
with, any governmental body or agency is required for the performance
by the Company of its obligations under this Agreement, the Indenture,
the Registration Rights Agreement or the Securities, other than
consents, approvals, authorizations or orders, which the failure to
receive would not have a Material Adverse Effect and except such as may
be required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Securities and by Federal and
state securities laws with respect to the Company's obligations under
the Registration Rights Agreement.
(i) There has not occurred any material adverse change,
or any development reasonably likely to result in a prospective
material adverse change, in the condition, financial or otherwise, or
in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the Final
Memorandum.
(j) Except as disclosed in each Memorandum, there are no
legal or governmental proceedings pending or, to the knowledge of the
Company, threatened to which the Company or any of its Material
Subsidiaries is a party other than proceedings that would not have a
Material Adverse Effect or a material adverse effect on the power or
ability of the Company to perform its obligations under this Agreement,
the Indenture, the Registration Rights Agreement or the Securities or
to consummate the transactions contemplated by the Final Memorandum.
<PAGE> 5
4
(k) The Company and its Material Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received
all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses
and (iii) are in compliance with all terms and conditions of any such
permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of
such permits, licenses or approvals would not, singly or in the
aggregate, have a Material Adverse Effect.
(l) Subsequent to the respective dates as of which
information is given in the Final Memorandum, (i) the Company and its
Material Subsidiaries have not incurred any material liability or
obligation, direct or contingent, nor entered into any material
transaction not in the ordinary course of business; (ii) the Company
has not purchased any of its outstanding capital stock, nor declared,
paid or otherwise made any dividend or distribution of any kind on its
capital stock other than ordinary and customary dividends; and (iii)
there has not been any material change in the capital stock, short-term
debt or long-term debt of the Company and its subsidiaries, except in
each case as described in the Final Memorandum.
(m) The Company and its Material Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct
their respective business except where the failure to possess such
certificates, authorizations and permits would not have a Material
Adverse Effect, and neither the Company nor any of its Material
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse
Effect, except as described the Final Memorandum.
(n) The Company is not, and after giving effect to the
offering and sale of the Securities and the application of the proceeds
thereof as described in the Final Memorandum, will not be an
"investment company" as such term is defined in the Investment Company
Act of 1940, as amended.
(o) None of the Company, its Affiliates or any person
acting on its or their behalf has engaged or will engage in any
directed selling efforts (within the meaning of Regulation S) with
respect to the Securities and the Company and its Affiliates and any
<PAGE> 6
5
person acting on its or their behalf have complied and will comply with
the offering restrictions requirement of Regulation S.
(p) Subject to compliance by the Placement Agents with
the representations and warranties and procedures set forth in Section
7, it is not necessary in connection with the offer, sale and delivery
of the Securities to the Placement Agents in the manner contemplated by
this Agreement to register the Securities under the Securities Act or
to qualify the Indenture under the Trust Indenture Act of 1939, as
amended.
(q) The Securities satisfy the requirements set forth in
Rule 144A(d)(3) under the Securities Act.
(r) Neither the Company nor any affiliate (as defined in
Rule 501(b) of Regulation D under the Securities Act, an "AFFILIATE")
of the Company has directly, or through any agent, (i) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect
of, any security (as defined in the Securities Act) which is or will be
integrated with the sale of the Securities in a manner that would
require the registration under the Securities Act of the Securities or
(ii) engaged in any form of general solicitation or general advertising
in connection with the offering of the Securities (as those terms are
used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the
Securities Act.
(s) The Securities conform in all material respects to
the description thereof contained in the Final Memorandum under the
heading "Description of the Notes".
2. Agreements to Sell and Purchase. Upon the basis of
the representations and warranties herein contained, but subject to the
conditions hereinafter stated, the Company hereby agrees to sell to the several
Placement Agents, and each Placement Agent agrees, severally and not jointly, to
purchase from the Company the respective principal amount of Securities set
forth in Schedule I hereto opposite its name at a purchase price of 97.5% of the
principal amount thereof (the "PURCHASE PRICE") plus accrued interest, if any,
to the Closing Date.
The Company hereby agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the Placement Agents,
it will not, during the period beginning on the date hereof and continuing to
and including the Closing Date, offer, sell, contract to sell or otherwise
dispose of any debt of the Company substantially similar to the Securities
(other than the sale of the Securities under this Agreement.)
<PAGE> 7
6
3. Terms of Offering. You have advised the Company that
the Placement Agents will make an offering of the Securities purchased by the
Placement Agents hereunder on the terms to be set forth in the Final Memorandum,
as soon as practicable after this Agreement is entered into as in your judgment
is advisable.
4. Payment and Delivery. Payment for the Securities
shall be made to the Company in Federal or other funds immediately available in
New York City against delivery of such Securities for the respective accounts of
the several Placement Agents at 10:00 a.m., New York City time, on December 21,
1998, or at such other time on the same or such other date, not later than
December 31, 1998, as shall be designated in writing by you and, if practicable,
of which notice shall be given by you to the Company. The time and date of such
payment are hereinafter referred to as the "CLOSING DATE."
Certificates for the Securities shall be in definitive form or
global form, as specified by you, and registered in such names and in such
denominations as you shall request in writing not later than one full business
day prior to the Closing Date. The certificates evidencing the Securities shall
be delivered to you on the Closing Date for the respective accounts of the
several Placement Agents, with any transfer taxes payable in connection with the
transfer of the Securities to the Placement Agents duly paid, against payment of
the Purchase Price therefor plus accrued interest, if any, to the date of
payment and delivery.
5. Conditions to the Placement Agents' Obligations. The
several obligations of the Placement Agents to purchase and pay for the
Securities on the Closing Date are subject to the following conditions:
(a) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date:
(i) there shall not have occurred any
downgrading, nor shall any notice have been given of any
intended or potential downgrading or of any review for a
possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or
any development involving a prospective change, in the
condition, financial or otherwise, or in the earnings,
business or operations of the Company and its subsidiaries,
taken as a whole, from that set forth in the Final Memorandum
(exclusive of any amendments or supplements thereto subsequent
to the date of this Agreement) that, in your judgment, is
material and adverse and that makes it, in your
<PAGE> 8
7
judgment, impracticable to market the Securities on the terms
and in the manner contemplated in the Final Memorandum.
(b) The Placement Agents shall have received on the
Closing Date a certificate, dated the Closing Date and signed by an
executive officer of the Company, to the effect set forth in Section
5(a)(i) and to the effect that the representations and warranties of
the Company contained in this Agreement are true and correct as of the
Closing Date and the Company has complied in all material respects with
all of the agreements and satisfied all of the conditions on its part
to be performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely
upon the best of his or her knowledge as to proceedings threatened.
(c) The Placement Agents shall have received on the
Closing Date an opinion of Skadden, Arps, Slate, Meagher & Flom LLP,
outside counsel for the Company, dated the Closing Date, to the effect
set forth in Exhibit A. Such opinion shall be rendered to the Placement
Agents at the request of the Company and shall so state therein.
(d) The Placement Agents shall have received on the
Closing Date an opinion of Michael R. Kargula, General Counsel of the
Company, dated the Closing Date, to the effect set forth in Exhibit B.
Such opinion shall be rendered to the Placement Agents at the request
of the Company and shall so state therein.
(e) The Placement Agents shall have received on the
Closing Date an opinion of Norton Rose, outside U.K. counsel for the
Company, dated the Closing Date, to the effect set forth in Exhibit C.
Such opinion shall be rendered to the Placement Agents at the request
of the Company and shall so state therein.
(f) The Placement Agents shall have received on the
Closing Date an opinion of Shearman & Sterling, counsel for the
Placement Agents, dated the Closing Date, in form and substance
satisfactory to you.
(g) The Placement Agents shall have received on each of
the date hereof and the Closing Date a letter, dated the date hereof or
the Closing Date, as the case may be, in form and substance
satisfactory to the Placement Agents, from Deloitte & Touche LLP,
independent public accountants, containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain
financial information contained in the Final
<PAGE> 9
8
Memorandum; provided that the letter delivered on the Closing Date
shall use a "cut-off date" not earlier than the date hereof.
(h) The Placement Agents shall have received such other
documents and certificates as are reasonably requested by you or your
counsel.
6. Covenants of the Company. In further consideration of
the agreements of the Placement Agents contained in this Agreement, the Company
covenants with each Placement Agent as follows:
(a) To furnish to you in New York City, without charge,
prior to 10:00 a.m. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned
in Section 6(c), as many copies of the Final Memorandum and any
supplements and amendments thereto as you may reasonably request.
(b) Before amending or supplementing either Memorandum,
to furnish to you a copy of each such proposed amendment or supplement
and not to use any such proposed amendment or supplement to which you
reasonably object; provided however that your consent to such amendment
or supplement may not be unreasonably withheld or delayed.
(c) If, during such period after the date hereof and
prior to the date on which all of the Securities shall have been sold
by the Placement Agents, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Final
Memorandum in order to make the statements therein, in the light of the
circumstances when the Final Memorandum is delivered to a purchaser,
not misleading, or if, in the opinion of counsel for the Placement
Agents, it is necessary to amend or supplement the Final Memorandum to
comply with applicable law, forthwith to prepare and furnish, at its
own expense, to the Placement Agents, either amendments or supplements
to the Final Memorandum so that the statements in the Final Memorandum
as so amended or supplemented will not, in the light of the
circumstances when the Final Memorandum is delivered to a purchaser, be
misleading or so that the Final Memorandum, as amended or supplemented,
will comply with applicable law.
(d) To endeavor to qualify the Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions as you
shall reasonably request provided, however, that the Company shall not
be required in connection therewith to register or qualify as a foreign
corporation where it is not now so qualified.
<PAGE> 10
9
(e) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees,
disbursements and expenses of the Company's counsel and the Company's
accountants in connection with the issuance and sale of the Securities
and all other fees or expenses in connection with the preparation of
each Memorandum and all amendments and supplements thereto, including
all printing costs associated therewith, and the delivering of copies
thereof to the Placement Agents, in the quantities herein above
specified, (ii) all costs and expenses related to the transfer and
delivery of the Securities to the Placement Agents, including any
transfer or other taxes payable thereon, (iii) the cost of printing or
producing any Blue Sky or legal investment memorandum in connection
with the offer and sale of the Securities under state securities laws
and all expenses in connection with the qualification of the Securities
for offer and sale under state securities laws as provided in Section
6(d) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Placement Agents in connection with
such qualification and in connection with the Blue Sky or legal
investment memorandum, (iv) any fees charged by rating agencies for the
rating of the Securities, (v) all document production charges and
expenses of counsel to the Placement Agents (but not including their
fees for professional services) in connection with the preparation of
this Agreement, (vi) the fees and expenses, if any, incurred in
connection with the admission of the Securities for trading in PORTAL
or any appropriate market system, (vii) the costs and charges of the
Trustee and any transfer agent, registrar or depositary, (viii) the
cost of the preparation, issuance and delivery of the Securities, (ix)
the costs and expenses of the Company relating to investor
presentations on any "road show" undertaken in connection with the
marketing of the offering of the Securities, including, without
limitation, expenses associated with the production of road show slides
and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of
the Company, travel and lodging expenses of the representatives and
officers of the Company and any such consultants, and the cost of any
aircraft chartered in connection with the road show, and (x) all other
costs and expenses incident to the performance of the obligations of
the Company hereunder for which provision is not otherwise made in this
Section. It is understood, however, that except as provided in this
Section, Section 8, and the last paragraph of Section 10, the Placement
Agents will pay all of their costs and expenses, including fees and
disbursements of their counsel, transfer taxes payable on resale of any
of the Securities by them and any advertising expenses connected with
any offers they may make.
(f) Neither the Company nor any Affiliate will sell,
offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in the
<PAGE> 11
10
Securities Act) which could be integrated with the sale of the
Securities in a manner which would require the registration under the
Securities Act of the Securities.
(g) Not to solicit any offer to buy or offer or sell the
Securities by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act.
(h) While any of the Securities remain "restricted
securities" within the meaning of the Securities Act, to make
available, upon request, to any seller of the Securities the
information specified in Rule 144A(d)(4) under the Securities Act,
unless the Company is then subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(i) To use its best efforts to permit the Securities to
be designated PORTAL securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers,
Inc. relating to trading in the PORTAL Market.
(j) None of the Company, its Affiliates or any person
acting on its or their behalf (other than the Placement Agents) will
engage in any directed selling efforts (as that term is defined in
Regulation S) with respect to the Securities, and the Company and its
Affiliates and each person acting on its or their behalf (other than
the Placement Agents) will comply with the offering restrictions
requirement of Regulation S.
(k) During the period of two years after the Closing
Date, the Company will not, and will not permit any of its affiliates
(as defined in Rule 144 under the Securities Act) to resell any of the
Securities which constitute "restricted securities" under Rule 144 that
have been reacquired by any of them.
7. Offering of Securities; Restrictions on Transfer. (a)
Each Placement Agent, severally and not jointly, represents and warrants that
such Placement Agent is a qualified institutional buyer as defined in Rule 144A
under the Securities Act (a "QIB"). Each Placement Agent, severally and not
jointly, agrees with the Company that (i) it will not solicit offers for, or
offer or sell, such Securities by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act and (ii) it will solicit offers for such Securities only
from, and will offer such Securities only to, persons that it reasonably
believes to be (A) in the case of offers inside the United States, QIBs and (B)
in the case of offers outside the United States, to persons other than U.S.
persons ("FOREIGN PURCHASERS," which term shall include dealers or other
professional fiduciaries in the United States acting on a discretionary basis
for foreign beneficial owners (other than an estate
<PAGE> 12
11
or trust)) in reliance upon Regulation S under the Securities Act that, in each
case, in purchasing such Securities are deemed to have represented and agreed as
provided in the Final Memorandum under the caption "Transfer Restrictions".
(b) Each Placement Agent, severally and not jointly,
represents, warrants, and agrees with respect to offers and sales outside the
United States that:
(i) such Placement Agent understands that no action has
been or will be taken in any jurisdiction by the Company that would
permit a public offering of the Securities, or possession or
distribution of either Memorandum or any other offering or publicity
material relating to the Securities, in any country or jurisdiction
where action for that purpose is required;
(ii) such Placement Agent will comply with all applicable
laws and regulations in each jurisdiction in which it acquires, offers,
sells or delivers Securities or has in its possession or distributes
either Memorandum or any such other material, in all cases at its own
expense;
(iii) the Securities have not been registered under the
Securities Act and may not be offered or sold within the United States
or to, or for the account or benefit of, U.S. persons except in
accordance with Rule 144A or Regulation S under the Securities Act or
pursuant to another exemption from the registration requirements of the
Securities Act;
(iv) such Placement Agent has offered the Securities and
will offer and sell the Securities (A) as part of their distribution at
any time and (B) otherwise until 40 days after the later of the
commencement of the offering and the Closing Date, only in accordance
with Rule 903 of Regulation S or as otherwise permitted in Section
7(a); accordingly, neither such Placement Agent, its Affiliates nor any
persons acting on its or their behalf have engaged or will engage in
any directed selling efforts (within the meaning of Regulation S) with
respect to the Securities, and any such Placement Agent, its Affiliates
and any such persons have complied and will comply with the offering
restrictions requirement of Regulation S;
(v) such Placement Agent has (A) not offered or sold and,
prior to the date six months after the Closing Date, will not offer or
sell any Securities to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted
and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995;
(B) complied and will comply with all applicable
<PAGE> 13
12
provisions of the Financial Services Act 1986 with respect to anything
done by it in relation to the Securities in, from or otherwise
involving the United Kingdom, and (C) only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it
in connection with the issue of the Securities to a person who is of a
kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to
whom such document may otherwise lawfully be issued or passed on;
(vi) such Placement Agent understands that the Securities
have not been and will not be registered under the Securities and
Exchange Law of Japan, and represents that it has not offered or sold,
and agrees not to offer or sell, directly or indirectly, any Securities
in Japan or for the account of any resident thereof except pursuant to
any exemption from the registration requirements of the Securities and
Exchange Law of Japan and otherwise in compliance with applicable
provisions of Japanese law; and
(vii) such Placement Agent agrees that, at or prior to
confirmation of sales of the Securities, it will have sent to each
distributor, dealer or person receiving a selling concession, fee or
other remuneration that purchases Securities from it during the
restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been
registered under the U.S. Securities Act of 1933 (the
"Securities Act") and may not be offered and sold within the
United States or to, or for the account or benefit of, U.S.
persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of
the offering and the closing date, except in either case in
accordance with Regulation S (or Rule 144A if available) under
the Securities Act. Terms used above have the meaning given to
them by Regulation S."
Terms used in this Section 7(b) have the meanings given to
them by Regulation S.
8. Indemnity and Contribution. (a) The Company agrees to
indemnify and hold harmless each Placement Agent and each person, if any, who
controls any Placement Agent within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in either Memorandum (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to
<PAGE> 14
13
make the statements therein in the light of the circumstances under which they
were made not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any Placement
Agent furnished to the Company in writing by such Placement Agent through you
expressly for use therein; PROVIDED that the foregoing indemnity with respect to
any Preliminary Memorandum shall not inure to the benefit of any Placement Agent
from whom the person asserting any such losses, claims, damages or liabilities
purchased Securities, or any person controlling such Placement Agent, if a copy
of the Final Memorandum (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Placement Agent to such person, if required by law so to
have been delivered, at or prior to the written confirmation of the sale of the
Securities to such person, and if the Final Memorandum (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage or liability, unless such failure was the result of noncompliance by the
Company with Section 6(a) hereof.
(b) Each Placement Agent agrees, severally and not
jointly, to indemnify and hold harmless the Company, its directors, its officers
and each person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Company to such Placement Agent, but
only with reference to information relating to such Placement Agent furnished to
the Company in writing by such Placement Agent through you expressly for use in
either Memorandum or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to Section 8(a) or 8(b), such person (the
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are
<PAGE> 15
14
incurred. Such firm shall be designated in writing by Morgan Stanley & Co.
Incorporated, in the case of parties indemnified pursuant to Section 8(a), and
by the Company, in the case of parties indemnified pursuant to Section 8(b). The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 30
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in
Section 8(a) or 8(b) is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Placement Agents on the
other hand from the offering of the Securities or (ii) if the allocation
provided by clause 8(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(d)(i) above but also the relative fault of the Company on the one
hand and of the Placement Agents on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Placement
Agents on the other hand in connection with the offering of the Securities shall
be deemed to be in the same respective proportions as the net proceeds from the
offering of the Securities (before deducting expenses) received by the Company
and the total discounts and commissions received by the Placement Agents in
respect thereof, bear to the aggregate offering price of the Securities. The
relative fault of the Company on the one hand and of the Placement Agents on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Placement Agents and
<PAGE> 16
15
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Placement Agents'
respective obligations to contribute pursuant to this Section 8 are several in
proportion to the respective principal amount of Securities they have purchased
hereunder, and not joint.
(e) The Company and the Placement Agents agree that it
would not be just or equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation (even if the Placement Agents were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in Section 8(d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in Section 8(d) shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8, no Placement Agent shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities resold by
it in the initial placement of such Securities were offered to investors exceeds
the amount of any damages that such Placement Agent has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained
in this Section 8 and the representations, warranties and other statements of
the Company contained in this Agreement shall remain operative and in full force
and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Placement Agent or any person
controlling any Placement Agent or by or on behalf of the Company, its officers
or directors or any person controlling the Company and (iii) acceptance of and
payment for any of the Securities.
9. Termination. This Agreement shall be subject to
termination by notice given by you to the Company, if (a) after the execution
and delivery of this Agreement and prior to the Closing Date (i) trading
generally shall have been suspended or materially limited on or by, as the case
may be, any of the New York Stock Exchange, the American Stock Exchange, the
National Association of Securities Dealers, Inc., the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii)
trading of any securities of the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities or (iv) there
<PAGE> 17
16
shall have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in your judgment, is material
and adverse and (b) in the case of any of the events specified in clauses
9(a)(i) through 9(a)(iv), such event, singly or together with any other such
event, makes it, in your judgment, impracticable to market the Securities on the
terms and in the manner contemplated in the Final Memorandum.
10. Effectiveness; Defaulting Placement Agents. This
Agreement shall become effective upon the execution and delivery hereof by the
parties hereto.
If, on the Closing Date, any one or more of the Placement
Agents shall fail or refuse to purchase Securities that it or they have agreed
to purchase hereunder on such date, and the aggregate principal amount of
Securities which such defaulting Placement Agent or Placement Agents agreed but
failed or refused to purchase is not more than one-tenth of the aggregate
principal amount of Securities to be purchased on such date, the other Placement
Agents shall be obligated severally in the proportions that the principal amount
of Securities set forth opposite their respective names in Schedule I bears to
the aggregate principal amount of Securities set forth opposite the names of all
such non-defaulting Placement Agents, or in such other proportions as you may
specify, to purchase the Securities which such defaulting Placement Agent or
Placement Agents agreed but failed or refused to purchase on such date; provided
that in no event shall the principal amount of Securities that any Placement
Agent has agreed to purchase pursuant to this Agreement be increased pursuant to
this Section 10 by an amount in excess of one-ninth of such principal amount of
Securities without the written consent of such Placement Agent. If, on the
Closing Date any Placement Agent or Placement Agents shall fail or refuse to
purchase Securities which it or they have agreed to purchase hereunder on such
date and the aggregate principal amount of Securities with respect to which such
default occurs is more than one-tenth of the aggregate principal amount of
Securities to be purchased on such date, and arrangements satisfactory to you
and the Company for the purchase of such Securities are not made within 36 hours
after such default, this Agreement shall terminate without liability on the part
of any non-defaulting Placement Agent or of the Company. In any such case either
you or the Company shall have the right to postpone the Closing Date, but in no
event for longer than seven days, in order that the required changes, if any, in
the Final Memorandum or in any other documents or arrangements may be effected.
Any action taken under this paragraph shall not relieve any defaulting Placement
Agent from liability in respect of any default of such Placement Agent under
this Agreement.
If this Agreement shall be terminated by the Placement Agents,
or any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement, the Company will reimburse the Placement Agents or such
Placement Agents as have so terminated this Agreement with respect to
themselves, severally, for all out-of-pocket expenses (including the fees and
disbursements
<PAGE> 18
17
of their counsel) reasonably incurred by such Placement Agents in connection
with this Agreement or the offering contemplated hereunder.
11. Notices. All notices and other communications under
this Agreement shall be in writing and mailed, delivered or sent by facsimile
transmission to: if sent to the Placement Agents, Morgan Stanley & Co.
Incorporated, 1585 Broadway, New York, New York 10036, attention: High Yield New
Issues Group, facsimile number (212) 761-0587 and if sent to the Company, to
Primark Corporation, 1000 Winter Street, Suite 4300, Waltham, MA 02154,
attention: Stephen H. Curran, Executive Vice President and Chief Financial
Officer, facsimile number (781) 890-6190.
12. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
13. Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
14. Headings. The headings of the sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed a part of this Agreement.
<PAGE> 19
Very truly yours,
PRIMARK CORPORATION
By: /s/ MICHAEL R. KARGULA
------------------------------------
Name: Michael R. Kargula
Title: Executive Vice President
General Counsel and Secretary
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
A.G. EDWARDS & SONS, INC.
BT ALEX. BROWN INCORPORATED
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
By: Morgan Stanley & Co. Incorporated
By:
---------------------------------
Name:
Title:
<PAGE> 20
Very truly yours,
PRIMARK CORPORATION
By:
------------------------------------
Name:
Title:
Accepted as of the date hereof
MORGAN STANLEY & CO. INCORPORATED
A.G. EDWARDS & SONS, INC.
BT ALEX. BROWN INCORPORATED
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
By: Morgan Stanley & Co. Incorporated
By: /s/ DAVID P. SUN
---------------------------------
Name: David P. Sun
Title: Vice President
<PAGE> 21
SCHEDULE I
<TABLE>
<CAPTION>
PLACEMENT AGENT PRINCIPAL AMOUNT OF
SECURITIES TO BE PURCHASED
<S> <C>
Morgan Stanley & Co. Incorporated.......................... 97,500,000
A.G. Edwards & Sons, Inc................................... 11,250,000
BT Alex. Brown Incorporated................................ 15,000,000
Chase Securities Inc....................................... 11,250,000
NationsBanc Montgomery Securities LLC...................... 15,000,000
Total:.............................................. $150,000,000
============
</TABLE>
<PAGE> 22
SCHEDULE II
MATERIAL SUBSIDIARIES
Datastream International Limited
Disclosure Incorporated
<PAGE> 1
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
These Articles of Incorporation are signed by the incorporator(s) for
the purpose of forming a profit corporation pursuant to the provisions of Act
284, Public Acts of 1972, as amended, as follows:
ARTICLE I
The name of the corporation is Primark Corporation.
ARTICLE II
The purpose or purposes for which the corporation is organized is to
engage in any activity within the purposes for which corporations may be
organized under the Business Corporation Act of Michigan and to have and
exercise all powers conferred by such Act upon corporations organized
thereunder.
ARTICLE III
The total authorized capital stock is:
1. Common Shares Par Value Per Share $
------------------- ---------------------
Preferred Shares 4,000,000 Par Value Per Share $ 1.00
---------------- ---------------------
and/or shares without par value as follows:
2. Common Shares 100,000,000 Par Value Per Share $ .02
------------------- ----------------------
Preferred Shares Par Value Per Share $
---------------- ----------------------
3. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
A. CUMULATIVE PREFERRED STOCK
1. ISSUANCE IN SERIES. Shares of Cumulative Preferred Stock may be issued
in one or more series, at such time or times, and for such consideration, not
less than the par value thereof, as the Board of Directors may, from time to
time,
<PAGE> 2
determine. All shares of any one series of Cumulative Preferred Stock shall be
identical with each other in all respects, except that shares of one series
issued at different times may differ as to dates from which dividends thereon
may be cumulative. All series will rank equally and be identical in all
respects, except as permitted by the following provisions of paragraph 2 of this
Division A.
2. AUTHORITY OF THE BOARD WITH RESPECT TO SERIES. The Board of Directors
is authorized, at any time and from time to time, (i) to divide into and to
issue the shares of Cumulative Preferred Stock in one or more series, (ii) to
establish the number of shares constituting each series and to designate each
series so as to distinguish the shares thereof from the shares of the other
series and classes, (iii) to the extent not provided in these Articles of
Incorporation, as amended from time to time, to prescribe variations in the
relative rights and preferences as among series, and (iv) within the limitations
set forth in these Articles of Incorporation, as amended from time to time, to
prescribe the relative rights and preferences of the shares of any series,
including, the following:
a. the dividend rate or rates;
b. certain voting powers, full and limited, if any, of the shares of the
series;
c. whether the shares are redeemable and, if so, the time or times, price
or prices, or rate or rates, and with such adjustments, at which, and the terms
and conditions (except as fixed in paragraph 5 of this Division A) on which, the
shares may be redeemed;
d. the amount or amounts payable on the shares in the event of the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation prior to any payment or distribution of the assets of the
Corporation to any class or classes of stock of the Corporation ranking junior
to the Cumulative Preferred Stock;
e. whether the shares are entitled to the benefit of a sinking, purchase
or analogous fund to be applied to the purchase or redemption of shares of the
series and, if so entitled, the amount of the fund and the manner of its
application, including the price or prices at which the shares may be redeemed
or purchased through application of the fund;
2
<PAGE> 3
f. whether the shares are convertible into, or exchangeable for, shares
of any other class or classes or of any other series of the same or any other
class of stock of the Corporation and, if so convertible or exchangeable, the
conversion price or prices, or the rates of exchange, and any adjustments
thereof, at which conversion or exchange may be made; and any other terms and
conditions of conversion or exchange; and
g. any other relative rights and preferences.
3. DIVIDENDS. The holders of shares of Cumulative Preferred Stock of each
series shall be entitled to receive, as and when declared payable by the Board
of Directors from funds legally available for the payment thereof, referential
dividends in lawful money of the United States of America at the rate per annum
fixed and determined as herein authorized for the shares of such series, but no
more, payable quarterly on the first day of each of the months of February, May,
August and November (the quarterly dividend payment dates) in each year with
respect to the quarterly period ending on the day prior to each such respective
dividend payment date, to shareholders of record on a date to be fixed by the
Board of Directors not exceeding 60 days preceding each quarterly dividend
payment date. Such dividends shall be cumulative with respect to each share from
and including the quarterly dividend payment date next preceding the date of
issue thereof unless (a) the date of issue be a quarterly dividend payment date,
in which case dividends shall be cumulative from and including the date of
issue, (b) issued during an interval between a record date for the payment of a
quarterly dividend on shares of such series and the payment date for such
dividend, in which case dividends shall be cumulative from and including such
payment date, or (c) the Board of Directors shall determine that the first
dividend with respect to shares of a particular series issued during an interval
between quarterly dividend payment dates shall be cumulative from and including
a date during such interval, in which event dividends shall be cumulative from
and including such date. No dividend shall be declared on shares of Cumulative
Preferred Stock of any series in respect of accumulations for any quarterly
dividend period or portion thereof unless dividends shall likewise be or have
been declared with respect to accumulations on all then outstanding shares of
Cumulative Preferred Stock of each other series for the same period or portion
thereof; and the ratios of the dividends declared to dividends accumulated with
respect to any quarterly dividend period on the shares of each series
outstanding shall be identical. Accumulations of dividends shall not bear
interest.
3
<PAGE> 4
So long as any shares of Cumulative Preferred Stock remain outstanding:
a. no dividend shall be declared on shares of junior stock unless
preferential dividends on all outstanding shares of Cumulative Preferred Stock
for all past quarterly periods and the period which includes the date of such
declaration shall have been previously declared; and
b. no dividend shall be paid or other distribution made on shares of
junior stock, nor shall any shares of junior stock be purchased, redeemed,
retired or otherwise acquired for a consideration, unless preferential dividends
on all outstanding shares of Cumulative Preferred Stock for all past quarterly
dividend periods and the period which includes the date of such payment or
distribution shall have been paid, or declared and set apart for payment,
provided, however, that the restrictions this sub-paragraph b not apply to (i)
the payment of dividends on shares of junior stock if payable solely in shares
of junior stock, (ii) the payment of dividends on shares of junior stock to the
extent that equivalent moneys are reinvested by the recipients of such dividends
in shares of such junior stock upon receipt of such dividends, (iii) the
acquisition of any shares of junior stock through application of proceeds of any
shares of junior stock sold at or about the time of such acquisition, or (iv)
the transfer of any amount from surplus to stated capital attributable to junior
stock; and
c. no funds shall be paid into or set aside for any sinking, purchase or
analogous fund established with respect to outstanding shares of any junior
stock, nor shall any dividend be paid or declared or other distribution made on
shares of junior stock, nor shall any shares of junior stock be purchased,
redeemed or retired or otherwise acquired for a consideration if the Corporation
shall be in default of deficient under any requirement of a sinking, purchase or
analogous fund established with respect to outstanding shares of any series of
Cumulative Preferred Stock for any period of time then elapsed.
4. LIQUIDATION PREFERENCES. In the event of voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the holders of shares
of Cumulative Preferred Stock of each series outstanding shall be entitled to
receive out of the assets of the Corporation such amount per share as shall have
been fixed by the Board of Directors as the voluntary or involuntary liquidation
price, as the case may be, for the shares of such series plus preferential
dividends at the rate
4
<PAGE> 5
fixed and determined for such series as herein authorized, accrued and unpaid to
the date fixed for payment, but no more. Until payment to the holders of
outstanding shares of Cumulative Preferred Stock as aforesaid, or until moneys
or other assets sufficient for such payment shall have been set apart for
payment by the Corporation, separate and apart from its other funds and assets
for the account of such holders so as to be and continue to be available for
payment to such holders, no payment or distribution shall be made to holders of
shares of junior stock in connection with or upon such dissolution or
liquidation or for declared but unpaid dividends on such junior stock. If upon
any such dissolution or liquidation the assets of the Corporation available for
payment and distribution to shareholders are insufficient to make payment in
full, as hereinabove provided, to the holders of shares of Cumulative Preferred
Stock, payment of such assets shall be made to such holders ratably in
accordance with the respective distributive amounts to which such holders would
be entitled if paid in full.
Neither a consolidation nor merger of the Corporation with or into any
other corporation, nor a merger of any other corporation into the Corporation,
nor the purchase or redemption of all or any part of the outstanding shares of
any class or classes of stock of the Corporation, nor the sale, transfer or
lease of the property and business of the Corporation as, or substantially as,
an entirety shall be construed to be a dissolution or liquidation of the
Corporation within the meaning of the foregoing provisions.
5. REDEMPTION AND PURCHASE. The Corporation may, at its option expressed
by vote of the Board of Directors, at any time or from time to time redeem the
whole or any part of the Cumulative Preferred Stock or of any series thereof, at
the redemption price or prices at the time in effect. Any such redemption of
Cumulative Preferred Stock to be on such redemption date and at such place in
the City of Detroit, State of Michigan, or in the City, County and State of New
York, as shall likewise be determined by vote of the Board of Directors. Notice
of any proposed redemption of shares of Cumulative Preferred Stock shall be
given by the Corporation by mailing a copy of such notice, not more than 60 or
less than 30 days prior to the redemption date, to the holders of record of
shares of Cumulative Preferred Stock to be redeemed, at their respective
addresses then appearing on the books of the Corporation and by publishing such
notice at least once in each week for four successive weeks in a newspaper
customarily published at least on each business day, other than Saturdays,
Sundays and holidays, which is printed in the
5
<PAGE> 6
English language and published and of general circulation in the Borough of
Manhattan, City and State of New York. Publication of such notice shall be
commenced not more than 60 days, and shall be concluded not less than 30 days,
prior to the redemption date, but such notice need not necessarily be published
on the same day of each week or in the same newspaper. In case less than all of
the shares of any series are to be redeemed, the shares so to be redeemed shall
be determined by lot or pro rata in such manner as may be prescribed by the
Board of Directors. On the redemption date the Corporation shall, and at any
time prior to such redemption date may, deposit in trust, for the account of the
holders of shares of Cumulative Preferred Stock to be redeemed, funds necessary
for such redemption with a bank or trust company in good standing, organized
under the laws of the United States of America or of the State of Michigan or of
the State of New York, doing business in the City of Detroit, Michigan, or in
the City, County and State of New York and having combined capital surplus and
undivided profits of at least $5,000,000, which shall be designated in such
notice of redemption. Notice of redemption having been duly given, or said bank
or trust company having been irrevocably authorized by the Corporation to give
such notice, and funds necessary for such redemption having been deposited, all
as aforesaid, all shares of Cumulative Preferred Stock with respect to which
such deposit shall have been made shall forthwith, whether or not the date fixed
for such redemption shall have occurred or the certificates for such shares
shall have been surrendered for cancellation, be deemed no longer to be
outstanding for any purpose, and all rights with respect to such shares shall
thereupon cease and terminate, excepting only the right of the holders of the
certificates for such shares to receive, out of the funds so deposited in trust,
on the redemption date (unless an earlier date is fixed by the Board of
Directors), the redemption funds, without interest, to which they are entitled,
and the right to exercise any privilege of conversion not theretofore expiring;
the Corporation to be entitled to the return of any funds, deposited for
redemption of shares converted pursuant to such privilege. At the expiration of
six years after the redemption date such trust shall terminated. Any such moneys
then remaining on deposit shall be paid to the Corporation by the bank or trust
company with which the deposit shall have been made, free of trust, and
thereafter the holders of the certificates for such shares shall have no claim
against such bank or trust company but only claims as unsecured creditors
against the Corporation for the amounts payable upon redemption thereof, without
interest. Interest, if any, allowed by the bank or trust company as aforesaid
shall belong to the Corporation, and shall be paid to it from time to time
during the term of such trust.
6
<PAGE> 7
Subject to applicable law, the Corporation may from time to time purchase
or otherwise acquire outstanding shares of Cumulative Preferred Stock at a rice
per share not exceeding the amount then payable in the event of redemption
thereof otherwise than through operation of a sinking fund, if any.
No shares of Cumulative Preferred Stock shall be purchased, redeemed or
otherwise acquired (whether pursuant to or for any sinking, purchase or
analogous fund established with respect to outstanding shares of any series of
Cumulative Preferred Stock, or otherwise) for a consideration (a) unless all
dividends on all outstanding shares of Cumulative Preferred Stock for all past
quarterly dividend periods shall have been paid or declared and set apart for
payment, or (b) if the Corporation shall be in default or deficient under any
requirement of a sinking, purchase or analogous fund established with respect to
outstanding shares of any series of Cumulative Preferred Stock for any period of
time then elapsed, except for the purpose of wholly or partially eliminating
such default or deficiency.
Any and all shares of Cumulative Preferred Stock which shall at any time
have been redeemed, or purchased through operation of any sinking fund with
respect thereto, or which shall have been converted into or exchanged for shares
of any other class or classes or other securities of the Corporation pursuant to
a right of conversion or exchange reserved in such Cumulative Preferred Stock,
shall be cancelled and shall assume the status of authorized but unissued shares
of Cumulative Preferred Stock and may thereafter be reissued as provided in
paragraph 2 of this Division A.
6. VOTING RIGHTS. So long as any shares of Cumulative Preferred Stock are
outstanding, the Corporation shall not, without the consent (given by vote in
person or by proxy at a meeting called for that purpose) of the holders of at
least two-thirds of the votes of the shares of Cumulative Preferred Stock then
outstanding-
a. Create, authorize or increase the authorized amount of any shares of
senior stock, or any obligations or security convertible into any such shares;
or
b. Alter or change the powers, preferences, priorities or special rights
of then outstanding Cumulative Preferred Stock so as to affect the holders
thereof adversely, provided, however, if any such alteration or change would
adversely affect the holders of the shares of one or more of the series of
Cumulative Preferred Stock
7
<PAGE> 8
at the time outstanding, but would not so affect all series thereof, only the
consent of holders of two-thirds of the shares of each series so affected shall
be required.
So long as any shares of Cumulative Preferred Stock are outstanding, the
Corporation shall not, without the consent (given by vote in person or by proxy
at a meeting called for that purpose) of the holders of a majority of the votes
of the shares of Cumulative Preferred Stock then outstanding.
c. Merge or consolidate with or into any other corporation, provided that
this provision shall not apply to a purchase or other acquisition by the
Corporation of franchises or assets of another corporation in any manner which
does not involve a statutory merger or consolidation, or to a merger or
consolidation with or into any corporation which directly or indirectly
controls, or is controlled by, or is under common control with the Corporation
(for purposes of this sub-paragraph c, control shall be deemed to exist through
ownership of 50% or more of the voting securities of a corporation) but no such
merger or consolidation shall in any way result in the occurrence of an event
described in sub-paragraph a of this paragraph 6 without the consent of the
holders of at least two-thirds of the votes of the shares of Cumulative
Preferred Stock then outstanding or result in the occurrence of an event
described in sub-paragraph b of this paragraph 6 without the consent required by
said sub-paragraph b; or
d. Sell, lease, or exchange all or substantially all of its property and
assets unless the fair value of the net assets of the Corporation after
completion of such transaction shall at least equal the then voluntary
liquidation preference of the Cumulative Preferred Stock of all series, and of
all senior or parity stock, then outstanding.
No consent provided for in this paragraph 6 shall be required in the case
of the holders of any shares of Cumulative Preferred Stock which are to be
redeemed at or prior to the time when the transaction being consented to it to
take effect.
Except as provided by law or as may be specifically provided in a
resolution or resolutions of the Board of Directors establishing a series of
Cumulative Preferred Stock, no consent of any holder of outstanding shares of
Cumulative Preferred Stock shall be required in connection with or as a
condition to any increase in the authorized amount, or issuance of authorized
but unissued shares, of Cumulative Preferred
8
<PAGE> 9
Stock or parity stock, or the creation or authorization of obligations or
securities payable in or convertible into shares of Cumulative Preferred Stock,
or, in each case, parity stock.
If at any time dividends on any of the outstanding shares of Cumulative
Preferred Stock shall be in default in an amount equivalent to four or more full
quarterly dividends, the holders of outstanding shares of Cumulative Preferred
Stock, voting separately as a class, shall be entitled to elect the smallest
number of the Directors necessary to constitute a majority of the full Board of
Directors of the Corporation, which right shall continue in force and effect
until all arrears of dividends on outstanding shares of Cumulative Preferred
Stock shall have been declared and paid or deposited in trust with a bank or
trust company having the qualifications set forth in paragraph 5 of this
Division A for payment on or before the next succeeding dividend payment date.
When all such arrears have been declared and paid or deposited in trust for
payment as aforesaid, such right to elect Directors shall cease and terminate
unless and until the equivalent of four or more full quarterly dividends shall
again be in default on outstanding shares of Cumulative Preferred Stock. At any
time when such right of holders of Cumulative Preferred Stock voting separately
as a class to elect Directors shall be in force and effect, the remaining
Directors shall be elected by the other class or classes of stock entitled to
vote, also voting separately as a class, at each meeting of shareholders held
for the purpose of electing Directors.
When and as voting power for the election of Directors shall be vested in
the Cumulative Preferred Stock as aforesaid, there shall be called a special
meeting of the Cumulative Preferred Stock and of any other class or classes of
stock having voting power with respect thereto, for the purpose of electing
Directors. Such meeting shall be called upon the notice required for annual
meetings of shareholders and shall be held at the earliest practicable date at
the place at which the last preceding annual meeting of the shareholders of the
Corporation was held, but may be held at the time and place of the annual
meeting of the shareholders of the Corporation was held, but may be held at the
time and place of the annual meeting if such annual meeting is to be held within
60 days after such voting power shall be vested in the Cumulative Preferred
Stock. If such meeting shall not be called as required within 20 days after such
voting power shall be so vested, then the holders of record of shares having at
least ten percent (10%) of the votes of the Cumulative Preferred Stock then
outstanding may designate in writing one of their number to call such
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<PAGE> 10
meeting, and such meeting may be called by such person so designated at the
expense of the Corporation upon the notice required for annual meetings of
shareholders and shall be held at the place at which the last preceding annual
meeting of the shareholders of the Corporation was held. Any holder of
Cumulative Preferred Stock so designated shall have access to the stock books of
the Corporation for the purpose of causing a meeting of shareholders to be
called pursuant to these provisions.
At any meeting so called, and at any other meeting of shareholders held for
the purpose of electing Directors at which the Cumulative Preferred Stock shall
have the right, voting separately and as a class, to elect Directors as
aforesaid, the presence in person or by proxy of holders of record of shares
having one-third of the votes of the outstanding shares of Cumulative Preferred
Stock shall be required to constitute a quorum of such class for the election of
any Director by the Cumulative Preferred Stock as a class. If such quorum of the
shares of Cumulative Preferred Stock be present, then such shares of Common
Stock as may be present at the meeting in person or by proxy, shall, for the
purpose of electing Directors, constitute a quorum of the Common Stock.
If at any such meeting or adjournment thereof a quorum of the Cumulative
Preferred Stock shall not be present, no election of the Directors shall take
place and the meeting shall be adjourned from time to time for periods not
exceeding thirty days until a quorum of the Cumulative Preferred Stock is
present at such adjourned meeting.
The terms of office of all Directors in office at any time when voting
power shall, as aforesaid, become vested in the Cumulative Preferred Stock shall
terminated upon the election of any new Directors at any meeting of shareholders
called for the purpose of electing Directors. Upon any termination of the right
of the Cumulative Preferred Stock to vote for Directors as herein provided, the
term of office of all Directors then in office shall terminate upon the election
of any new Directors at a meeting of the other class or classes of stock of the
Corporation then entitled to vote for Directors, which meeting shall be called
to be held as promptly as practicable after such termination of voting right in
the Cumulative Preferred Stock, upon notice as above provided, and shall be
called by the Secretary of the Corporation upon written request of any holder of
record of outstanding shares of such other class or classes of stock then
entitled to vote for Directors.
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<PAGE> 11
In case of any vacancy in the office of a Director occurring among the
Directors elected by the holders of Cumulative Preferred Stock, as a class,
pursuant to the foregoing provisions of this paragraph 6, the remaining Director
or Directors elected by the holders of Cumulative Preferred Stock may elect, by
affirmative vote of a majority thereof, a successor or successors to hold office
for the unexpired term of the Director or Directors whose place or places shall
be vacant. Likewise, in case of any vacancy in the office of a Director
occurring among the Directors elected by the holders of the other class or
classes of stock entitled to vote pursuant to the foregoing provisions of this
paragraph 6, the remaining Director or Directors elected by the holders of such
other class or classes of stock may elect, by affirmative vote of a majority
thereof, a successor or successors to hold office for the unexpired term of the
Director or Directors whose place or places shall be vacant.
Each share of Cumulative Preferred Stock shall have the number of votes
determined by multiplying the number one (1) by a fraction, the numerator of
which is the amount of the involuntary liquidation preference of such share and
the denominator of which is $25.
Except as provided in this paragraph 6 of this Division A, or in a
resolution or resolutions of the Board of Directors establishing a series of
Cumulative Preferred Stock, or as by statute at the time mandatorily provided,
holders of outstanding shares of Cumulative Preferred Stock shall not be
entitled to vote; and except as by statute at the time mandatorily provided,
holders of such shares shall not be entitled to receive notice of any meeting of
shareholders at which they are not entitled to vote or consent.
7. JUNIOR, PARITY AND SENIOR STOCK. Junior, parity or senior stock, with
regard to Cumulative Preferred Stock, shall refer to stock of the Corporation
ranking junior, on a parity with or senior to the Cumulative Preferred Stock
upon dissolution or liquidation, or as to dividends.
B. COMMON STOCK
1. DIVIDENDS. Subject to the rights of the Cumulative Preferred Stock,
the holders of the Common Stock are entitled to receive, to the extent permitted
by law, such dividends as may be declared by the Board of Directors.
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<PAGE> 12
2. LIQUIDATION. In the event of the voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation, after distribution in full of the
preferential amounts, if any, to be distributed to the holders of shares of
Cumulative Preferred Stock, holders of Common Stock shall be entitled to receive
all of the remaining assets of the Corporation, of whatever kind, available for
distribution to shareholders ratably in proportion to the number of shares of
Common Stock held. The merger or consolidation of the Corporation into or with
any other corporation, or the merger of any other corporation into it, or the
purchase or redemption of any shares of stock of the Corporation, of any class,
shall not be deemed to be a dissolution, liquidation or winding up of the
Corporation for the purposes of this paragraph.
3. VOTING RIGHTS. Except as may be otherwise required by law or these
Articles of Incorporation, each holder of Common Stock has one vote in respect
of each share of stock held by him of record on the books of the Corporation on
all matters voted upon by the shareholders.
C. CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF THE SERIES A
CUMULATIVE CONVERTIBLE PREFERRED STOCK ($1.00 PAR VALUE)
Section 1. DESIGNATION AND NUMBER OF SHARES OF SERIES. A series
of preferred stock is hereby established and designated "Series A Cumulative
Convertible Preferred Stock" par value $1.00 per share (the "Series A Preferred
Stock"). The maximum number of shares which shall constitute the Series A
Preferred Stock shall be 1,000,000, which number may from time to time be
decreased (but not below the number of shares at the time outstanding).
Section 2. DIVIDENDS. The holders of Series A Preferred Stock
shall be entitled to receive, as, when and if declared by the Board of Directors
of the Corporation (the "Board of Directors"), out of funds at the time legally
available therefore, dividends at the rate of 8.5% per annum per share or, at
the option of the Corporation for the first 20 quarters from the date of
original issuance, and only during such 20 quarters, 0% per annum, and no more;
which shall be fully cumulative, shall accrue from the date of original issuance
and shall be payable quarterly on the first day of each of the months of
February, May, August, and November (each a "Dividend Payment Date") each year
to holders of record as they appear on the stock books of the Corporation on
such record dates, not more than 60
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<PAGE> 13
days preceding each such Dividend Payment Date, as shall be fixed by the Board
of Directors; PROVIDED, HOWEVER, that, during such first 20 quarters, dividends
at the rate of 0% per annum per share shall accrue only if a quarterly
distribution of additional shares of Series A Preferred Stock is made in the
amount of 0.02125 share of Series A Preferred Stock for each share of Series A
Preferred Stock outstanding. If any Dividend Payment Date is a Saturday, Sunday
or legal holiday then such dividend shall be payable on the next day that is not
a Saturday, Sunday or legal holiday. The amount of dividends (or distribution of
additional shares of Series A Preferred Stock) payable (or made) for the initial
dividend period and any period shorter than a full quarterly dividend shall be
computed on the basis of a 360-day year of twelve 30-day months. Dividends on
account of arrearages for any past dividend period may be declared and paid at
any time, without reference to any regular Dividend Payment Date. No interest
shall be payable in respect of any dividend payment which may be in arrears.
So long as any shares of Series A Preferred Stock remain
outstanding:
(a) no dividend shall be declared on shares the Corporation's
common stock, no par value (the "Common Stock"), or any other class of stock or
series thereof ranking junior to the Series A Preferred Stock upon dissolution,
liquidation or in the payment of dividends (together with the Common Stock, the
"junior stock") unless preferential dividends on all outstanding shares of
Series A Preferred Stock for all past quarterly periods and the period which
includes the date of such declaration shall have been previously declared; and
(b) no dividend shall be paid or other distribution made on
shares of junior stock, nor shall any shares of junior stock be purchased,
redeemed, retired or otherwise acquired for a consideration, unless preferential
dividends on all outstanding shares of Series A Preferred Stock for all past
quarterly dividend periods and the period which includes the date of such
payment or distribution shall have been paid, or declared and set apart for
payment; PROVIDED, HOWEVER, that the restrictions of this subparagraph (b) shall
not apply to (i) the payment of dividends on shares of junior stock if payable
solely in shares of junior stock, (ii) the payment of dividends on shares of
junior stock to the extent that equivalent moneys are reinvested by the
recipients of such dividends in shares of such junior stock upon receipt of such
dividends, (iii) the acquisition of any shares of junior stock through
application of proceeds of any shares of junior stock sold at or about the time
of such
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<PAGE> 14
acquisition, or (iv) the transfer of any amount from surplus to stated
capital attributable to junior stock; and
(c) no funds shall be paid into or set aside for any sinking,
purchase or analogous fund established with respect to outstanding shares of any
junior stock, nor shall any dividend be paid or declared or other distribution
made on shares of junior stock, nor shall any shares of junior stock be
purchased, redeemed or retired or otherwise acquired for a consideration if the
Corporation shall be in default or deficient under any requirement of a sinking,
purchase or analogous fund established with respect to outstanding shares of the
Series A Preferred Stock for any period of time then elapsed.
Section 3. LIQUIDATION PREFERENCES. In the event of
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, before any payment or distribution of the assets of the Corporation
(whether capital or surplus) shall be made to or set apart for the holders of
any class or classes of stock ranking junior to the Series A Preferred Stock
upon liquidation, the holders of any class or classes of stock ranking junior to
the Series A Preferred Stock shall be entitled to receive out of the net assets
of the Corporation an amount in cash per share equal to $25.00 plus accrued and
unpaid dividends to the date fixed for payment (the "Liquidation Preference"),
but no more. After the holders of Series A Preferred Stock are paid the full
preferential amounts to which they are entitled, they will not be entitled to
further participate in any distribution of assets by the Corporation. Until
payment to the holders of outstanding shares of Series A Preferred Stock as
aforesaid, or until moneys or other assets sufficient for such payment shall
have been set apart for payment by the Corporation, separate and apart from its
other funds and assets for the account of such holders so as to be and continue
to be available for payment to such holders, no payment or distribution shall be
made to holders of shares of junior stock in connection with or upon such
dissolution or liquidation or for declared but unpaid dividends on such junior
stock. If upon any such dissolution or liquidation the assets of the Corporation
available for payment and distribution to shareholders are insufficient to make
payment in full, as hereinabove provided, to the holders of shares of Series A
Preferred Stock, payment of such assets shall be made to such holders ratably in
accordance with the respective distributive amounts to which such holders would
be entitled if paid in full.
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<PAGE> 15
Neither a consolidation nor merger of the Corporation with or into any
other corporation, nor a merger of any other corporation into the Corporation,
nor the purchase or redemption of all or any part of the outstanding shares of
any class or classes of stock of the Corporation, nor the sale, transfer or
lease of the property and business of the Corporation as, or substantially as,
an entirety shall be construed to be a dissolution or liquidation of the
Corporation within the meaning of the foregoing provisions.
Section 4. CONVERSION INTO COMMON STOCK. (a) A holder of
shares of the Series A Preferred Stock shall be entitled, at any time prior to
the close of business on the date, if any, fixed for redemption of such shares
pursuant to Section 5 hereof, to cause any or all of such shares to be converted
into shares of Common Stock, by presentation of the certificate or certificates
representing such shares in person or by registered mail, return receipt
requested with postage prepaid thereon, duly assigned or endorsed for transfer
to the Corporation (or accompanied by duly executed stock powers relating
thereto) at the principal office of the Corporation or the offices of the
transfer agent for the Series A Preferred Stock or such office or offices of an
agent for conversion as may from time to time be designated by notice to the
holders of the Series A Preferred Stock by the Corporation, accompanied by
written notice of conversion. Such notice of conversion shall specify (1) the
number of shares of Series A Preferred Stock to be converted and the name or
names in which such holder wishes the certificate or certificates for Common
Stock and for any shares of Series A Preferred Stock not to be so converted to
be issued and (2) the address to which such holder wishes delivery to be made of
such new certificate or certificates to be issued upon such conversion.
(b) Each share of the Series A Preferred Stock shall be
convertible into the number of shares of fully paid and nonassessable shares of
Common Stock determined by dividing $25.00 by the conversion price in effect at
the time of conversion. The conversion price initially shall be $14.49 and shall
be subject to adjustment from time to time as provided in Section 7 hereof (and,
as so adjusted, is hereinafter referred to as the "Conversion Price").
(c) Upon surrender of a certificate representing a share or
shares of Series A Preferred Stock for conversion, the Corporation shall issue
and send by hand delivery (with receipt to be acknowledged) or by first class
mail, postage prepaid, to the holder thereof or to such holder's designee, at
the address designated
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<PAGE> 16
by such holder, a certificate or certificates for the number of whole shares of
Common Stock to which such holder shall be entitled upon conversion. In the
event that there shall have been surrendered a certificate or certificates
representing shares of Series A Preferred Stock only part of which are to be
converted, the Corporation shall issue and deliver to such holder or such
holder's designee, in the manner set forth in the preceding sentence, a new
certificate or certificates representing the number of shares of Series A
Preferred Stock which shall not have been converted.
(d) The issuance by the Corporation of shares of Common Stock
upon a conversion pursuant to this Section 4 shall be effective as of the
earlier of (1) the delivery to such holder or such holder's designee of the
certificate(s) representing shares of Common Stock issued upon conversion
therefor or (2) the commencement of business on the second business day after
receipt by the Corporation or the transfer agent for the Series A Preferred
Stock of certificate(s) representing shares of Series A Preferred Stock to be
converted, duly assigned or endorsed for transfer to the Company (or accompanied
by duly executed stock powers relating thereto) as required by the instructions
for conversion appearing on the reverse side of certificate(s) representing
shares of Series A Preferred Stock. On and after the effective date of
conversion, the person or persons entitled to receive the Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock, but no allowance or adjustment shall be
made in respect of dividends payable to holders of Common Stock in respect of
any period prior to such effective date. The Corporation shall not be obligated
to pay any dividends which shall have been declared and shall be payable to
holders of shares of Series A Preferred Stock on any Dividend Payment Date if
the Dividend Payment Date for such dividend is subsequent to the effective date
of conversion of such shares.
(e) Shares of the Series A Preferred Stock which shall at
anytime have been converted into Common Stock shall, after such conversion, be
restored to the status of authorized and unissued shares of preferred stock
undesignated as to series, and may thereafter be redesignated and reissued as
part of any series of preferred stock. The Corporation shall at all times
reserve and keep available out of its authorized and unissued Common Stock
and/or shares of Common Stock held in the Corporation's Treasury, solely for
issuance upon the conversion of shares of Series A Preferred Stock as herein
provided, free from any preemptive rights, such number of shares of Common Stock
as shall from time to time be issuable upon the
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<PAGE> 17
conversion of all the shares of Series A Preferred Stock then outstanding.
Nothing contained herein shall preclude the Corporation from issuing shares of
Common Stock held in its treasury upon the conversion of shares of Series A
Preferred Stock into Common Stock pursuant to the terms hereof. The Corporation
shall prepare and shall use its best efforts to obtain and keep in force such
governmental or regulatory permits or other authorizations as may be required by
law, and shall comply with all requirements as to registration or qualification
of the Common Stock, in order to enable the Corporation lawfully to issue and
deliver to each holder of record of Series A Preferred Stock such number of
shares of its Common Stock as shall from time to time be sufficient to effect
the conversion of all shares of Series A Preferred Stock then outstanding and
convertible into shares of Common Stock.
(f) No fractional shares or scrip representing fractional shares
of Common Stock shall be issued upon conversion of any shares of Series A
Preferred Stock. If more than one share of Series A Preferred Stock shall be
surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares of Series A Preferred Stock so
surrendered. If the conversion of any shares of Series A Preferred Stock results
in a fraction, an amount equal to such fraction multiplied by the Per Share
Market Value (as defined in Section 7(f) hereof) of the Common Stock on the date
of conversion shall be paid to such holder in cash by the Corporation.
(g) The issuance of certificates for shares of Common Stock upon
conversion of Series A Preferred Stock shall be made without charge to the
holders thereof for any documentary stamp or similar taxes that may be payable
in respect of the issuance or delivery of such certificate, PROVIDED, HOWEVER,
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any such
certificate in a name other than that of the holder of the Series A Preferred
Stock converted and the Corporation shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Corporation the amount of such tax or shall have
established to the satisfaction of the Corporation that such tax has been paid.
Section 5. REDEMPTION. (a) OPTIONAL. The Corporation may,
at its option, redeem the Series A Preferred Stock at any time after the fifth
anniver-
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<PAGE> 18
sary of the original date of issuance of the Series A Preferred Stock in whole
or from time to time in part at a redemption price of $25.00 per share, together
with accrued and unpaid dividends thereon to the date fixed for redemption,
without interest.
(b) MANDATORY. Commencing on the seventh anniversary of the
original date of issuance of the Series A Preferred Stock and on each such
anniversary thereafter (each such date being referred to as a "mandatory
redemption date"), so long as any shares of the Series A Preferred Stock shall
be outstanding and to the extent the Corporation shall have funds legally
available for such payment, the Corporation shall set aside, in trust with a
bank or trust company, as and for a sinking fund for the Series A Preferred
Stock a sum sufficient to redeem and shall redeem the following:
<TABLE>
<CAPTION>
Anniversary of the Number of Shares of
Original Date of Issuance Series A Preferred Stock
------------------------- ------------------------
<S> <C>
7 150,000
8 150,000
9 150,000
10 All then outstanding
shares of Series A
Preferred Stock
</TABLE>
at a redemption price of $25.00 per share, together with accrued and unpaid
dividends thereon to the mandatory redemption date, without interests; PROVIDED,
HOWEVER, that the number of any shares of Series A Preferred Stock that have
been called for redemption, converted or otherwise acquired by the Corporation
may be subtracted from the amount of funds to be set aside for such sinking fund
payments.
(c) ACQUIRED SHARES. Shares of Series A Preferred Stock which
have been issued and reacquired in any manner, including shares purchased or
redeemed, shall (upon compliance with any applicable provisions of the laws of
the State of Michigan) have the status of authorized and unissued shares of
preferred stock undesignated as to series and may be redesignated and reissued
as part of any series of the preferred stock.
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<PAGE> 19
(d) PROCEDURE FOR REDEMPTION.
(i) In the event that less than all the outstanding shares
of Series A Preferred Stock are to be redeemed, the number of shares to be
redeemed shall be determined by the Board of Directors, subject to the
provisions of this Section 5, and the shares to be redeemed shall be determined
by lot or pro rata in such manner as may be prescribed by the Board of
Directors.
(ii) In the event the Corporation shall redeem shares of the
Series A Preferred Stock, notice of such redemption shall be given by the
Corporation by mailing a copy of such notice not more than 60 or less than 30
days prior to the redemption date, to each holder of record of the shares to be
redeemed, at such holder's address as the same appears on the stock books of the
Corporation and by publication of such notice in the manner set forth in the
Corporation's Articles of Incorporation. On the redemption date the Corporation
shall, and at any time prior to such redemption date may, deposit in trust, for
the account of the holders of shares of Series A Preferred Stock to be redeemed,
funds necessary for such redemption with a bank or trust company in good
standing, organized under the laws of the United States of America or of the
State of Michigan or of the State of New York, doing business in the City of
Detroit, Michigan, or in the City, County and State of New York and having
combined capital surplus and undivided profits of at least $5,000,000, which
shall be designated in such notice of redemption. Notice of redemption having
been duly given, or said bank or trust company having been irrevocably
authorized by the Corporation to give such notice, and funds necessary for such
redemption having been deposited, all shares of Series A Preferred Stock with
respect to which such deposit shall have been made shall forthwith, whether or
not the date fixed for such redemption shall have occurred or the certificates
for such shares shall have been surrendered for cancellation, be deemed no
longer to be outstanding for any purpose, and all rights with respect to such
shares shall thereupon cease and terminate, excepting only the right of the
holders of the certificates of such shares to receive, out of the funds so
deposited in trust, on the redemption date (unless an earlier date is fixed by
the Board of Directors), the redemption funds, without interest, to which they
are entitled, and the right to exercise any privilege of conversion not
theretofore expiring; the Corporation to be entitled to the return of any funds,
deposited for redemption of shares converted pursuant to such privilege. At the
expiration of six years after the redemption date such trust shall terminate.
Any such moneys then remaining on deposit shall be paid to the Corporation by
the
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<PAGE> 20
bank or trust company with which the deposit shall have been made, free of
trust, and thereafter the holders of the certificates for such shares shall have
no claim against such bank or trust company but only claims as unsecured
creditors against the Corporation for the amounts payable upon redemption
thereof, without interest. Interest, if any, allowed by the bank or trust
company as aforesaid shall belong to the Corporation, and shall be paid to it
from time to time during the term of such trust.
Section 6. VOTING RIGHTS. (a) The holders of record of shares of
Series A Preferred Stock shall not be entitled to any voting rights except as
provided in the Corporation's Articles of Incorporation, as hereinafter provided
in this Section 6 or as otherwise provided by law.
(b) If at any time dividends on any Series A Preferred Stock
shall be in arrears, the occurrence of such contingency shall mark the beginning
of a period (herein called a "default period") which shall extend until such
time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Preferred Stock then outstanding shall have been declared and paid or set apart
for payment. During each default period, each share of Series A Preferred Stock
shall entitle the holder thereof to one (1) vote, subject to adjustment as
provided in the Corporation's Articles of Incorporation, on all matters
submitted to a vote of the Corporation, and the holders of shares of Series A
Preferred Stock together with the holders of Common Stock shall vote together as
one class on all matters submitted to a vote of stockholders of the Corporation.
Section 7. ANTI-DILUTION ADJUSTMENTS. (a) In the event that the
Company shall, at any time or from time to time while any of the shares of the
Series A Preferred Stock are outstanding, (1) subdivide the outstanding shares
of Common Stock or (2) combine the outstanding shares of Common Stock into a
smaller number of shares, in each case whether by reclassification of shares,
recapitalization of the Corporation or otherwise, then, subject to the
provisions of subparagraph (e) hereof, the Conversion Price in effect
immediately prior to such action shall be adjusted by multiplying such
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately before such event, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to this subpara-
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<PAGE> 21
graph (a) shall become effective immediately as of the effective date of such
subdivision or combination.
(b) If there is any reorganization or reclassification of the
Common Stock, or merger or consolidation of the Corporation (other than a merger
of the Corporation in which the Corporation is the surviving corporation and the
outstanding Common Stock is not converted into or exchanged for stock,
securities, cash or any other thing of value), in lieu of the shares of Common
Stock theretofore issuable upon the exercise of the conversion rights of the
Series A Preferred Stock, each holder of Series A Preferred Stock shall have the
right to obtain upon exercise of the conversion rights of such Series A
Preferred Stock the kind and amount of shares of stock, other securities, money
and property which such holder would have received at the time of such
reclassification, reorganization, merger or consolidation if such holder had
exercised the conversion rights of the Series A Preferred Stock immediately
prior to such reclassification or reorganization. The provisions of this
subparagraph (b) shall similarly apply to successive reorganizations,
reclassifications, mergers or consolidations.
(c) In the event that the Corporation shall, at any time or from
time to time while any of the shares of Series A Preferred Stock are
outstanding, issue, sell or exchange shares of Common Stock (other than pursuant
to any right or warrant to purchase or acquire shares of Common Stock or any
right or warrant to purchase or acquire any security convertible into or
exchangeable for shares of Common Stock or pursuant to any employee or director
incentive or benefit plan or arrangements, including any employment, severance
or consulting agreement, of the Corporation or any subsidiary of the Corporation
heretofore or hereafter adopted or pursuant to any exchange of shares of Common
Stock for securities of another person, organization, association or entity, if
the Board of Directors determines that such exchange is fair to the holders of
shares of Common Stock taken as a whole) for a consideration having a Fair
Market Value (as defined in subparagraph (f) hereof), on the date of such
issuance, sale or exchange, less than the Fair Market Value of such shares on
the date of issuance, sale or exchange, then, subject to the provisions of
subparagraph (e) hereof, the Conversion Price in effect immediately prior to
such action shall be adjusted by multiplying such Conversion Price by a
fraction, the numerator of which shall be the sum of (i) the Fair Market Value
of all the shares of Common Stock outstanding on the day immediately preceding
the first public announcement of such issuance, sale or exchange plus (ii) the
Fair Market Value of
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<PAGE> 22
the consideration received by the Corporation in respect of such issuance, sale
or exchange of shares of Common Stock, and the denominator of which shall be the
product of (a) the Fair Market Value of a share of Common Stock on the day
immediately preceding the first public announcement of such issuance, sale or
exchange multiplied by (b) the sum of the number of shares of Common Stock
outstanding on such day plus the number of shares of Common Stock so issued,
sold or exchanged by the Corporation.
(d) Whenever the Conversion Price is adjusted as herein
provided, the Corporation shall forthwith place on file with the transfer agent
for the Common Stock and any transfer agent for the Series A Preferred Stock,
and with the Secretary of the Corporation, a statement signed by an officer of
the Corporation stating that the Conversion Price has been adjusted and setting
forth the new Conversion Price and in reasonable detail the method of
calculation upon which the adjustment of the Conversion Price is based. Promptly
after each adjustment to the Conversion Price, the Corporation shall cause a
notice thereof and of the then prevailing Conversion Price to be mailed to the
holders of the Series A Preferred Stock at their last addresses as the same
shall appear upon the books of the Corporation or of any transfer agent for the
Series A Preferred Stock.
(e) Notwithstanding any other provisions of this Section 7, the
Corporation shall not be required to make any adjustment to the Conversion Price
unless such adjustment would require an increase or decrease of at least one
percent (1%) in the Conversion Price, PROVIDED, HOWEVER, that the Corporation
may make any such adjustment at its election. Any lesser adjustment which the
Corporation elects not to make shall be carried forward and shall be made no
later than the time of, and together with, the next subsequent adjustment which,
together with any adjustment or adjustments so carried forward, shall amount to
an increase or decrease of at least one percent (1%) in the Conversion Price.
(f) As used herein, "Fair Market Value" shall mean, as to shares
of Common Stock or any other class of capital stock or securities of the
Corporation or any other issues which are publicly traded, the average of the
Per Share Market Value (as defined below) for each of the five (5) consecutive
trading days preceding, and including, the date as of which the Fair Market
Value of a security is to be determined.
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<PAGE> 23
As used herein, "Per Share Fair Market Value" shall mean on any
particular date (1) the last reported sale price per share of the Common Stock
on such date on the principal stock exchange on which the Common Stock has been
listed or, if there is no such price on such date, then the last price on such
exchange on the date nearest preceding such date, or (2) if the Common Stock is
not listed on any stock exchange, the last reported sale price per share of the
Common Stock on the NASDAQ National Market System at the close of business on
such date, or if there is no such price on such date, then the last sale price
on the date nearest preceding such date, or (3) if the Common Stock is not
quoted on such National Market System, the average of the closing bid and asked
prices on such day in the over-the-counter market as reported by NASDAQ (or any
similar organization or agency succeeding to its functions of reporting prices),
or (4) if bid and asked prices for the Common Stock on each such day shall not
have been reported through NASDAQ, the average of the bid and asked prices for
such day as furnished by any New York Stock Exchange member firm regularly
making a market in such security selected for such purpose by the Board or a
committee thereof, provided that none of the transactions related to the
foregoing shall include purchases by any "affiliate" (as such term is defined in
the General Rules and Regulations under the Securities Act of 1933) of the
Corporation. If the Common Stock is not publicly traded, the "Per Share Market
Value" shall mean the fair market value of the Common Stock as determined by an
independent investment banking or appraisal firm experienced in the valuation of
such securities selected in good faith by the Board or a committee thereof, or
if no such investment banking or appraisal firm is in the good faith judgment of
the Board or a committee available to make such determination, as determined in
good faith by the Board or such committee.
Section 8. NOTICE. If:
(a) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock; or
(b) the Corporation shall authorize the granting to the holders
of the Common Stock of rights (other than the Rights) or warrants to subscribe
for or purchase any shares of any class or any other rights or warrants; or
(c) there shall be any reclassification of the Common Stock
(other than a subdivision or combination of the outstanding Common Stock and
other than
23
<PAGE> 24
a change in the par value, or from par value to no par value, or from no par
value to par value), or any consolidation, merger, or statutory share exchange
to which the Corporation is a party and for which approval of any stockholders
of the Corporation is required, or any sale or transfer of all or substantially
all the assets of the Corporation as an entirety; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up the Corporation;
then the Corporation shall cause to be filed with the conversion agent, and
shall cause to be mailed to the holders of shares of the Series A Preferred
Stock at their addresses as shown on the stock books of the Corporation, at
least 5 days prior to the applicable date hereinafter specified, a notice
stating (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or issuance of rights or warrants, or, if a record is not
to be taken, the dates as of which the holders of Common Stock of record to be
entitled to such dividend, distribution or rights or warrants are to be
determined or (ii) the date on which such reclassification, consolidation,
merger, statutory share exchange, sale, transfer, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property. deliverable upon
such reclassification, consolidation, merger, statutory share exchange, sale,
transfer, dissolution, liquidation or winding up. Failure to give such notice or
any defect therein shall not affect the legality or validity of the proceedings
described in this Section 8.
Section 9. AMENDMENT. The Articles of Incorporation of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences, priorities or special rights of the
Series A Preferred Stock then outstanding so as to affect the holders thereof
adversely without the consent of the holders of two-thirds or more of the
outstanding shares of Series A Preferred Stock, voting separately as a class.
ARTICLE IV
1. The address of the initial registered office is:
c/o The Corporation Company
24
<PAGE> 25
30600 Telegraph Road, Bingham Farms, Michigan 48025
2. Mailing address of the initial registered office if different than above:
same as above
3. The name of the initial resident agent at the registered office is:
The Corporation Company
ARTICLE V
The name and address of the incorporator is as follows:
Name Residence or Business Address
---- -----------------------------
Tejinder S. Bindra One Woodward Avenue
Detroit, Michigan 48226
ARTICLE VI
Intentionally Left Blank
ARTICLE VII
Intentionally Left Blank
ARTICLE VIII
The corporation shall indemnify any person who is or was a director or
officer of the corporation or is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with any
threatened, pending or completed action, suit, or proceeding to the full extent
provided by the Michigan Business Corporation Act from time to time in effect.
The corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the corporation with similar
25
<PAGE> 26
scope and effect as the foregoing indemnification of directors and officers.
Notwithstanding the foregoing, the indemnification and advancement of expenses
provided by or granted under the Michigan Business Corporation Act shall not be
considered exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under the articles of incorporation,
bylaws, or a contractual agreement.
ARTICLE IX
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) for a violation of Section 551(1) of the Michigan
Business Corporation Act, or (iv) for any transaction from which the director
derived any improper personal benefit. If the Michigan Business Corporation Act
is amended after approval by the stockholders of this provision to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the Michigan Business
Corporation Act, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE X
Any action to be taken at an annual or special meeting of shareholders
may be taken without a meeting, without prior notice and without a vote, if all
the shareholders entitled to vote thereon consent thereto in writing.
ARTICLE XI
A. Number of Directors
26
<PAGE> 27
The number of the directors of the Corporation shall be fixed from
time to time by resolution adopted by the affirmative vote of a majority of the
entire Board of Directors of the Corporation, except that the minimum number of
directors shall be fixed at no less than five and the maximum number of
directors shall be fixed at no more than seven.
B. Removal
Any director may be removed from office only for cause and only by the
affirmative vote of the holders of at least a majority of the voting power of
all the shares of the Corporation entitled to vote generally in the election of
directors, voting together as a single class.
C. Nomination of Director Candidates
Nominations for election to the Board of Directors of the Corporation
at a meeting of shareholders may be made by the Board of Directors, on behalf of
the Board of Directors by any nominating committee appointed by the Board of
Directors, or by any shareholder of the Corporation entitled to vote for the
election of directors at the meeting. Nominations, other than those made by or
on behalf of the Board of Directors, shall be made by notice in writing
delivered to or mailed, postage prepaid, and received by the Secretary of the
Corporation at least 60 days but not more than 90 days prior to the anniversary
date of the immediately preceding Annual Meeting of Shareholders. The notice
shall set forth (i) the name and address of the shareholder who intends to make
the nomination; (ii) the name, age, business address and, if known, residence
address of each nominee; (iii) the principal occupation or employment of each
nominee; (iv) the number of shares of stock of the Corporation which are
beneficially owned by each nominee and by the nominating shareholder; (v) any
other information concerning the nominee that must be disclosed of nominees in
proxy solicitation pursuant to Regulation 14A of the Securities Exchange Act of
1934 (or any subsequent provisions replacing such Regulation); and (vi) the
executed consent of each nominee to serve as a director of the Corporation, if
elected. The chairman of the meeting of shareholders may, if the facts warrant,
determine that a nomination was not made in accordance with the foregoing
procedures, and if the chairman should so determine, the chairman shall so
declare to the meeting and the defective nomination shall be disregarded.
27
<PAGE> 28
D. Vacancies
In case of any vacancy on the Board of Directors through death,
resignation, disqualification, or other cause, the remaining directors (though
less than a quorum of the Board) by affirmative vote of a majority thereof, may
elect a successor to hold office for the unexpired portion of the term of the
director whose place shall be vacant, and until the election and qualification
of his or her successor.
28
<PAGE> 1
EXHIBIT 4.1
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated December 16, 1998
between
PRIMARK CORPORATION
and
MORGAN STANLEY & CO. INCORPORATED
A.G. EDWARDS & SONS, INC.
BT ALEX. BROWN INCORPORATED
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
- --------------------------------------------------------------------------------
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into December 16, 1998, between PRIMARK CORPORATION, a Michigan
corporation (the "Company"), and MORGAN STANLEY & CO. INCORPORATED, A.G. EDWARDS
& SONS, INC., BT ALEX. BROWN INCORPORATED, CHASE SECURITIES INC., and
NATIONSBANC MONTGOMERY SECURITIES LLC (the "Placement Agents").
This Agreement is made pursuant to the Placement Agreement
dated December 16, 1998, between the Company and the Placement Agents (the
"Placement Agreement"), which provides for the sale by the Company to the
Placement Agents of an aggregate of $150,000,000 principal amount of the
Company's 9 1/4% Senior Subordinated Notes due 2008 (the "Securities"). In order
to induce the Placement Agents to enter into the Placement Agreement, the
Company has agreed to provide to the Placement Agents and their direct and
indirect transferees the registration rights set forth in this Agreement. The
execution of this Agreement is a condition to the closing under the Placement
Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. DEFINITIONS.
As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended
from time to time.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"CLOSING DATE" shall mean the Closing Date as defined in the
Placement Agreement.
"COMPANY" shall have the meaning set forth in the preamble and
shall also include the Company's successors.
"EXCHANGE OFFER" shall mean the exchange offer by the Company
of Exchange Securities for Registrable Securities pursuant to Section
2(a) hereof.
"EXCHANGE OFFER REGISTRATION" shall mean a registration under
the 1933 Act effected pursuant to Section 2(a) hereof.
<PAGE> 3
2
"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form) and all amendments and supplements to such
registration statement, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by
reference therein.
"EXCHANGE SECURITIES" shall mean securities issued by the
Company under the Indenture containing terms identical to the
Securities (except that the Exchange Securities will not contain
restrictions on transfer) and to be offered to Holders of Securities in
exchange for Securities pursuant to the Exchange Offer.
"HOLDER" shall mean the Placement Agents, for so long as they
own any Registrable Securities, and each of their successors, assigns
and direct and indirect transferees who become registered owners of
Registrable Securities under the Indenture; PROVIDED that for purposes
of Sections 4 and 5 of this Agreement, the term "Holder" shall include
Participating Broker-Dealers (as defined in Section 4(a)).
"INDENTURE" shall mean the Indenture relating to the
Securities dated as of December 21, 1998 between the Company and State
Street Bank and Trust Company, as trustee, and as the same may be
amended from time to time in accordance with the terms thereof.
"MAJORITY HOLDERS" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Securities;
PROVIDED that whenever the consent or approval of Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or any of its affiliates (as
such term is defined in Rule 405 under the 1933 Act) (other than the
Placement Agents or subsequent Holders of Registrable Securities if
such subsequent holders are deemed to be such affiliates solely by
reason of their holding of such Registrable Securities) shall not be
counted in determining whether such consent or approval was given by
the Holders of such required percentage or amount.
"PERSON" shall mean an individual, partnership, limited
liability company, corporation, trust or unincorporated organization,
or a government or agency or political subdivision thereof.
"PLACEMENT AGENTS" shall have the meaning set forth in the
preamble.
"PLACEMENT AGREEMENT" shall have the meaning set forth in the
preamble.
<PAGE> 4
3
"PROSPECTUS" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by
a Shelf Registration Statement, and by all other amendments and
supplements to such prospectus, and in each case including all material
incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Securities; PROVIDED,
HOWEVER, that the Securities shall cease to be Registrable Securities
(i) when a Registration Statement with respect to such Securities shall
have been declared effective under the 1933 Act and such Securities
shall have been disposed of pursuant to such Registration Statement,
(ii) when such Securities have been sold to the public pursuant to Rule
144(k) (or any similar provision then in force, but not Rule 144A)
under the 1933 Act or (iii) when such Securities shall have ceased to
be outstanding.
"REGISTRATION EXPENSES" shall mean any and all expenses
incident to performance of or compliance by the Company with this
Agreement, including without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. registration and
filing fees, (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws (including reasonable
fees and disbursements of counsel for any underwriters or Holders in
connection with blue sky qualification of any of the Exchange
Securities or Registrable Securities), (iii) all expenses of any
Persons in preparing or assisting in preparing, word processing,
printing and distributing any Registration Statement, any Prospectus,
any amendments or supplements thereto, any underwriting agreements,
securities sales agreements and other documents relating to the
performance of and compliance with this Agreement, (iv) all rating
agency fees, (v) all fees and disbursements relating to the
qualification of the Indenture under applicable securities laws, (vi)
the fees and disbursements of the Trustee and its counsel, (vii) the
fees and disbursements of counsel for the Company and, in the case of a
Shelf Registration Statement, the fees and disbursements of one counsel
for the Holders (which counsel shall be selected by the Majority
Holders and which counsel may also be counsel for the Placement Agent)
and (viii) the fees and disbursements of the independent public
accountants of the Company, including the expenses of any special
audits or "cold comfort" letters required by or incident to such
performance and compliance, but excluding fees and expenses of counsel
to the underwriters (other than fees and expenses set forth in clause
(ii) above) or the Holders and underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a Holder.
<PAGE> 5
4
"REGISTRATION STATEMENT" shall mean any registration statement
of the Company that covers any of the Exchange Securities or
Registrable Securities pursuant to the provisions of this Agreement and
all amendments and supplements to any such Registration Statement,
including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"SHELF REGISTRATION" shall mean a registration effected
pursuant to Section 2(b) hereof.
"SHELF REGISTRATION STATEMENT" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of
Section 2(b) of this Agreement which covers all of the Registrable
Securities (but no other securities unless approved by the Holders
whose Registrable Securities are covered by such Shelf Registration
Statement) on an appropriate form under Rule 415 under the 1933 Act, or
any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by reference
therein.
"TRUSTEE" shall mean the trustee with respect to the
Securities under the Indenture.
"UNDERWRITER" shall have the meaning set forth in Section 3
hereof.
"UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" shall
mean a registration in which Registrable Securities are sold to an
Underwriter for reoffering to the public.
2. REGISTRATION UNDER THE 1933 ACT.
(a) To the extent not prohibited by any applicable law or
applicable interpretation of the Staff of the SEC, the Company shall use its
best efforts to cause to be filed an Exchange Offer Registration Statement
covering the offer by the Company to the Holders to exchange all of the
Registrable Securities for Exchange Securities and to have such Registration
Statement remain effective until the closing of the Exchange Offer. The Company
shall commence the Exchange Offer promptly after the Exchange Offer Registration
Statement has been declared effective by the SEC and use its best efforts to
have the Exchange Offer consummated not later than 60 days after such effective
date. The Company shall
<PAGE> 6
5
commence the Exchange Offer by mailing the related exchange offer Prospectus and
accompanying documents to each Holder stating, in addition to such other
disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to
this Registration Rights Agreement and that all Registrable Securities
validly tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be
a period of at least 20 business days from the date such notice is
mailed) (the "Exchange Dates");
(iii) that any Registrable Security not tendered will
remain outstanding and continue to accrue interest, but will not retain
any rights under this Registration Rights Agreement;
(iv) that Holders electing to have a Registrable Security
exchanged pursuant to the Exchange Offer will be required to surrender
such Registrable Security, together with the enclosed letters of
transmittal, to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the notice
prior to the close of business on the last Exchange Date; and
(v) that Holders will be entitled to withdraw their
election, not later than the close of business on the last Exchange
Date, by sending to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the notice a
telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Registrable Securities
delivered for exchange and a statement that such Holder is withdrawing
his election to have such Securities exchanged.
As soon as practicable after the last Exchange Date, the
Company shall:
(i) accept for exchange Registrable Securities or
portions thereof tendered and not validly withdrawn pursuant to the
Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities or portions thereof so accepted
for exchange by the Company and issue, and cause the Trustee to
promptly authenticate and mail to each Holder, an Exchange Security
equal in principal amount to the principal amount of the Registrable
Securities surrendered by such Holder.
<PAGE> 7
6
The Company shall use its best efforts to complete the Exchange Offer as
provided above and shall comply with the applicable requirements of the 1933
Act, the 1934 Act and other applicable laws and regulations in connection with
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer does not violate applicable law or any
applicable interpretation of the Staff of the SEC. The Company shall inform the
Placement Agents of the names and addresses of the Holders to whom the Exchange
Offer is made, and the Placement Agents shall have the right, subject to
applicable law, to contact such Holders and otherwise facilitate the tender of
Registrable Securities in the Exchange Offer.
(b) In the event that (i) the Company determines that the
Exchange Offer Registration provided for in Section 2(a) above is not available
or may not be consummated as soon as practicable after the last Exchange Date
because it would violate applicable law or the applicable interpretations of the
Staff of the SEC, (ii) the Exchange Offer is not for any other reason
consummated by June 21, 1999 or (iii) the Exchange Offer has been completed and
in the opinion of counsel for the Placement Agents a Registration Statement must
be filed and a Prospectus must be delivered by the Placement Agents in
connection with any offering or sale of Registrable Securities, the Company
shall use its best efforts to cause to be filed as soon as practicable after
such determination, date or notice of such opinion of counsel is given to the
Company, as the case may be, a Shelf Registration Statement providing for the
sale by the Holders of all of the Registrable Securities and to have such Shelf
Registration Statement declared effective by the SEC. In the event the Company
is required to file a Shelf Registration Statement solely as a result of the
matters referred to in clause (iii) of the preceding sentence, the Company shall
use its best efforts to file and have declared effective by the SEC both an
Exchange Offer Registration Statement pursuant to Section 2(a) with respect to
all Registrable Securities and a Shelf Registration Statement (which may be a
combined Registration Statement with the Exchange Offer Registration Statement)
with respect to offers and sales of Registrable Securities held by the Placement
Agents after completion of the Exchange Offer. The Company agrees to use its
best efforts to keep the Shelf Registration Statement continuously effective
until the expiration of the period referred to in Rule 144(k) with respect to
the Registrable Securities or such shorter period that will terminate when all
of the Registrable Securities covered by the Shelf Registration Statement have
been sold pursuant to the Shelf Registration Statement. The Company further
agrees to supplement or amend the Shelf Registration Statement if required by
the rules, regulations or instructions applicable to the registration form used
by the Company for such Shelf Registration Statement or by the 1933 Act or by
any other rules and regulations thereunder for shelf registration or if
reasonably requested by a Holder with respect to information relating to such
Holder, and to use its best efforts to cause any such amendment to become
effective and such Shelf Registration Statement to become usable as soon as
thereafter practicable. The Company agrees to furnish to the Holders of
Registrable Securities copies of any such supplement or amendment promptly after
its being used or filed with the SEC.
<PAGE> 8
7
(c) The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) or Section 2(b). Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to the Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b)
hereof will not be deemed to have become effective unless it has been declared
effective by the SEC; PROVIDED, HOWEVER, that, if, after it has been declared
effective, the offering of Registrable Securities pursuant to a Shelf
Registration Statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have become effective during the
period of such interference until the offering of Registrable Securities
pursuant to such Registration Statement may legally resume. As provided for in
the Indenture, in the event the Exchange Offer is not consummated and the Shelf
Registration Statement is not declared effective on or prior to June 21, 1999,
the interest rate on the Securities will be increased by .5% per annum until the
Exchange Offer is consummated or the Shelf Registration Statement is declared
effective by the SEC.
(e) Without limiting the remedies available to the
Placement Agents and the Holders, the Company acknowledges that any failure by
the Company to comply with its obligations under Section 2(a) and Section 2(b)
hereof may result in material irreparable injury to the Placement Agents or the
Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Placement Agents or any Holder may obtain such relief
as may be required to specifically enforce the Company's obligations under
Section 2(a) and Section 2(b) hereof.
3. REGISTRATION PROCEDURES.
In connection with the obligations of the Company with respect
to the Registration Statements pursuant to Section 2(a) and Section 2(b) hereof,
the Company shall as expeditiously as possible:
(a) prepare and file with the SEC a Registration
Statement on the appropriate form under the 1933 Act, which form (x)
shall be selected by the Company and (y) shall, in the case of a Shelf
Registration, be available for the sale of the Registrable Securities
by the selling Holders thereof and (z) shall comply as to form in all
material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed
therewith, and use its best efforts
<PAGE> 9
8
to cause such Registration Statement to become effective and remain
effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement effective for the
applicable period and cause each Prospectus to be supplemented by any
required prospectus supplement and, as so supplemented, to be filed
pursuant to Rule 424 under the 1933 Act; to keep each Prospectus
current during the period described under Section 4(3) and Rule 174
under the 1933 Act that is applicable to transactions by brokers or
dealers with respect to the Registrable Securities or Exchange
Securities;
(c) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, to counsel for the Placement Agents,
to counsel for the Holders and to each Underwriter of an Underwritten
Offering of Registrable Securities, if any, without charge, as many
copies of each Prospectus, including each preliminary Prospectus, and
any amendment or supplement thereto and such other documents as such
Holder or Underwriter may reasonably request, in order to facilitate
the public sale or other disposition of the Registrable Securities; and
the Company consents to the use of such Prospectus and any amendment or
supplement thereto in accordance with applicable law by each of the
selling Holders of Registrable Securities and any such Underwriters in
connection with the offering and sale of the Registrable Securities
covered by and in the manner described in such Prospectus or any
amendment or supplement thereto in accordance with applicable law;
(d) use its best efforts to register or qualify the
Registrable Securities under all applicable state securities or "blue
sky" laws of such jurisdictions as any Holder of Registrable Securities
covered by a Registration Statement shall reasonably request in writing
by the time the applicable Registration Statement is declared effective
by the SEC, to cooperate with such Holders in connection with any
filings required to be made with the National Association of Securities
Dealers, Inc. and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition in each such jurisdiction of such Registrable
Securities owned by such Holder; PROVIDED, HOWEVER, that the Company
shall not be required to (i) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(d), (ii) file any general
consent to service of process or (iii) subject itself to taxation in
any such jurisdiction if it is not so subject;
(e) in the case of a Shelf Registration, notify each
Holder of Registrable Securities, counsel for the Holders and counsel
for the Placement Agents promptly and,
<PAGE> 10
9
if requested by any such Holder or counsel, confirm such advice in
writing (i) when a Registration Statement has become effective and when
any post-effective amendment thereto has been filed and becomes
effective, (ii) of any request by the SEC or any state securities
authority for amendments and supplements to a Registration Statement
and Prospectus or for additional information after the Registration
Statement has become effective, (iii) of the issuance by the SEC or any
state securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) if, between the effective date of a
Registration Statement and the closing of any sale of Registrable
Securities covered thereby, the representations and warranties of the
Company contained in any underwriting agreement, securities sales
agreement or other similar agreement, if any, relating to the offering
cease to be true and correct in all material respects or if the Company
receives any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any
jurisdiction or the initiation of any proceeding for such purpose, (v)
of the happening of any event during the period a Shelf Registration
Statement is effective which makes any statement made in such
Registration Statement or the related Prospectus untrue in any material
respect or which requires the making of any changes in such
Registration Statement or Prospectus in order to make the statements
therein not misleading and (vi) of any determination by the Company
that a post-effective amendment to a Registration Statement would be
appropriate;
(f) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of a Registration Statement
at the earliest possible moment and provide immediate notice to each
Holder of the withdrawal of any such order;
(g) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, without charge, at least one
conformed copy of each Registration Statement and any post-effective
amendment thereto (without documents incorporated therein by reference
or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with
the selling Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends and
enable such Registrable Securities to be in such denominations
(consistent with the provisions of the Indenture) and registered in
such names as the selling Holders may reasonably request at least one
business day prior to the closing of any sale of Registrable
Securities;
(i) in the case of a Shelf Registration, upon the
occurrence of any event contemplated by Section 3(e)(v) hereof, use its
best efforts to prepare and file with the SEC a supplement or
post-effective amendment to a Registration Statement or the
<PAGE> 11
10
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to
the purchasers of the Registrable Securities, such Prospectus will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company
agrees to notify the Holders to suspend use of the Prospectus as
promptly as practicable after the occurrence of such an event, and the
Holders hereby agree to suspend use of the Prospectus until the Company
has amended or supplemented the Prospectus to correct such misstatement
or omission;
(j) a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus, provide copies of
such document to the Placement Agents and their counsel (and, in the
case of a Shelf Registration Statement, the Holders and their counsel)
and make such of the representatives of the Company as shall be
reasonably requested by the Placement Agents or their counsel (and, in
the case of a Shelf Registration Statement, the Holders or their
counsel) available for discussion of such document, and shall not at
any time file or make any amendment to the Registration Statement, any
Prospectus or any amendment of or supplement to a Registration
Statement or a Prospectus or any document which is to be incorporated
by reference into a Registration Statement or a Prospectus, of which
the Placement Agents and their counsel (and, in the case of a Shelf
Registration Statement, the Holders and their counsel) shall not have
previously been advised and furnished a copy or to which the Placement
Agents or their counsel (and, in the case of a Shelf Registration
Statement, the Holders or their counsel) shall reasonably object;
(k) obtain a CUSIP number for all Exchange Securities or
Registrable Securities, as the case may be, not later than the
effective date of a Registration Statement;
(l) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the Exchange Securities or Registrable Securities, as
the case may be, cooperate with the Trustee and the Holders to effect
such changes to the Indenture as may be required for the Indenture to
be so qualified in accordance with the terms of the TIA and execute,
and use its best efforts to cause the Trustee to execute, all documents
as may be required to effect such changes and all other forms and
documents required to be filed with the SEC to enable the Indenture to
be so qualified in a timely manner;
(m) in the case of a Shelf Registration, make available
for inspection by a representative of the Holders of the Registrable
Securities, any Underwriter
<PAGE> 12
11
participating in any disposition pursuant to such Shelf Registration
Statement, and attorneys and accountants designated by the Holders, at
reasonable times and in a reasonable manner, all financial and other
records, pertinent documents and properties of the Company, and cause
the respective officers, directors and employees of the Company to
supply all information reasonably requested by any such representative,
Underwriter, attorney or accountant in connection with a Shelf
Registration Statement; PROVIDED, HOWEVER, that any information that is
designated in writing by the Company, in good faith, as confidential at
the time of delivery of such information shall be kept confidential by
the Holders or any such Underwriter, attorney, accountant or other
agent, unless such disclosure is made in connection with a court
proceeding or required by law, or such information becomes available to
the public generally or through a third party without an accompanying
obligation of confidentiality.
(n) in the case of a Shelf Registration, use its best
efforts to cause all Registrable Securities to be listed on any
securities exchange or any automated quotation system on which similar
securities issued by the Company are then listed if requested by the
Majority Holders, to the extent such Registrable Securities satisfy
applicable listing requirements;
(o) use its best efforts to cause the Exchange Securities
or Registrable Securities, as the case may be, to be rated by two
nationally recognized statistical rating organizations (as such term is
defined in Rule 436(g)(2) under the 1933 Act);
(p) if reasonably requested by any Holder of Registrable
Securities covered by a Registration Statement, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information with respect to such Holder as such Holder reasonably
requests to be included therein and (ii) make all required filings of
such Prospectus supplement or such post-effective amendment as soon as
the Company has received notification of the matters to be incorporated
in such filing; and
(q) in the case of a Shelf Registration, enter into such
customary agreements and take all such other actions in connection
therewith (including those requested by the Holders of a majority of
the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities including,
but not limited to, an Underwritten Offering and in such connection,
(i) to the extent possible, make such representations and warranties to
the Holders and any Underwriters of such Registrable Securities with
respect to the business of the Company and its material subsidiaries,
the Registration Statement, Prospectus and documents incorporated by
reference or deemed incorporated by reference, if any, in each case, in
form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings and confirm the same if and when
requested, (ii) obtain opinions of counsel to the Company (which
<PAGE> 13
12
counsel and opinions, in form, scope and substance, shall be reasonably
satisfactory to the Holders and such Underwriters and their respective
counsel) addressed to each selling Holder and Underwriter of
Registrable Securities, covering the matters customarily covered in
opinions requested in underwritten offerings, (iii) obtain "cold
comfort" letters from the independent certified public accountants of
the Company (and, if necessary, any other certified public accountant
of any subsidiary of the Company, or of any business acquired by the
Company for which financial statements and financial data are or are
required to be included in the Registration Statement) addressed to
each selling Holder and Underwriter of Registrable Securities, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings, and (iv) deliver such documents and
certificates as may be reasonably requested by the Holders of a
majority in principal amount of the Registrable Securities being sold
or the Underwriters, and which are customarily delivered in
underwritten offerings, to evidence the continued validity of the
representations and warranties of the Company made pursuant to clause
(i) above and to evidence compliance with any customary conditions
contained in an underwriting agreement.
In the case of a Shelf Registration Statement, the Company may
require each Holder of Registrable Securities to furnish to the Company such
information regarding the Holder and the proposed distribution by such Holder of
such Registrable Securities as the Company may from time to time reasonably
request in writing; and the Company may exclude from such registration the
Securities of any Holder that fails to furnish such information within a
reasonable time after receiving such request.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 3(e)(v) hereof, such Holder will
forthwith discontinue disposition of Registrable Securities pursuant to a
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if
so directed by the Company, such Holder will deliver to the Company (at its
expense) all copies in its possession, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. If the Company shall give any
such notice to suspend the disposition of Registrable Securities pursuant to a
Registration Statement, the Company shall extend the period during which the
Registration Statement shall be maintained effective pursuant to this Agreement
by the number of days during the period from and including the date of the
giving of such notice to and including the date when the Holders shall have
received copies of the supplemented or amended Prospectus necessary to resume
such dispositions. The Company may give any such notice only twice during any
365 day period and any such suspensions may not exceed 30 days
<PAGE> 14
13
for each suspension and there may not be more than two suspensions in effect
during any 365 day period.
The Holders of Registrable Securities covered by a Shelf
Registration Statement who desire to do so may sell such Registrable Securities
in an Underwritten Offering. In any such Underwritten Offering, the investment
banker or investment bankers and manager or managers (the "Underwriters") that
will administer the offering will be selected by the Majority Holders of the
Registrable Securities included in such offering.
4. PARTICIPATION OF BROKER-DEALERS IN EXCHANGE OFFER.
(a) The Staff of the SEC has taken the position that any
broker-dealer that receives Exchange Securities for its own account in the
Exchange Offer in exchange for Securities that were acquired by such
broker-dealer as a result of market-making or other trading activities (a
"Participating Broker-Dealer"), may be deemed to be an "underwriter" within the
meaning of the 1933 Act and must deliver a prospectus meeting the requirements
of the 1933 Act in connection with any resale of such Exchange Securities.
The Company understands that it is the Staff's position that
if the Prospectus contained in the Exchange Offer Registration Statement
includes a plan of distribution containing a statement to the above effect and
the means by which Participating Broker- Dealers may resell the Exchange
Securities, without naming the Participating Broker-Dealers or specifying the
amount of Exchange Securities owned by them, such Prospectus may be delivered by
Participating Broker-Dealers to satisfy their prospectus delivery obligation
under the 1933 Act in connection with resales of Exchange Securities for their
own accounts, so long as the Prospectus otherwise meets the requirements of the
1933 Act.
(b) In light of the above, notwithstanding the other
provisions of this Agreement, the Company agrees that the provisions of this
Agreement as they relate to a Shelf Registration shall also apply to an Exchange
Offer Registration to the extent, and with such reasonable modifications thereto
as may be, reasonably requested by the Placement Agents or by one or more
Participating Broker-Dealers, in each case as provided in clause (ii) below, in
order to expedite or facilitate the disposition of any Exchange Securities by
Participating Broker-Dealers consistent with the positions of the Staff recited
in Section 4(a) above; PROVIDED that:
(i) the Company shall not be required to amend or
supplement the Prospectus contained in the Exchange Offer Registration
Statement, as would otherwise be contemplated by Section 3(i), for a
period exceeding 180 days after the last Exchange Date (as such period
may be extended pursuant to the penultimate paragraph of Section 3 of
this Agreement) and Participating Broker-Dealers shall not be
<PAGE> 15
14
authorized by the Company to deliver and shall not deliver such
Prospectus after such period in connection with the resales
contemplated by this Section 4; and
(ii) the application of the Shelf Registration procedures
set forth in Section 3 of this Agreement to an Exchange Offer
Registration, to the extent not required by the positions of the Staff
of the SEC or the 1933 Act and the rules and regulations thereunder,
will be in conformity with the reasonable request to the Company by the
Placement Agents or with the reasonable request in writing to the
Company by one or more broker-dealers who certify to the Placement
Agents and the Company in writing that they anticipate that they will
be Participating Broker-Dealers; and PROVIDED FURTHER that, in
connection with such application of the Shelf Registration procedures
set forth in Section 3 to an Exchange Offer Registration, the Company
shall be obligated (x) to deal only with one entity representing the
Participating Broker-Dealers, which shall be Morgan Stanley & Co.
Incorporated unless it elects not to act as such representative, (y) to
pay the fees and expenses of only one counsel representing the
Participating Broker-Dealers, which shall be counsel to the Placement
Agents unless such counsel elects not to so act and (z) to cause to be
delivered only one, if any, "cold comfort" letter with respect to the
Prospectus in the form existing on the last Exchange Date and with
respect to each subsequent amendment or supplement, if any, effected
during the period specified in clause (i) above.
(c) The Placement Agents shall have no liability to the
Company or any Holder with respect to any request that it may make pursuant to
Section 4(b) above.
5. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless the
Placement Agents, each Holder and each Person, if any, who controls any
Placement Agent or any Holder within the meaning of either Section 15 of the
1933 Act or Section 20 of the 1934 Act, or is under common control with, or is
controlled by, any Placement Agent or any Holder, from and against all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred by the Placement Agent, any Holder or any
such controlling or affiliated Person in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) pursuant to which Exchange Securities or
Registrable Securities were registered under the 1933 Act, including all
documents incorporated therein by reference, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or caused by any
untrue statement or alleged untrue statement of a material fact contained in any
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
<PAGE> 16
15
omission to state therein a material fact necessary to make the statements
therein in light of the circumstances under which they were made not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information relating to the Placement Agents or any Holder furnished to the
Company in writing through Morgan Stanley & Co. Incorporated or any selling
Holder expressly for use therein; PROVIDED that the foregoing indemnity with
respect to any preliminary Prospectus shall not inure to the benefit of any
Holder from whom the person asserting any such losses, claims, damages or
liabilities purchased Securities, or any person controlling such Holder, if a
copy of the final Prospectus (as then amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) was not sent or
given by or on behalf of such Holder to such person, if required by law so to
have been delivered, at or prior to the written confirmation of the sale of the
Securities to such person, and if the final Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage or liability. In connection with any Underwritten Offering permitted by
Section 3, the Company will also indemnify the Underwriters, if any, selling
brokers, dealers and similar securities industry professionals participating in
the distribution, their officers and directors and each Person who controls such
Persons (within the meaning of the 1933 Act and the 1934 Act) to the same extent
as provided above with respect to the indemnification of the Holders, if
requested in connection with any Registration Statement.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Placement Agents and the other
selling Holders, and each of their respective directors, officers who sign the
Registration Statement and each Person, if any, who controls the Company, any
Placement Agent and any other selling Holder within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as
the foregoing indemnity from the Company to the Placement Agents and the
Holders, but only with reference to information relating to such Holder
furnished to the Company in writing by such Holder expressly for use in any
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any Person in respect of which
indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above,
such Person (the "indemnified party") shall promptly notify the Person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the
<PAGE> 17
16
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for (a)
the fees and expenses of more than one separate firm (in addition to any local
counsel) for the Placement Agents and all Persons, if any, who control any
Placement Agent within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act, (b) the fees and expenses of more than one separate
firm (in addition to any local counsel) for the Company, its directors, its
officers who sign the Registration Statement and each Person, if any, who
controls the Company within the meaning of either such Section and (c) the fees
and expenses of more than one separate firm (in addition to any local counsel)
for all Holders and all Persons, if any, who control any Holders within the
meaning of either such Section, and that all such fees and expenses shall be
reimbursed as they are incurred. In such case involving the Placement Agents and
Persons who control the Placement Agents, such firm shall be designated in
writing by Morgan Stanley & Co. Incorporated. In such case involving the Holders
and such Persons who control Holders, such firm shall be designated in writing
by the Majority Holders. In all other cases, such firm shall be designated by
the Company. The indemnifying party shall not be liable for any settlement of
any proceeding effected without its written consent but, if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party for such fees and expenses of counsel in accordance with such
request prior to the date of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which such
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraph (a)
or paragraph (b) of this Section 5 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or
<PAGE> 18
17
payable by such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company and the Holders shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Holders' respective obligations to contribute
pursuant to this Section 5(d) are several in proportion to the respective
principal amount of Registrable Securities of such Holder that were registered
pursuant to a Registration Statement.
(e) The Company and each Holder agree that it would not
be just or equitable if contribution pursuant to this Section 5 were determined
by PRO RATA allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5, no Holder shall be required to indemnify or
contribute any amount in excess of the amount by which the total price at which
Registrable Securities were sold by such Holder exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. The remedies provided for in this
Section 5 are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this
Section 5 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of the Placement Agents, any Holder or any Person controlling any Placement
Agent or any Holder, or by or on behalf of the Company, its officers or
directors or any Person controlling the Company, (iii) acceptance of any of the
Exchange Securities and (iv) any sale of Registrable Securities pursuant to a
Shelf Registration Statement.
<PAGE> 19
18
6. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company has not
entered into, and on or after the date of this Agreement will not enter into,
any agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's other issued and outstanding securities under any such agreements.
(b) AMENDMENTS AND WAIVERS. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company has obtained the written
consent of Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Securities affected by such amendment, modification,
supplement, waiver or consent; PROVIDED, HOWEVER, that no amendment,
modification, supplement, waiver or consent to any departure from the provisions
of Section 5 hereof shall be effective as against any Holder of Registrable
Securities unless consented to in writing by such Holder.
(c) NOTICES. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, telex, telecopier, or any courier guaranteeing
overnight delivery (i) if to a Holder, at the most current address given by such
Holder to the Company by means of a notice given in accordance with the
provisions of this Section 6(c), which address initially is, with respect to the
Placement Agents, the address set forth in the Placement Agreement; and (ii) if
to the Company, initially at the Company's address set forth in the Placement
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(c).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the Person giving the same to the Trustee, at
the address specified in the Indenture.
<PAGE> 20
19
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; PROVIDED that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Placement Agreement. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such Person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such Person shall be entitled to receive the benefits hereof. The
Placement Agents (in their capacity as Placement Agents) shall have no liability
or obligation to the Company with respect to any failure by a Holder to comply
with, or any breach by any Holder of, any of the obligations of such Holder
under this Agreement.
(e) PURCHASES AND SALES OF SECURITIES. The Company shall
not, and shall use its best efforts to cause its affiliates (as defined in Rule
405 under the 1933 Act) not to, purchase and then resell or otherwise transfer
any Securities.
(f) THIRD PARTY BENEFICIARY. The Holders shall be third
party beneficiaries to the agreements made hereunder between the Company, on the
one hand, and the Placement Agents, on the other hand, and shall have the right
to enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. This Agreement shall be governed by
the laws of the State of New York.
(j) SEVERABILITY. In the event that any one or more of
the provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
PRIMARK CORPORATION
By: /s/ MICHAEL K. KARGULA
-----------------------------------
Name: Michael K. Kargula
Title: Executive Vice President,
General Counsel and Secretary
Confirmed and accepted as of the date first above written:
MORGAN STANLEY & CO. INCORPORATED
A.G. EDWARDS & SONS, INC.
BT ALEX. BROWN INCORPORATED
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
By: MORGAN STANLEY & CO. INCORPORATED
By:
----------------------------------
Name:
Title:
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
PRIMARK CORPORATION
By: /s/
-----------------------------------
Name:
Title:
Confirmed and accepted as of the date first above written:
MORGAN STANLEY & CO. INCORPORATED
A.G. EDWARDS & SONS, INC.
BT ALEX. BROWN INCORPORATED
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
By: MORGAN STANLEY & CO. INCORPORATED
By: /s/ DAVID P. SUN
----------------------------------
Name: David P. Sun
Title: Vice President
<PAGE> 1
EXHIBIT 4.2
================================================================================
PRIMARK CORPORATION,
Issuer
and
STATE STREET BANK AND TRUST COMPANY,
Trustee
--------------------
Indenture
Dated as of December 21, 1998
--------------------
9 1/4% Senior Subordinated Notes Due 2008
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
TIA SECTIONS INDENTURE SECTIONS
- ------------ ------------------
ss. 310(a)(1)................................................ 7.10
(a)(2)................................................ 7.10
(b)................................................... 7.03; 7.08
ss. 311(a)................................................... 7.03
(b)................................................... 7.03
ss. 312(a)................................................... 2.04
(b)................................................... 11.02
(c)................................................... 11.02
ss. 313(a)................................................... 7.06
(b)(2)................................................ 7.07
(c)................................................... 7.05; 7.06; 11.02
(d)................................................... 7.06
ss. 314(a)................................................... 7.05; 11.02
(a)(4)................................................ 4.17; 11.02
(c)(1)................................................ 11.03
(c)(2)................................................ 11.03
(e)................................................... 4.17; 11.04
ss. 315(a)................................................... 7.02
(b)................................................... 7.05; 11.02
(c)................................................... 7.02
(d)................................................... 7.02
(e)................................................... 6.11
ss. 316(a)(1)(A)............................................. 6.05
(a)(1)(B)............................................. 6.04
(b)................................................... 6.07
(c)................................................... 9.03
ss. 317(a)(1)................................................ 6.08
(a)(2)................................................ 6.09
(b)................................................... 2.05
ss. 318(a)................................................... 11.01
(c)................................................... 11.01
- -----------------
Note: The Cross-Reference Table shall not for any purpose be deemed to be a part
of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.................................................. 1
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT............ 22
SECTION 1.03. RULES OF CONSTRUCTION........................................ 23
ARTICLE TWO
THE NOTES
SECTION 2.01. FORM AND DATING.............................................. 23
SECTION 2.02. RESTRICTIVE LEGENDS.......................................... 24
SECTION 2.03. EXECUTION, AUTHENTICATION AND DENOMINATIONS.................. 26
SECTION 2.04. REGISTRAR AND PAYING AGENT................................... 27
SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST.......................... 28
SECTION 2.06. TRANSFER AND EXCHANGE........................................ 28
SECTION 2.07. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES....................... 29
SECTION 2.08. SPECIAL TRANSFER PROVISIONS.................................. 31
SECTION 2.09. REPLACEMENT NOTES............................................ 34
SECTION 2.10. OUTSTANDING NOTES............................................ 34
SECTION 2.11. TEMPORARY NOTES.............................................. 35
SECTION 2.12. CANCELLATION................................................. 35
SECTION 2.13. CUSIP NUMBERS................................................ 36
SECTION 2.14. DEFAULTED INTEREST........................................... 36
SECTION 2.15. ISSUANCE OF ADDITIONAL NOTES................................. 36
ARTICLE THREE
REDEMPTION
SECTION 3.01. RIGHT OF REDEMPTION.......................................... 36
SECTION 3.02. NOTICES TO TRUSTEE........................................... 37
SECTION 3.03. SELECTION OF NOTES TO BE REDEEMED............................ 37
SECTION 3.04. NOTICE OF REDEMPTION......................................... 38
SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION............................... 39
SECTION 3.06. DEPOSIT OF REDEMPTION PRICE.................................. 39
</TABLE>
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Note: The Table of Contents shall not for any purposes be deemed to be a part of
the Indenture.
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SECTION 3.07. PAYMENT OF NOTES CALLED FOR REDEMPTION....................... 39
SECTION 3.08. NOTES REDEEMED IN PART....................................... 39
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF NOTES............................................. 39
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.............................. 40
SECTION 4.03. LIMITATION ON INDEBTEDNESS................................... 40
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS............................ 43
SECTION 4.05. LIMITATION ON DIVIDEND AND OTHER PAYMENT
RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES............... 45
SECTION 4.06. LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL
STOCK OF RESTRICTED SUBSIDIARIES............................. 47
SECTION 4.07. LIMITATION ON ISSUANCES OF GUARANTEES BY
RESTRICTED SUBSIDIARIES...................................... 47
SECTION 4.08. LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS
AND AFFILIATES............................................... 48
SECTION 4.09. LIMITATION ON LIENS.......................................... 49
SECTION 4.10. LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS............... 49
SECTION 4.11. LIMITATION ON ASSET SALES.................................... 49
SECTION 4.12. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL................. 50
SECTION 4.13. EXISTENCE.................................................... 50
SECTION 4.14. PAYMENT OF TAXES AND OTHER CLAIMS............................ 51
SECTION 4.15. MAINTENANCE OF PROPERTIES AND INSURANCE...................... 51
SECTION 4.16. NOTICE OF DEFAULTS........................................... 51
SECTION 4.17. COMPLIANCE CERTIFICATES...................................... 52
SECTION 4.18. COMMISSION REPORTS AND REPORTS TO HOLDERS.................... 52
SECTION 4.19. WAIVER OF STAY, EXTENSION OR USURY LAWS...................... 52
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC.................................. 53
SECTION 5.02. SUCCESSOR SUBSTITUTED........................................ 54
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT............................................ 54
SECTION 6.02. ACCELERATION................................................. 56
SECTION 6.03. OTHER REMEDIES............................................... 56
SECTION 6.04. WAIVER OF PAST DEFAULTS...................................... 57
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SECTION 6.05. CONTROL BY MAJORITY.......................................... 57
SECTION 6.06. LIMITATION ON SUITS.......................................... 57
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT......................... 58
SECTION 6.08. COLLECTION SUIT BY TRUSTEE................................... 58
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM............................. 58
SECTION 6.10. PRIORITIES................................................... 58
SECTION 6.11. UNDERTAKING FOR COSTS........................................ 59
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES........................... 59
SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE............................... 59
SECTION 6.14. DELAY OR OMISSION NOT WAIVER................................. 60
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. GENERAL...................................................... 60
SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE.................................... 60
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE................................. 61
SECTION 7.04. TRUSTEE'S DISCLAIMER......................................... 61
SECTION 7.05. NOTICE OF DEFAULT............................................ 61
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS................................ 61
SECTION 7.07. COMPENSATION AND INDEMNITY................................... 62
SECTION 7.08. REPLACEMENT OF TRUSTEE....................................... 62
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC............................. 63
SECTION 7.10. ELIGIBILITY.................................................. 64
SECTION 7.11. MONEY HELD IN TRUST.......................................... 64
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS......................... 64
SECTION 8.02. DEFEASANCE AND DISCHARGE OF INDENTURE........................ 65
SECTION 8.03. DEFEASANCE OF CERTAIN OBLIGATIONS............................ 67
SECTION 8.04. APPLICATION OF TRUST MONEY................................... 69
SECTION 8.05. REPAYMENT TO COMPANY......................................... 69
SECTION 8.06. REINSTATEMENT................................................ 69
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS................................... 70
SECTION 9.02. WITH CONSENT OF HOLDERS...................................... 70
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SECTION 9.03. REVOCATION AND EFFECT OF CONSENT............................. 71
SECTION 9.04. NOTATION ON OR EXCHANGE OF NOTES............................. 72
SECTION 9.05. TRUSTEE TO SIGN AMENDMENTS, ETC.............................. 72
SECTION 9.06. CONFORMITY WITH TRUST INDENTURE ACT.......................... 72
ARTICLE TEN
SUBORDINATION OF NOTES
SECTION 10.01. NOTES SUBORDINATED TO SENIOR INDEBTEDNESS................... 73
SECTION 10.02. NO PAYMENT ON NOTES IN CERTAIN CIRCUMSTANCES................ 73
SECTION 10.03. PAYMENT OVER PROCEEDS UPON DISSOLUTION, ETC................. 74
SECTION 10.04. SUBROGATION................................................. 76
SECTION 10.05. OBLIGATIONS OF COMPANY UNCONDITIONAL........................ 76
SECTION 10.06. NOTICE TO TRUSTEE........................................... 77
SECTION 10.07. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF
LIQUIDATING AGENT........................................... 77
SECTION 10.08. TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS................... 78
SECTION 10.09. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS
OF THE COMPANY OR HOLDERS OF SENIOR INDEBTEDNESS............ 78
SECTION 10.10. HOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF NOTES...................................... 78
SECTION 10.11. NOT TO PREVENT EVENTS OF DEFAULT............................ 79
SECTION 10.12. TRUSTEE'S COMPENSATION NOT PREJUDICED....................... 79
SECTION 10.13. NO WAIVER OF SUBORDINATION PROVISIONS....................... 79
SECTION 10.14. PAYMENTS MAY BE PAID PRIOR TO DISSOLUTION................... 79
SECTION 10.15. CONSENT OF HOLDERS OF SENIOR INDEBTEDNESS
UNDER THE CREDIT AGREEMENT.................................. 79
SECTION 10.16. TRUST MONEYS NOT SUBORDINATED............................... 80
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT OF 1939................................. 80
SECTION 11.02. NOTICES..................................................... 80
SECTION 11.03. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.......... 81
SECTION 11.04. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION............... 81
SECTION 11.05. RULES BY TRUSTEE, PAYING AGENT OR REGISTRAR................. 82
SECTION 11.06. PAYMENT DATE OTHER THAN A BUSINESS DAY...................... 82
SECTION 11.07. GOVERNING LAW............................................... 82
SECTION 11.08. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS............... 82
SECTION 11.09. NO RECOURSE AGAINST OTHERS.................................. 82
SECTION 11.10. SUCCESSORS.................................................. 83
SECTION 11.11. DUPLICATE ORIGINALS......................................... 83
SECTION 11.12. SEPARABILITY................................................ 83
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SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC............................ 83
EXHIBIT A Form of Note................................................ A-1
EXHIBIT B Form of Certificate......................................... B-1
EXHIBIT C Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Non-QIB Accredited Investors.......... C-1
EXHIBIT D Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Regulation S.......................... D-1
</TABLE>
<PAGE> 8
INDENTURE, dated as of December 21, 1998, between PRIMARK CORPORATION,
a Michigan corporation (the "COMPANY"), and STATE STREET BANK AND TRUST COMPANY,
a Massachusetts trust company, trustee (the "TRUSTEE").
RECITALS
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance initially of up to $150,000,000 aggregate
principal amount of the Company's 9 1/4% Senior Subordinated Notes Due 2008 (thE
"NOtes") issuable as provided in this Indenture. All things necessary to make
this Indenture a valid agreement of the Company, in accordance with its terms,
have been done, and the Company has done all things necessary to make the Notes,
when executed by the Company and authenticated and delivered by the Trustee
hereunder and duly issued by the Company, valid obligations of the Company as
hereinafter provided.
This Indenture is subject to, and shall be governed by, the provisions
of the Trust Indenture Act of 1939, as amended, that are required to be a part
of and to govern indentures qualified under the Trust Indenture Act of 1939, as
amended.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders, as follows.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Indebtedness" means Indebtedness of a Person existing at the
time such Person becomes a Restricted Subsidiary or assumed in connection with
an Asset Acquisition by a Restricted Subsidiary; provided that Indebtedness of
such Person which is redeemed, defeased, retired or otherwise repaid at the time
of or immediately upon consummation of the transactions by which such Person
becomes a Restricted Subsidiary or such Asset Acquisition shall not be Acquired
Indebtedness.
"Adjusted Consolidated Net Income" means, for any period, the aggregate
net income (or loss) of the Company and its Restricted Subsidiaries for such
period determined in conformity with GAAP; provided that the following items
shall be excluded in computing Adjusted Consolidated Net Income (without
duplication):
<PAGE> 9
2
(i) the net income of any Person that is not a Restricted
Subsidiary, except to the extent of the amount of dividends or other
distributions actually paid to the Company or any of its Restricted
Subsidiaries by such Person during such period;
(ii) solely for the purposes of calculating the amount of
Restricted Payments that may be made pursuant to clause (C) of the
first paragraph of Section 4.04 (and in such case, except to the extent
includable pursuant to clause (i) above), the net income (or loss) of
any Person accrued prior to the date it becomes a Restricted Subsidiary
or is merged into or consolidated with the Company or any of its
Restricted Subsidiaries or all or substantially all of the property and
assets of such Person are acquired by the Company or any of its
Restricted Subsidiaries;
(iii) the net income of any Restricted Subsidiary to the extent
that the declaration or payment of dividends or similar distributions
by such Restricted Subsidiary of such net income is not at the time
permitted by the operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Restricted Subsidiary;
(iv) any gains or losses (on an after-tax basis) attributable to
Asset Sales;
(v) solely for purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph
of Section 4.04, any amount paid or accrued as dividends on Preferred
Stock of the Company or any Restricted Subsidiary owned by Persons
other than the Company and any of its Restricted Subsidiaries;
(vi) the Restructuring Charge;
(vii) all extraordinary gains and extraordinary losses (on an
after-tax basis);
(viii) write-offs of intangible assets, including research and
development, relating to assets acquired by the Company and its
Restricted Subsidiaries if such write-offs are done at the time of, or
within three months after, such acquisition; and
(ix) any non-cash compensation expense incurred in connection
with the exercise of or paid or payable solely with Capital Stock
(other than Disqualified Stock) of the Company or any options, warrants
or other rights to acquire Capital Stock (other than Disqualified
Stock) of the Company.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms
<PAGE> 10
3
"controlling," "controlled by" and "under common control with"), as applied to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" means any Registrar, Co-Registrar, Paying Agent or
authenticating agent.
"Agent Members" has the meaning provided in Section 2.07(a).
"Asset Acquisition" means (i) an investment by the Company or any of
its Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary or shall be merged into or consolidated
with the Company or any of its Restricted Subsidiaries; provided that such
Person's primary business is related, ancillary or complementary to the
businesses of the Company and its Restricted Subsidiaries on the date of such
investment or (ii) an acquisition by the Company or any of its Restricted
Subsidiaries of the property and assets of any Person other than the Company or
any of its Restricted Subsidiaries that constitute substantially all of a
division or line of business of such Person; provided that the property and
assets acquired are related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by the Company
or any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any of its
Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition (including
by way of merger, consolidation or sale-leaseback transaction) in one
transaction or a series of related transactions by the Company or any of its
Restricted Subsidiaries to any Person other than the Company or any of its
Restricted Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted Subsidiaries
or (iii) any other property and assets (other than the Capital Stock or other
Investment in an Unrestricted Subsidiary) of the Company or any of its
Restricted Subsidiaries outside the ordinary course of business of the Company
or such Restricted Subsidiary and, in each case, that is not governed by Article
Five; provided that "Asset Sale" shall not include (a) sales or other
dispositions of inventory, receivables and other current assets, (b) sales,
transfers or other dispositions of assets constituting a Restricted Payment
permitted to be made under Section 4.04, or (c) sales or other dispositions of
assets for consideration at least equal to the fair market value of the assets
sold or disposed of, to the extent that the consideration received would satisfy
clause (B) of Section 4.11.
<PAGE> 11
4
"Average Life" means, at any date of determination with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Board of Directors" means the Board of Directors of the Company or any
committee of such Board of Directors duly authorized to act under this
Indenture.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York, or in the city of the Corporate
Trust Office of the Trustee, are authorized by law to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether outstanding on the
Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value of
the rental obligations under a Capitalized Lease.
"Change of Control" means such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes
the ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) of more than 35% of the total voting power of the Voting Stock of the
Company on a fully diluted basis; or (ii) individuals who on the Closing Date
constitute the Board of Directors (together with any new directors whose
election by the Board of Directors or whose nomination by the Board of Directors
for election by the Company's shareholders was approved by a vote of at least
two-thirds of the members of the Board of Directors then in office who either
were members of the Board of Directors on the Closing Date or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the members of the Board of Directors then in office.
<PAGE> 12
5
"Closing Date" means the date on which the Notes are originally issued
under this Indenture.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the TIA, then the body performing such duties at
such time.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's equity, other than Preferred Stock of
such Person, whether outstanding on the Closing Date or issued thereafter,
including, without limitation, all series and classes of such common stock.
"Company" means the party named as such in the first paragraph of this
Indenture until a successor replaces it pursuant to Article Five of this
Indenture and thereafter means the successor.
"Company Order" means a written request or order signed in the name of
the Company (i) by its Chairman, a Vice Chairman, its President or a Vice
President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary and delivered to the Trustee; provided, however, that such
written request or order may be signed by any two of the officers or directors
listed in clause (i) above in lieu of being signed by one of such officers or
directors listed in such clause (i) and one of the officers listed in clause
(ii) above.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating such Adjusted Consolidated Net Income: (i) Consolidated Interest
Expense, (ii) income taxes (other than income taxes (either positive or
negative) attributable to extraordinary and non-recurring gains or losses or
sales of assets), (iii) depreciation expense, (iv) amortization expense and (v)
all other non-cash items reducing Adjusted Consolidated Net Income (other than
items that will require cash payments and for which an accrual or reserve is, or
is required by GAAP to be, made), less all non-cash items increasing Adjusted
Consolidated Net Income, all as determined on a consolidated basis for the
Company and its Restricted Subsidiaries in conformity with GAAP; provided that,
if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary,
Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in
accordance with GAAP) by an amount equal to (A) the amount of the Adjusted
Consolidated Net Income attributable to such Restricted Subsidiary multiplied by
(B) the percentage ownership interest in the income of such Restricted
Subsidiary not owned on the last day of such period by the Company or any of its
Restricted Subsidiaries.
<PAGE> 13
6
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries), Preferred Stock dividends in respect of Preferred
Stock of the Company or any Restricted Subsidiary held by Persons other than the
Company or a Wholly Owned Restricted Subsidiary and all but the principal
component of rentals in respect of Capitalized Lease Obligations paid, accrued
or scheduled to be paid or to be accrued by the Company and its Restricted
Subsidiaries during such period; excluding, however, (i) any amount of such
interest of any Restricted Subsidiary if the net income of such Restricted
Subsidiary is excluded in the calculation of Adjusted Consolidated Net Income
pursuant to clause (iii) of the definition thereof (but only in the same
proportion as the net income of such Restricted Subsidiary is excluded from the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof) and (ii) any premiums, fees and expenses (and any
amortization thereof) payable in connection with the offering of the Notes, all
as determined on a consolidated basis (without taking into account Unrestricted
Subsidiaries) in conformity with GAAP. For purposes of the preceding sentence,
Preferred Stock dividends shall be deemed to be an amount equal to the actual
dividends paid divided by one minus the combined federal, state, local and
foreign income tax rate applicable to the Company and its Subsidiaries
(expressed as a decimal).
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of the Company and its Restricted Subsidiaries
(which shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of the Company or any of its Restricted Subsidiaries, each item to
be determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at Two International Place, 4th floor, Boston, MA 02110; Attention:
Corporate Trust Department.
"Credit Agreement" means (i) the Revolving Credit Agreement, dated as
of February 7, 1997, among the Company, the lenders party thereto from time to
time, the issuing banks referred
<PAGE> 14
7
to therein and Mellon Bank, N.A., as Agent, together with any agreements,
instruments and documents executed or delivered pursuant to or in connection
with such credit agreement (including without limitation any Guarantees and
security documents), in each case as such credit agreement or such agreements,
instruments or documents may be amended (including any amendment and restatement
thereof), supplemented, extended, renewed, replaced or otherwise modified from
time to time (including any agreement extending the maturity of, refinancing or
otherwise restructuring all or any portion of the Indebtedness under such
agreement or any successor agreement, as such agreement may be amended, renewed,
extended, substituted, replaced, restated and otherwise modified from time to
time) and any refinancing, replacement or substitution thereof or therefor, or
in respect of or for any previous refinancing, replacement or substitution and
(ii) the Note Backup Agreement.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees, and
their respective successors.
"Designated Senior Indebtedness" means (i) any Indebtedness under the
Credit Agreement (except that any Indebtedness which represents a partial
refinancing of Indebtedness theretofore outstanding pursuant to the Credit
Agreement, rather than a complete refinancing thereof, shall only constitute
Designated Senior Indebtedness if such partial refinancing meets the
requirements of clause (ii) below) and (ii) any other Indebtedness constituting
Senior Indebtedness that, at the date of determination, has an aggregate
principal amount outstanding of at least $25 million and that is specifically
designated by the Company, in the instrument creating or evidencing such Senior
Indebtedness as "Designated Senior Indebtedness."
"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in
<PAGE> 15
8
Section 4.11 and Section 4.12 and such Capital Stock specifically provides that
such Person will not repurchase or redeem any such stock pursuant to such
provision prior to the Company's repurchase of such Notes as are required to be
repurchased pursuant to Section 4.11 and Section 4.12.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.11.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means any securities of the Company containing terms
identical to the Notes (except that such Exchange Notes shall be registered
under the Securities Act) that are issued and exchanged for the Notes pursuant
to the Registration Rights Agreement and this Indenture.
"fair market value" means the price that would be paid in an
arm's-length transaction between an informed and willing seller under no
compulsion to sell and an informed and willing buyer under no compulsion to buy,
as determined in good faith by the Board of Directors, whose determination shall
be conclusive if evidenced by a Board Resolution.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Closing Date, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession. All ratios and computations contained or referred
to in this Indenture shall be computed in conformity with GAAP applied on a
consistent basis, except that calculations made for purposes of determining
compliance with the terms of the covenants and with other provisions of the
Indenture shall be made without giving effect to (i) the amortization of any
expenses incurred in connection with the offering of the Notes and (ii) except
as otherwise provided, the amortization of any amounts required or permitted by
Accounting Principles Board Opinion Nos. 16 and 17.
"Global Notes" has the meaning provided in Section 2.01.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and, without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to
<PAGE> 16
9
keep-well, to purchase assets, goods, securities or services (unless such
purchase arrangements are on arm's-length terms and are entered into in the
ordinary course of business), to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided that the term "Guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Guaranteed Indebtedness" has the meaning provided in Section 4.07.
"Holder" or "Noteholder" means the registered holder of any Note.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to, or
become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an "Incurrence" of Acquired Indebtedness; provided that
neither the accrual of interest nor the accretion of original issue discount
shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication):
(i) all indebtedness of such Person for borrowed money;
(ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(iii) all obligations of such Person in respect of letters of
credit or other similar instruments (including reimbursement
obligations with respect thereto, but excluding obligations with
respect to letters of credit (including trade letters of credit)
securing obligations (other than obligations described in (i) or (ii)
above or (v), (vi) or (vii) below) entered into in the ordinary course
of business of such Person to the extent such letters of credit are not
drawn upon or, if drawn upon, to the extent such drawing is reimbursed
no later than the third Business Day following receipt by such Person
of a demand for reimbursement);
(iv) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services, which purchase price is
due more than six months after the date of placing such property in
service or taking delivery and title thereto or the completion of such
services, except Trade Payables and other accrued current liabilities
incurred in the ordinary course of business;
<PAGE> 17
10
(v) all Capitalized Lease Obligations;
(vi) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by
such Person; provided that the amount of such Indebtedness shall be the
lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness;
(vii) all Indebtedness of other Persons Guaranteed by such Person
to the extent such Indebtedness is Guaranteed by such Person;
(viii) all obligations to redeem or repurchase Preferred Stock
issued by such Person; and
(ix) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements.
The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the obligation,
provided (A) that the amount outstanding at any time of any Indebtedness issued
with original issue discount is the face amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP, (B) that money
borrowed and set aside at the time of the Incurrence of any Indebtedness in
order to prefund the payment of the interest on such Indebtedness shall not be
deemed to be "Indebtedness" so long as such money is held to secure the payment
of such interest, (C) that the amount of Indebtedness at any time of any
Disqualified Stock shall be the maximum fixed redemption or repurchase price in
respect thereof, and (D) that Indebtedness shall not include (x) indemnities for
or guarantees of any obligations of any Restricted Subsidiary under agreements
entered into by such Restricted Subsidiary in the ordinary course of business,
provided that such obligations do not constitute Indebtedness; (y) contingent
obligations arising in connection with the acquisition of any business or
Person, based on the future performance of such business or Person, except to
the extent such obligations are not paid at the time such contingency is
resolved under GAAP and are a recorded liability on the books of the Company and
its Subsidiaries, and (z) any liability for federal, state, local or other
taxes.
"Indenture" means this Indenture as originally executed or as it may be
amended or supplemented from time to time by one or more indentures supplemental
to this Indenture entered into pursuant to the applicable provisions of this
Indenture.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
<PAGE> 18
11
"Interest Coverage Ratio" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Consolidated EBITDA for the then most recent four
fiscal quarters prior to such Transaction Date for which reports have been filed
with the Commission or provided to the Trustee (the "Four Quarter Period") to
(ii) the aggregate Consolidated Interest Expense during such Four Quarter
Period. In making the foregoing calculation, (A) pro forma effect shall be given
to any Indebtedness Incurred or repaid during the period (the "Reference
Period") commencing on the first day of the Four Quarter Period and ending on
the Transaction Date (other than Indebtedness Incurred or repaid under a
revolving credit or similar arrangement to the extent of the commitment
thereunder (or under any predecessor revolving credit or similar arrangement) in
effect on the last day of such Four Quarter Period unless any portion of such
Indebtedness is projected, in the reasonable judgment of the senior management
of the Company, to remain outstanding for a period in excess of 12 months from
the date of the Incurrence thereof), in each case as if such Indebtedness had
been Incurred or repaid on the first day of such Reference Period; (B)
Consolidated Interest Expense attributable to interest on any Indebtedness
(whether existing or being Incurred) computed on a pro forma basis and bearing a
floating interest rate shall be computed as if the rate in effect on the
Transaction Date (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term in excess
of 12 months or, if shorter, at least equal to the remaining term of such
Indebtedness) had been the applicable rate for the entire period; (C) pro forma
effect shall be given to Asset Dispositions and Asset Acquisitions (including
giving pro forma effect to the application of proceeds of any Asset Disposition)
that occur during such Reference Period as if they had occurred and such
proceeds had been applied on the first day of such Reference Period; and (D) pro
forma effect shall be given to asset dispositions and asset acquisitions
(including giving pro forma effect to the application of proceeds of any asset
disposition) that have been made by any Person that has become a Restricted
Subsidiary or has been merged with or into the Company or any Restricted
Subsidiary during such Reference Period and that would have constituted Asset
Dispositions or Asset Acquisitions had such transactions occurred when such
Person was a Restricted Subsidiary as if such asset dispositions or asset
acquisitions were Asset Dispositions or Asset Acquisitions that occurred on the
first day of such Reference Period; provided that to the extent that clause (C)
or (D) of this sentence requires that pro forma effect be given to an Asset
Acquisition or Asset Disposition, such pro forma calculation shall be based upon
the four full fiscal quarters immediately preceding the Transaction Date of the
Person, or division or line of business of the Person, that is acquired or
disposed for which financial information is available.
"Interest Payment Date" means each semiannual interest payment date on
June 15 and December 15 of each year, commencing June 15, 1999.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
<PAGE> 19
12
"Investment" in any Person means any direct or indirect advance, loan
or other extension of credit (including, without limitation, by way of Guarantee
or similar arrangement; but excluding advances to customers in the ordinary
course of business that are, in conformity with GAAP, recorded as accounts
receivable on the balance sheet of the Company or its Restricted Subsidiaries)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, such Person and shall include
(i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and
(ii) the fair market value of the Capital Stock (or any other Investment), held
by the Company or any of its Restricted Subsidiaries, of (or in) any Person that
has ceased to be a Restricted Subsidiary, including without limitation, by
reason of any transaction permitted by clause (iii) of Section 4.06. For
purposes of the definition of "Unrestricted Subsidiary" and Section 4.04, (i)
"Investment" shall include the fair market value of the assets (net of
liabilities (other than liabilities to the Company or any of its Restricted
Subsidiaries)) of any Restricted Subsidiary at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair market value
of the assets (net of liabilities (other than liabilities to the Company or any
of its Restricted Subsidiaries)) of any Unrestricted Subsidiary at the time that
such Unrestricted Subsidiary is designated a Restricted Subsidiary shall be
considered a reduction in outstanding Investments and (iii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer. Notwithstanding the foregoing,
payments by the Company or any Restricted Subsidiary for contingent obligations
arising in connection with the acquisition of any business or Person that
becomes (or prior to the Closing Date became) a Restricted Subsidiary, the
payment of which was based on the future performance of such business or Person,
will not constitute an Investment; provided that any such payment is taken into
account in the event such Person ceases to be a Restricted Subsidiary prior to
such payment.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof or any agreement
to give any security interest).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents, including
payments in respect of deferred payment obligations (to the extent corresponding
to the principal, but not interest, component thereof) when received in the form
of cash or cash equivalents (except to the extent such obligations are financed
or sold with recourse to the Company or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such
<PAGE> 20
13
taxes will actually be paid or are payable) as a result of such Asset Sale
without regard to the consolidated results of operations of the Company and its
Restricted Subsidiaries, taken as a whole, (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary as a reserve against any
liabilities associated with such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as determined in conformity with GAAP and
(b) with respect to any issuance or sale of Capital Stock, the proceeds of such
issuance or sale in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
"Non-U.S. Person" means a person who is not a "U.S. person" (as defined
in Regulation S).
"Note Backup Agreement" means the Note Backup Agreement, dated as of
February 7, 1997, among the Company and the lenders party thereto from time to
time, the issuing bank referred to therein and Mellon Bank, N.A., as Agent, as
amended, together with any agreements, instruments and documents executed or
delivered pursuant to or in connection with such agreement (including without
limitation any Guarantees and security documents), in each case as such
agreement or such agreements, instruments or documents may be amended (including
any amendment and restatement thereof), supplemented, extended, renewed,
replaced or otherwise modified from time to time (including any agreement
extending the maturity of, refinancing or otherwise restructuring all or any
portion of the Indebtedness under such agreement or any successor agreement, as
such agreement may be amended, renewed, extended, substituted, replaced,
restated and otherwise modified from time to time) and any refinancing,
replacement or substitution thereof or therefor, or in respect of or for any
previous refinancing, replacement or substitution.
"Notes" means any of the securities, as defined in the first paragraph
of the recitals hereof, that are authenticated and delivered under this
Indenture. For all purposes of this Indenture, the term "Notes" shall include
the Notes initially issued on the Closing Date, any Exchange Notes to be issued
and exchanged for any Notes pursuant to the Registration Rights Agreement and
this
<PAGE> 21
14
Indenture and any other Notes issued after the Closing Date under this
Indenture. For purposes of this Indenture, all Notes shall vote together as one
series of Notes under this Indenture.
"Offer to Purchase" means an offer to purchase Notes by the Company
from the Holders commenced by mailing a notice to the Trustee and each Holder
stating:
(i) the covenant pursuant to which the offer is being made and
that all Notes validly tendered will be accepted for payment on a pro
rata basis;
(ii) the purchase price and the date of purchase (which shall be
a Business Day no earlier than 30 days nor later than 60 days from the
date such notice is mailed) (the "Payment Date");
(iii) that any Note not tendered shall continue to accrue
interest pursuant to its terms;
(iv) that, unless the Company defaults in the payment of the
purchase price, any Note accepted for payment pursuant to the Offer to
Purchase shall cease to accrue interest on and after the Payment Date;
(v) that Holders electing to have a Note purchased pursuant to
the Offer to Purchase will be required to surrender the Note, together
with the form entitled "Option of the Holder to Elect Purchase" on the
reverse side of the Note completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the Business
Day immediately preceding the Payment Date;
(vi) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the
third Business Day immediately preceding the Payment Date, a telegram,
facsimile transmission or letter setting forth the name of such Holder,
the principal amount of Notes delivered for purchase and a statement
that such Holder is withdrawing his election to have such Notes
purchased; and
(vii) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered; provided that each Note purchased and
each new Note issued shall be in a principal amount of $1,000 or
integral multiples thereof.
On the Payment Date, the Company shall (i) accept for payment on a pro
rata basis Notes or portions thereof tendered pursuant to an Offer to Purchase;
(ii) deposit with the Paying Agent money sufficient to pay the purchase price of
all Notes or portions thereof so accepted; and (iii) deliver, or cause to be
delivered, to the Trustee all Notes or portions thereof so accepted together
<PAGE> 22
15
with an Officers' Certificate specifying the Notes or portions thereof accepted
for payment by the Company. The Paying Agent shall promptly mail to the Holders
of Notes so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Note equal in
principal amount to any unpurchased portion of the Note surrendered; provided
that each Note purchased and each new Note issued shall be in a principal amount
of $1,000 or integral multiples thereof. The Company shall publicly announce the
results of an Offer to Purchase as soon as practicable after the Payment Date.
The Trustee shall act as the Paying Agent for an Offer to Purchase. The Company
shall comply with Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable, in the event that the Company is required to repurchase Notes
pursuant to an Offer to Purchase.
"Officer" means, with respect to the Company, (i) the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President or the
Chief Financial Officer, and (ii) the Treasurer or any Assistant Treasurer, or
the Secretary or any Assistant Secretary.
"Officers' Certificate" means a certificate signed by one Officer
listed in clause (i) of the definition thereof and one Officer listed in clause
(ii) of the definition thereof or two officers listed in clause (i) of the
definition thereof. Each Officers' Certificate (other than certificates provided
pursuant to TIA Section 314(a)(4)) shall include the statements provided for in
TIA Section 314(e).
"Offshore Global Note" has the meaning provided in Section 2.01.
"Offshore Physical Notes" has the meaning provided in Section 2.01.
"Opinion of Counsel" means a written opinion signed by legal counsel,
who may be an employee of or counsel to the Company, that meets the requirements
of Section 11.04 hereof. Each such Opinion of Counsel shall include the
statements provided for in TIA Section 314(e).
"Paying Agent" has the meaning provided in Section 2.04, except that,
for the purposes of Article Eight, the Paying Agent shall not be the Company or
a Subsidiary of the Company or an Affiliate of any of them. The term "Paying
Agent" includes any additional Paying Agent.
"Payment Blockage Period" has the meaning provided in Section 10.02.
"Payment Date" has the meaning provided in the definition of Offer to
Purchase.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in:
<PAGE> 23
16
(i) the Company or a Restricted Subsidiary or a Person which
will, upon the making of such Investment, become a Restricted
Subsidiary or be merged or consolidated with or into or transfer or
convey all or substantially all its assets to, the Company or a
Restricted Subsidiary; provided that such person's primary business is
related, ancillary or complementary to the businesses of the Company
and its Restricted Subsidiaries on the date of such Investment;
(ii) Temporary Cash Investments;
(iii) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as
expenses in accordance with GAAP;
(iv) stock, obligations or securities received in satisfaction
of judgments;
(v) an Unrestricted Subsidiary consisting solely of an
Investment in another Unrestricted Subsidiary;
(vi) Interest Rate Agreements and Currency Agreements designed
solely to protect the Company or its Restricted Subsidiaries against
fluctuations in interest rates or foreign currency exchange rates;
(vii) loans or advances to employees of the Company or its
Restricted Subsidiaries to purchase Capital Stock (other than
Disqualified Stock) of the Company in an aggregate amount outstanding
not to exceed $10 million; and
(viii) any Person the primary business of which is related,
ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such Investment; provided that
the aggregate amount of such Investments does not exceed $50 million
plus the net reduction in Investments made pursuant to this clause
(viii) resulting from distributions on or repayments of such
Investments or from the Net Cash Proceeds from any sale of any such
Investment (except in each case to the extent any such payment or
proceeds is included in the calculation of Adjusted Consolidated Net
Income) or from such Person becoming a Restricted Subsidiary (valued in
each case as provided in the definition of "Investments"), provided
that the net reduction in any Investment shall not exceed the amount of
such Investment.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Physical Notes" has the meaning provided in Section 2.01.
<PAGE> 24
17
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's preferred or preference equity,
whether outstanding on the Closing Date or issued thereafter, including, without
limitation, all series and classes of such preferred or preference stock.
"principal" of a debt security, including the Notes, means the
principal amount due on the Stated Maturity as shown on such debt security.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth in Section 2.02.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Redemption Date" means, when used with respect to any Note to be
redeemed, the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price" means, when used with respect to any Note to be
redeemed, the price at which such Note is to be redeemed pursuant to this
Indenture.
"Registrar" has the meaning provided in Section 2.04.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated December 16, 1998 between the Company and Morgan Stanley & Co.
Incorporated, BT Alex. Brown Incorporated, NationsBanc Montgomery Securities
LLC, A.G. Edwards & Sons, Inc. and Chase Securities Inc. and certain permitted
assigns specified therein.
"Registration Statement" means the Registration Statement as defined
and described in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the June 1 or December 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Repurchase Program" means repurchases of Capital Stock of the Company
prior to December 1, 2003 in an aggregate amount not to exceed $75 million.
"Responsible Officer," when used with respect to the Trustee, means any
trust officer or assistant trust officer or any other officer of the Trustee in
its corporate trust department
<PAGE> 25
18
customarily performing functions similar to those performed by any of the
above-designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of his
or her knowledge of and familiarity with the particular subject.
"Restricted Payments" has the meaning provided in Section 4.04.
"Restricted Subsidiary" means any Subsidiary of the Company other than
an Unrestricted Subsidiary.
"Restructuring Charge" means the up to $77.4 million of pre-tax charges
(including an extraordinary item) recorded by the Company in the quarter ended
June 30, 1998 in connection with the restructuring and integration of the
Company's operations into three divisions.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, and its successors.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" has the meaning provided in Section 2.04.
"Senior Indebtedness" means the following obligations of the Company,
whether outstanding on the Closing Date or thereafter Incurred: (i) all
Indebtedness and all other monetary obligations (including, without limitation,
expenses, fees, principal, interest, reimbursement obligations under letters of
credit and indemnities payable in connection therewith) of the Company under (or
in respect of) the Credit Agreement or any Interest Rate Agreement or Currency
Agreement relating to the Indebtedness under the Credit Agreement and (ii) all
other Indebtedness and all other monetary obligations of the Company (other than
the Notes), including principal and interest on such Indebtedness, unless such
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such Indebtedness is issued, is pari passu with, or
subordinated in right of payment to, the Notes; provided that the term "Senior
Indebtedness" shall not include (a) any Indebtedness of the Company that, when
Incurred, was without recourse to the Company, (b) any Indebtedness of the
Company to a Subsidiary of the Company, or to a joint venture in which the
Company has an interest, (c) any Indebtedness of the Company, to the extent not
permitted by Section 4.03 or Section 4.10, (d) any repurchase, redemption or
other obligation in respect of Disqualified Stock, (e) any Indebtedness to any
employee of the Company or any of its Subsidiaries, (f) any liability for taxes
owed or owing to the Company or (g) any Trade Payables.
<PAGE> 26
19
"Senior Subordinated Obligations" means any principal of, premium, if
any, interest, or other amounts due, on the Notes payable pursuant to the terms
of the Notes or upon acceleration, including any amounts received upon the
exercise of the rights of rescission or other rights of action (including claims
for damages) or otherwise, to the extent relating to the purchase price of the
Notes or amounts corresponding to such principal, premium, if any, or interest
on the Notes.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
"S&P" means Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, and its successors.
"Stated Maturity" means, (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Subsidiary Guarantee" has the meaning provided in Section 4.06.
"Temporary Cash Investment" means any of the following:
(i) direct obligations of the United States of America or any
agency thereof or obligations fully and unconditionally guaranteed by
the United States of America or any agency thereof;
(ii) time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust
<PAGE> 27
20
company which is organized under the laws of the United States of
America, any state thereof or any foreign country recognized by the
United States of America, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50 million (or
the foreign currency equivalent thereof) and has outstanding debt which
is rated "A" (or such similar equivalent rating) or higher by at least
one nationally recognized statistical rating organization (as defined
in Rule 436 under the Securities Act) or any money-market fund
sponsored by a registered broker dealer or mutual fund distributor;
(iii) repurchase obligations with a term of not more than 30 days
for securities of the type described in clause (i) above entered into
with an institution meeting the qualifications described in clause (ii)
above;
(iv) commercial paper, maturing not more than 270 days after the
date of acquisition, issued by a corporation (other than an Affiliate
of the Company) organized and in existence under the laws of the United
States of America, any state thereof or any foreign country recognized
by the United States of America with a rating at the time as of which
any investment therein is made of "P-1" (or higher) according to
Moody's or "A-1" (or higher) according to S&P;
(v) securities with maturities of six months or less from the
date of acquisition issued or fully and unconditionally guaranteed by
any state, commonwealth or territory of the United States of America,
or by any political subdivision or taxing authority thereof, and rated
at least "A" by S&P or Moody's; and
(vi) any mutual fund investing exclusively in investments of the
type described in clauses (i) through (v) above.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939
(15 U.S. Code secs. 77aaa-77bbbb), as in effect on the date this Indenture was
executed, except as provided in Section 9.06.
"Trade Payables" means, with respect to any Person, any accounts
payable or any other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person or any of its Subsidiaries arising
in the ordinary course of business in connection with the acquisition of goods
or services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
<PAGE> 28
21
"Trustee" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
Article Seven of this Indenture and thereafter means such successor.
"United States Bankruptcy Code" means the Bankruptcy Reform Act of
1978, as amended and as codified in Title 11 of the United States Code, as
amended from time to time hereafter, or any successor federal bankruptcy law.
"Unrestricted Subsidiary" means (i) Triad International Maintenance
Corporation and any other Subsidiary of the Company that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors in the manner provided below; and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of
such designation; (B) either (I) the Subsidiary to be so designated has total
assets of $1,000 or less or (II) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under Section 4.04 and (C) if
applicable, the Incurrence of Indebtedness and the Investment referred to in
clause (A) of this proviso would be permitted under Section 4.03 and Section
4.04. The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that (i) no Default or Event of Default shall
have occurred and be continuing at the time of or after giving effect to such
designation and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately after such designation would, if Incurred at such time,
have been permitted to be Incurred (and shall be deemed to have been Incurred)
for all purposes of this Indenture. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the Trustee
a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Dollar Equivalent" means, with respect to any monetary amounts in
a currency other than the U.S. dollar, at any time of determination thereof, the
amount of U.S. dollars obtained by converting such foreign currency involved in
such computation into U.S. dollars at the spot rate for the purchase of U.S.
dollars with the applicable foreign currency as quoted by Reuters at
approximately 11:00 a.m. (New York time) on a date not more than two Business
Days prior to such determination.
"U.S. Global Notes" has the meaning provided in Section 2.01.
<PAGE> 29
22
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Notes, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.
"U.S. Physical Notes" means the Notes issued in the form of permanent
certificated Notes in registered form in substantially the form set forth in
Exhibit A to Institutional Accredited Investors which are not QIBs (excluding
Non-U.S. Persons) who purchased Notes pursuant to Regulation D of the Securities
Act.
"Voting Stock" means with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder or a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
<PAGE> 30
23
"obligor" on the indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in the
plural include the singular;
(v) provisions apply to successive events and transactions;
(vi) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section
or other subdivision;
(vii) all ratios and computations based on GAAP contained in this
Indenture shall be computed in accordance with the definition of GAAP
set forth in Section 1.01; and
(viii) all references to Sections or Articles refer to Sections or
Articles of this Indenture unless otherwise indicated.
ARTICLE TWO
THE NOTES
SECTION 2.01. FORM AND DATING. The Notes and the Trustee's certificate
of authentication shall be substantially in the form annexed hereto as Exhibit A
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture. The Notes may have notations,
legends or endorsements required by law, stock exchange agreements to which the
Company is subject or usage. The Company shall approve the form of the Notes and
any notation, legend or endorsement on the Notes. Each Note shall be dated the
date of its authentication.
<PAGE> 31
24
The terms and provisions contained in the form of the Notes annexed
hereto as Exhibit A shall constitute, and are hereby expressly made, a part of
this Indenture. To the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Notes in registered form,
substantially in the form set forth in Exhibit A (the "U.S. GLOBAL NOTES"),
registered in the name of the nominee of the Depositary, deposited with the
Trustee, as custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount [at maturity] of the U.S. Global Notes may from time to time be increased
or decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, in accordance with the instructions given by the
Holder thereof, as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of one or more permanent
global Notes in registered form substantially in the form set forth in Exhibit A
(the "OFFSHORE GLOBAL NOTES"), registered in the name of the nominee of the
Depositary, deposited with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Offshore Global Notes may from
time to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Notes issued pursuant to Section 2.07 in exchange for interests in the
Offshore Global Notes shall be in the form of permanent certificated Notes in
registered form substantially in the form set forth in Exhibit A (the "OFFSHORE
PHYSICAL NOTES").
The Offshore Physical Notes and U.S. Physical Notes are sometimes
collectively herein referred to as the "PHYSICAL NOTES." The U.S. Global Notes
and the Offshore Global Notes are sometimes referred to herein as the "GLOBAL
NOTES."
The definitive Notes shall be typed, printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Notes may
be listed, all as determined by the Officers executing such Notes, as evidenced
by their execution of such Notes.
SECTION 2.02. RESTRICTIVE LEGENDS. Unless and until a Note is exchanged
for an Exchange Note or sold in connection with an effective Registration
Statement pursuant to the Registration Rights Agreement, (i) the U.S. Global
Notes and U.S. Physical Notes shall bear the legend set forth below on the face
thereof and (ii) the Offshore Physical Notes and Offshore Global
<PAGE> 32
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Notes shall bear the legend set forth below on the face thereof until at least
the 41st day after the Closing Date and receipt by the Company and the Trustee
of a certificate substantially in the form of Exhibit B hereto.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES
THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k)
UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF TRANSFER OF THIS
NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY
OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
THE TRUSTEE), AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF NOTES OF LESS THAN $100,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
THE
<PAGE> 33
26
TRUSTEE. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A
PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
Each Global Note, whether or not an Exchange Note, shall also bear the
following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.08 OF THE INDENTURE.
SECTION 2.03. EXECUTION, AUTHENTICATION AND DENOMINATIONS. Subject to
Article Four and applicable law, the aggregate principal amount of Notes which
may be authenticated and delivered under this Indenture is unlimited. The Notes
shall be executed by two Officers of the Company. The signature of these
Officers on the Notes may be by facsimile or manual signature in the name and on
behalf of the Company.
<PAGE> 34
27
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee or authenticating agent authenticates the Note, the Note
shall be valid nevertheless.
A Note shall not be valid until the Trustee or authenticating agent
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
At any time and from time to time after the execution of this
Indenture, the Trustee or an authenticating agent shall upon receipt of a
Company Order authenticate for original issue Notes in the aggregate principal
amount specified in such Company Order; provided that the Trustee shall be
entitled to receive an Officers' Certificate and an Opinion of Counsel of the
Company in connection with such authentication of Notes. Such Company Order
shall specify the amount of Notes to be authenticated and the date on which the
original issue of Notes is to be authenticated and, in case of an issuance of
Notes pursuant to Section 2.15, shall certify that such issuance is in
compliance with Article Four.
The Trustee may appoint an authenticating agent to authenticate Notes.
An authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such authenticating agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the Company.
The Notes shall be issuable only in registered form without coupons and
only in denominations of $1,000 in principal amount and any integral multiple
thereof.
SECTION 2.04. REGISTRAR AND PAYING AGENT. The Company shall maintain an
office or agency where Notes may be presented for registration of transfer or
for exchange (the "REGISTRAR"), an office or agency where Notes may be presented
for payment (the "PAYING AGENT") and an office or agency where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served, which shall be at the office of State Street Bank and Trust Company,
N.A., and Affiliate of the Trustee, in the Borough of Manhattan, The City of New
York, and at the Corporate Trust Office of the Trustee. The Company shall cause
the Registrar to keep a register of the Notes and of their transfer and exchange
(the "SECURITY REGISTER"). The Security Register shall be in written form or any
other form capable of being converted into written form within a reasonable
time. The Company may have one or more co-Registrars and one or more additional
Paying Agents.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, except in the case of the Trustee's
Affiliate identified in the preceding paragraph. The agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company shall
give prompt written notice to the Trustee of the name and address of any such
<PAGE> 35
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Agent and any change in the address of such Agent. If the Company fails to
maintain a Registrar, Paying Agent and/or agent for service of notices and
demands, the Trustee shall act as such Registrar, Paying Agent and/or agent for
service of notices and demands. The Company may remove any Agent upon written
notice to such Agent and the Trustee; provided that no such removal shall become
effective until (i) the acceptance of an appointment by a successor Agent to
such Agent as evidenced by an appropriate agency agreement entered into by the
Company and such successor Agent and delivered to the Trustee or (ii)
notification to the Trustee that the Trustee shall serve as such Agent until the
appointment of a successor Agent in accordance with clause (i) of this proviso.
The Company, any Subsidiary of the Company, or any Affiliate of any of them may
act as Paying Agent, Registrar or co-Registrar, and/or agent for service of
notice and demands.
The Company initially appoints the Trustee as Registrar, Paying Agent,
authenticating agent and agent for service of notice and demands. The Trustee
shall preserve in as current a form as is reasonably practicable the most recent
list available to it of the names and addresses of Holders and shall otherwise
comply with TIA ss. 312(a). If the Trustee is not the Registrar, the Company
shall furnish to the Trustee as of each Regular Record Date and at such other
times as the Trustee may reasonably request the names and addresses of Holders
as they appear in the Security Register, including the aggregate principal
amount of Notes held by each Holder.
SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST. Not later than 11:00
a.m. (New York City time) each due date of the principal, premium, if any, and
interest on any Notes, the Company shall deposit with the Paying Agent money in
immediately available funds sufficient to pay such principal, premium, if any,
and interest so becoming due. The Company shall require each Paying Agent other
than the Trustee to agree in writing that such Paying Agent shall hold in trust
for the benefit of the Holders or the Trustee all money held by the Paying Agent
for the payment of principal of, premium, if any, and interest on the Notes
(whether such money has been paid to it by the Company or any other obligor on
the Notes), and such Paying Agent shall promptly notify the Trustee of any
default by the Company (or any other obligor on the Notes) in making any such
payment. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee and account for any funds disbursed, and the Trustee
may at any time during the continuance of any payment default, upon written
request to a Paying Agent, require such Paying Agent to pay all money held by it
to the Trustee and to account for any funds disbursed. Upon doing so, the Paying
Agent shall have no further liability for the money so paid over to the Trustee.
If the Company or any Subsidiary of the Company or any Affiliate of any of them
acts as Paying Agent, it will, on or before each due date of any principal of,
premium, if any, or interest on the Notes, segregate and hold in a separate
trust fund for the benefit of the Holders a sum of money sufficient to pay such
principal, premium, if any, or interest so becoming due until such sum of money
shall be paid to such Holders or otherwise disposed of as provided in this
Indenture, and will promptly notify the Trustee of its action or failure to act.
<PAGE> 36
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SECTION 2.06. TRANSFER AND EXCHANGE. The Notes are issuable only in
registered form. A Holder may transfer a Note only by written application to the
Registrar stating the name of the proposed transferee and otherwise complying
with the terms of this Indenture. No such transfer shall be effected until, and
such transferee shall succeed to the rights of a Holder only upon, final
acceptance and registration of the transfer by the Registrar in the Security
Register. Prior to the registration of any transfer by a Holder as provided
herein, the Company, the Trustee, and any agent of the Company shall treat the
person in whose name the Note is registered as the owner thereof for all
purposes whether or not the Note shall be overdue, and neither the Company, the
Trustee, nor any such agent shall be affected by notice to the contrary.
Furthermore, any Holder of a Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent) and that ownership of a beneficial interest in the
Note shall be required to be reflected in a book entry. When Notes are presented
to the Registrar or a co-Registrar with a request to register the transfer or to
exchange them for an equal principal amount of Notes of other authorized
denominations (including an exchange of Notes for Exchange Notes), the Registrar
shall register the transfer or make the exchange as requested if its
requirements for such transactions are met (including that such Notes are duly
endorsed or accompanied by a written instrument of transfer in form satisfactory
to the Trustee and Registrar duly executed by the Holder thereof or by an
attorney who is authorized in writing to act on behalf of the Holder); provided
that no exchanges of Notes for Exchange Notes shall occur until a Registration
Statement shall have been declared effective by the Commission and that any
Notes that are exchanged for Exchange Notes shall be canceled by the Trustee. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Notes at the Registrar's request. No service
charge shall be made for any registration of transfer or exchange or redemption
of the Notes, but the Company may require payment of a sum sufficient to cover
any transfer tax or similar governmental charge payable in connection therewith
(other than any such transfer taxes or other similar governmental charge payable
upon exchanges pursuant to Section 2.11, 3.08 or 9.04).
The Registrar shall not be required (i) to issue, register the transfer
of or exchange any Note during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of Notes selected
for redemption under Section 3.03 and ending at the close of business on the day
of such mailing, or (ii) to register the transfer of or exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of
any Note being redeemed in part.
SECTION 2.07. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES. (a) The U.S.
Global Notes and Offshore Global Notes initially shall (i) be registered in the
name of the Depositary for such Global Notes or the nominee of such Depositary,
(ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear
legends as set forth in Section 2.02.
<PAGE> 37
30
Members of, or participants in, the Depositary ("AGENT MEMBERS") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary, or the Trustee as its custodian, or under such
Global Note, and the Depositary may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee, from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers of such
Global Note in whole, but not in part, to the Depositary, its successors or
their respective nominees. Interests of beneficial owners in Global Notes may be
transferred in accordance with the rules and procedures of the Depositary and
the provisions of Section 2.08. In addition, U.S. Physical Notes and Offshore
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in the U.S. Global Notes or the Offshore Global
Notes, as the case may be, if (i) the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary for the U.S. Global Notes or the
Offshore Global Notes, as the case may be, and a successor depositary is not
appointed by the Company within 90 days of such notice, (ii) an Event of Default
has occurred and is continuing and the Registrar has received a request from the
Depositary or (iii) in accordance with the rules and procedures of the
Depositary and the provisions of Section 2.08.
(c) Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an interest in another
Global Note will, upon transfer, cease to be an interest in such Global Note and
become an interest in such other Global Note and, accordingly, will thereafter
be subject to all transfer restrictions, if any, and other procedures applicable
to beneficial interests in such other Global Note for as long as it remains such
an interest.
(d) In connection with any transfer of a portion of the beneficial
interests in a Global Note to beneficial owners pursuant to paragraph (b) of
this Section 2.07, the Registrar shall reflect on its books and records the date
and a decrease in the principal amount of such Global Note in an amount equal to
the principal amount of the beneficial interest in such Global Note to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more U.S. Physical Notes or Offshore Physical Notes, as the
case may be, of like tenor and amount.
(e) In connection with the transfer of the U.S. Global Notes or the
Offshore Global Notes, in whole, to beneficial owners pursuant to paragraph (b)
of this Section 2.07, the U.S. Global Notes or Offshore Global Notes, as the
case may be, shall be deemed to be surrendered to the Trustee for cancellation,
and the Company shall execute, and the Trustee shall authenticate
<PAGE> 38
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and deliver, to each beneficial owner identified by the Depositary in exchange
for its beneficial interest in the U.S. Global Notes or Offshore Global Notes,
as the case may be, an equal aggregate principal amount of U.S. Physical Notes
or Offshore Physical Notes, as the case may be, of authorized denominations.
(f) Any U.S. Physical Note delivered in exchange for an interest in
the U.S. Global Notes pursuant to paragraph (b), (d) or (e) of this Section 2.07
shall, except as otherwise provided by paragraph (e) of Section 2.08, bear the
legend regarding transfer restrictions applicable to the U.S. Physical Note set
forth in Section 2.02.
(g) Any Offshore Physical Note delivered in exchange for an interest
in the Offshore Global Notes pursuant to paragraph (b), (d) or (e) of this
Section 2.07 shall, except as otherwise provided by paragraph (e) of Section
2.08, bear the legend regarding transfer restrictions applicable to the Offshore
Physical Note set forth in Section 2.02.
(h) The registered holder of a Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
SECTION 2.08. SPECIAL TRANSFER PROVISIONS. Unless and until a Note is
exchanged for an Exchange Note or sold in connection with an effective
Registration Statement pursuant to the Registration Rights Agreement, the
following provisions shall apply:
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS. The
following provisions shall apply with respect to the registration of
any proposed transfer of a Note to any Institutional Accredited
Investor which is not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Note,
whether or not such Note bears the Private Placement Legend, if
(x) the requested transfer is after the time period referred to in
Rule 144(k) under the Securities Act or (y) the proposed
transferee has delivered to the Registrar (A) a certificate
substantially in the form of Exhibit C hereto and (B) if the
aggregate principal amount of the Notes being transferred is less
than $100,000, an opinion of counsel acceptable to the Company
that such transfer is in compliance with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding
a beneficial interest in the U.S. Global Notes, upon receipt by
the Registrar of (x) the documents, if any, required by paragraph
(i) above and (y) instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and a decrease in the
principal amount of the U.S. Global Notes in an amount equal to
the principal amount of the
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beneficial interest in the U.S. Global Notes to be transferred,
and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more U.S. Physical Notes of like tenor and
amount.
(b) TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note to a QIB
(excluding Non-U.S. Persons):
(i) If the Note to be transferred consists of (x) either
Offshore Physical Notes prior to the removal of the Private
Placement Legend or U.S. Physical Notes, the Registrar shall
register the transfer if such transfer is being made by a proposed
transferor who has checked the box provided for on the form of
Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed
the certification provided for on the form of Note stating, or has
otherwise advised the Company and the Registrar in writing, that
it is purchasing the Note for its own account or an account with
respect to which it exercises sole investment discretion and that
it and any such account is a QIB within the meaning of Rule 144A
and is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information
regarding the Company as it has requested pursuant to Rule 144A or
has determined not to request such information and that it is
aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A or (y) an interest in the U.S. Global Notes,
the transfer of such interest may be effected only through the
book entry system maintained by the Depositary.
(ii) If the proposed transferee is an Agent Member, and the
Note to be transferred consists of U.S. Physical Notes, upon
receipt by the Registrar of the documents referred to in paragraph
(i) above and instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal amount of U.S. Global Notes in an amount equal to the
principal amount of the U.S. Physical Notes to be transferred, and
the Trustee shall cancel the U.S. Physical Notes so transferred.
(c) TRANSFERS OF INTERESTS IN THE OFFSHORE GLOBAL NOTES OR
OFFSHORE PHYSICAL NOTES. The following provisions shall apply with
respect to any transfer of interests in Offshore Global Notes or
Offshore Physical Notes:
(i) prior to the removal of the Private Placement Legend
from the Offshore Global Notes or Offshore Physical Notes pursuant
to Section 2.02, the
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Registrar shall refuse to register such transfer unless such
transfer complies with Section 2.08(b) or Section 2.08(d), as the
case may be, and
(ii) after such removal, the Registrar shall register the
transfer of any such Note without requiring any additional
certification.
(d) TRANSFERS TO NON-U.S. PERSONS AT ANY TIME. The following
provisions shall apply with respect to any transfer of a Note to a
Non-U.S. Person:
(i) The Registrar shall register any proposed transfer to
any Non-U.S. Person if the Note to be transferred is a U.S.
Physical Note or an interest in U.S. Global Notes, upon receipt of
a certificate substantially in the form of Exhibit D hereto from
the proposed transferor.
(ii) (a) If the proposed transferor is an Agent Member
holding a beneficial interest in the U.S. Global Notes, upon
receipt by the Registrar of (x) the documents, if any, required by
paragraph (ii) and (y) instructions in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and a decrease in the
principal amount of the U.S. Global Notes in an amount equal to
the principal amount of the beneficial interest in the U.S. Global
Notes to be transferred, and (b) if the proposed transferee is an
Agent Member, upon receipt by the Registrar of instructions given
in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records
the date and an increase in the principal amount of the Offshore
Global Notes in an amount equal to the principal amount of the
U.S. Physical Notes or the U.S. Global Notes, as the case may be,
to be transferred, and the Trustee shall cancel the Physical Note,
if any, so transferred or decrease the amount of the U.S. Global
Notes.
(e) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Notes bearing the
Private Placement Legend, the Registrar shall deliver only Notes that
bear the Private Placement Legend unless (i) the Private Placement
Legend is no longer required by Section 2.02, (ii) the circumstances
contemplated by paragraph (a)(i)(x) of this Section 2.08 exist or (iii)
there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither
such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act.
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(f) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and
in the Private Placement Legend and agrees that it will transfer such
Note only as provided in this Indenture. The Registrar shall not
register a transfer of any Note unless such transfer complies with the
restrictions on transfer of such Note set forth in this Indenture. In
connection with any transfer of Notes, each Holder agrees by its
acceptance of the Notes to furnish the Registrar or the Company such
certifications, legal opinions or other information as either of them
may reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or a transaction not subject to, the
registration requirements of the Securities Act; provided that the
Registrar shall not be required to determine (but may rely on a
determination made by the Company with respect to) the sufficiency of
any such certifications, legal opinions or other information.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.07 or this Section 2.08.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Note (including any transfers between or among beneficial owners of
interests in any Global Note) other than to require delivery of such
certificates and other documentation or evidence as are expressly required by,
and to do so if and when expressly required by the terms of, this Indenture, and
to examine the same to determine substantial compliance as to form with the
express requirements hereof.
SECTION 2.09. REPLACEMENT NOTES. If a mutilated Note is surrendered to
the Trustee or if the Holder claims that the Note has been lost, destroyed or
wrongfully taken, then, in the absence of notice to the Company or the Trustee
that such Note has been acquired by a bona fide purchaser, the Company shall
issue and the Trustee shall authenticate a replacement Note of like tenor and
principal amount and bearing a number not contemporaneously outstanding;
provided that the requirements of this Section 2.09 are met. If required by the
Trustee or the Company, an indemnity bond must be furnished that is sufficient
in the judgment of both the Trustee and the Company to protect the Company, the
Trustee or any Agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge such Holder for its expenses and the expenses
of the Trustee in replacing a Note. In case any such mutilated, lost, destroyed
or wrongfully taken Note has become or is about to become due and payable, the
Company in its discretion may pay such Note instead of issuing a new Note in
replacement thereof.
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Every replacement Note is an additional obligation of the Company and
shall be entitled to the benefits of this Indenture.
SECTION 2.10. OUTSTANDING NOTES. Notes outstanding at any time are all
Notes that have been authenticated by the Trustee except for those canceled by
it, those delivered to it for cancellation and those described in this Section
2.10 as not outstanding.
If a Note is replaced pursuant to Section 2.09, it ceases to be
outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Note is held by a bona fide purchaser.
If the Paying Agent (other than the Company or an Affiliate of the
Company) holds on the maturity date money sufficient to pay Notes payable on
that date, then on and after that date such Notes cease to be outstanding and
interest on them shall cease to accrue.
A Note does not cease to be outstanding because the Company or one of
its Affiliates holds such Note, provided, however, that in determining whether
the Holders of the requisite principal amount of the outstanding Notes have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Notes owned by the Company or any other obligor upon the Notes or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes which the Trustee has actual
knowledge to be so owned shall be so disregarded. Notes so owned which have been
pledged in good faith may be regarded as outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect to
such Notes and that the pledgee is not the Company or any other obligor upon the
Notes or any Affiliate of the Company or of such other obligor.
SECTION 2.11. TEMPORARY NOTES. Until definitive Notes are ready for
delivery, the Company may prepare and execute and the Trustee shall authenticate
temporary Notes. Temporary Notes shall be substantially in the form of
definitive Notes but may have insertions, substitutions, omissions and other
variations determined to be appropriate by the Officers executing the temporary
Notes, as evidenced by their execution of such temporary Notes. If temporary
Notes are issued, the Company will cause definitive Notes to be prepared without
unreasonable delay. After the preparation of definitive Notes, the temporary
Notes shall be exchangeable for definitive Notes upon surrender of the temporary
Notes at the office or agency of the Company designated for such purpose
pursuant to Section 4.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Notes the Company shall execute and
the Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Notes of authorized denominations. Until so exchanged, the
temporary Notes shall be entitled to the same benefits under this Indenture as
definitive Notes.
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SECTION 2.12. CANCELLATION. The Company at any time may deliver to the
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and may
deliver to the Trustee for cancellation any Notes previously authenticated
hereunder which the Company has not issued and sold. The Registrar and the
Paying Agent shall forward to the Trustee any Notes surrendered to them for
transfer, exchange or payment. The Trustee shall cancel all Notes surrendered
for transfer, exchange, payment or cancellation and shall destroy them in
accordance with its normal procedure.
SECTION 2.13. CUSIP NUMBERS. The Company in issuing the Notes may use
"CUSIP", "CINS" or "ISIN" numbers (if then generally in use), and the Company
and the Trustee shall use CUSIP, CINS or ISIN numbers, as the case may be, in
notices of redemption or exchange as a convenience to Holders; provided that any
such notice shall state that no representation is made as to the correctness of
such numbers either as printed on the Notes or as contained in any notice of
redemption or exchange and that reliance may be placed only on the other
identification numbers printed on the Notes. The Company shall promptly notify
the Trustee of any change in "CUSIP", "CINS" or "ISIN" numbers for the Notes.
SECTION 2.14. DEFAULTED INTEREST. If the Company defaults in a payment
of interest on the Notes, it shall pay, or shall deposit with the Paying Agent
money in immediately available funds sufficient to pay, the defaulted interest,
plus (to the extent lawful) any interest payable on the defaulted interest, to
the Persons who are Holders on a subsequent special record date. A special
record date, as used in this Section 2.14 with respect to the payment of any
defaulted interest, shall mean the 15th day next preceding the date fixed by the
Company for the payment of defaulted interest, whether or not such day is a
Business Day. At least 15 days before the subsequent special record date, the
Company shall mail to each Holder and to the Trustee a notice that states the
subsequent special record date, the payment date and the amount of defaulted
interest to be paid.
SECTION 2.15. ISSUANCE OF ADDITIONAL NOTES. The Company may, subject to
Article Four of this Indenture and applicable law, issue additional Notes under
this Indenture. The Notes issued on the Closing Date and any additional Notes
subsequently issued shall be treated as a single class for all purposes under
this Indenture.
ARTICLE THREE
REDEMPTION
SECTION 3.01. RIGHT OF REDEMPTION. (a) The Notes shall be redeemable,
at the Company's option, in whole or in part, at any time or from time to time,
on or after December 15, 2003 and prior to maturity, upon not less than 30 nor
more than 60 days' prior notice mailed by first
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37
class mail to each Holder's last address as it appears in the Security Register,
at the following Redemption Prices (expressed in percentages of principal
amount), plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date), if redeemed during the 12-month period commencing
December 15, of the years set forth below:
REDEMPTION
YEAR PRICE
---- ----------
2003......................... 104.625%
2004......................... 103.083%
2005......................... 101.542%
2006 and thereafter.......... 100.000%
(b) In addition, at any time prior to December 15, 2001, the Company
may redeem up to 35% of the principal amount of the Notes with the Net Cash
Proceeds of one or more sales by the Company of its Capital Stock (other than
Disqualified Stock), at any time or from time to time in part, at a Redemption
Price (expressed as a percentage of principal amount) of 109.25%, plus accrued
and unpaid interest to the Redemption Date (subject to the rights of Holders of
record on the relevant Regular Record Date that is prior to the Redemption Date
to receive interest due on an Interest Payment Date); provided that at least 65%
of the aggregate principal amount of Notes originally issued remains outstanding
after each such redemption and notice of any such redemption is mailed within 60
days after the consummation of such sale or sales.
SECTION 3.02. NOTICES TO TRUSTEE. If the Company elects to redeem Notes
pursuant to Section 3.01, it shall notify the Trustee in writing of the
Redemption Date and the principal amount of Notes to be redeemed and the clause
of this Indenture pursuant to which redemption shall occur.
The Company shall give each notice provided for in this Section 3.02 in
an Officers' Certificate at least 45 days before the Redemption Date (unless a
shorter period shall be satisfactory to the Trustee).
SECTION 3.03. SELECTION OF NOTES TO BE REDEEMED. If less than all of
the Notes are to be redeemed at any time, the Trustee shall select the Notes to
be redeemed in compliance with the requirements, as certified to it by the
Company, of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not listed on a national securities
exchange, or automated quotation system, by lot or by such other method as the
Trustee in its sole discretion shall deem fair and appropriate; provided that no
Note of $1,000 in principal amount or less shall be redeemed in part.
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The Trustee shall make the selection from the Notes outstanding and not
previously called for redemption. Notes in denominations of $1,000 in principal
amount may only be redeemed in whole. The Trustee may select for redemption
portions (equal to $1,000 in principal amount or any integral multiple thereof)
of Notes that have denominations larger than $1,000 in principal amount .
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption. The Trustee shall notify the
Company and the Registrar promptly in writing of the Notes or portions of Notes
to be called for redemption.
SECTION 3.04. NOTICE OF REDEMPTION. With respect to any redemption of
Notes pursuant to Section 3.01, at least 30 days but not more than 60 days
before a Redemption Date, the Company shall mail a notice of redemption by
first-class mail to each Holder whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered to the
Paying Agent in order to collect the Redemption Price;
(v) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on
and after the Redemption Date and the only remaining right of the
Holders is to receive payment of the Redemption Price plus accrued
interest to the Redemption Date upon surrender of the Notes to the
Paying Agent;
(vi) that, if any Note is being redeemed in part, the portion of
the principal amount (equal to $1,000 in principal amount or any
integral multiple thereof) of such Note to be redeemed and that, on and
after the Redemption Date, upon surrender of such Note, a new Note or
Notes in principal amount equal to the unredeemed portion thereof will
be reissued; and
(vii) that, if any Note contains a CUSIP, CINS or ISIN number as
provided in Section 2.13, no representation is being made as to the
correctness of the CUSIP, CINS or ISIN number either as printed on the
Notes or as contained in the notice of redemption and that reliance may
be placed only on the other identification numbers printed on the
Notes.
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At the Company's request (which request may be revoked by the Company
at any time prior to the time at which the Trustee shall have given such notice
to the Holders), made in writing to the Trustee at least 45 days (or such
shorter period as shall be satisfactory to the Trustee) before a Redemption
Date, the Trustee shall give the notice of redemption in the name and at the
expense of the Company. If, however, the Company gives such notice to the
Holders, the Company shall concurrently deliver to the Trustee an Officers'
Certificate stating that such notice has been given.
SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption
is mailed, Notes called for redemption become due and payable on the Redemption
Date and at the Redemption Price. Upon surrender of any Notes to the Paying
Agent, such Notes shall be paid at the Redemption Price, plus accrued interest,
if any, to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed, whether
or not the Holder receives the notice. In any event, failure to give such
notice, or any defect therein, shall not affect the validity of the proceedings
for the redemption of Notes held by Holders to whom such notice was properly
given.
SECTION 3.06. DEPOSIT OF REDEMPTION PRICE. On or prior to any
Redemption Date, the Company shall deposit with the Paying Agent (or, if the
Company is acting as its own Paying Agent, shall segregate and hold in trust as
provided in Section 2.05) money sufficient to pay the Redemption Price of and
accrued interest on all Notes to be redeemed on that date other than Notes or
portions thereof called for redemption on that date that have been delivered by
the Company to the Trustee for cancellation.
SECTION 3.07. PAYMENT OF NOTES CALLED FOR REDEMPTION. If notice of
redemption has been given in the manner provided above, the Notes or portion of
Notes specified in such notice to be redeemed shall become due and payable on
the Redemption Date at the Redemption Price stated therein, together with
accrued interest to such Redemption Date, and on and after such date (unless the
Company shall default in the payment of such Notes at the Redemption Price and
accrued interest to the Redemption Date, in which case the principal, until
paid, shall bear interest from the Redemption Date at the rate prescribed in the
Notes), such Notes shall cease to accrue interest. Upon surrender of any Note
for redemption in accordance with a notice of redemption, such Note shall be
paid and redeemed by the Company at the Redemption Price, together with accrued
interest, if any, to the Redemption Date; provided that installments of interest
whose Stated Maturity is on or prior to the Redemption Date shall be payable to
the Holders registered as such at the close of business on the relevant Regular
Record Date.
SECTION 3.08. NOTES REDEEMED IN PART. Upon surrender of any Note that
is redeemed in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder without service charge, a new Note equal
in principal amount to the unredeemed portion of such surrendered Note.
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ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF NOTES. The Company shall pay the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes and this Indenture. An installment of principal, premium,
if any, or interest shall be considered paid on the date due if the Trustee or
Paying Agent (other than the Company, a Subsidiary of the Company, or any
Affiliate of any of them) holds on that date money designated for and sufficient
to pay the installment. If the Company or any Subsidiary of the Company or any
Affiliate of any of them acts as Paying Agent, an installment of principal,
premium, if any, or interest shall be considered paid on the due date if the
entity acting as Paying Agent complies with the last sentence of Section 2.05.
As provided in Section 6.09, upon any bankruptcy or reorganization procedure
relative to the Company, the Trustee shall serve as the Paying Agent, if any,
for the Notes.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
the rate per annum specified in the Notes.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company will
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Notes may be surrendered for registration of transfer or exchange or for
presentation for payment and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Company will give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 11.02.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby initially designates the office of the Affiliate of
the Trustee as such office of the Company in accordance with Section 2.04.
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SECTION 4.03. LIMITATION ON INDEBTEDNESS. (a) The Company shall not,
and shall not permit any of its Restricted Subsidiaries to, Incur any
Indebtedness (other than the Notes and Indebtedness existing on the Closing
Date); provided that the Company or any Restricted Subsidiary may Incur
Indebtedness if, after giving effect to the Incurrence of such Indebtedness and
the receipt and application of the proceeds therefrom, the Interest Coverage
Ratio would be greater than 2.0:1.
Notwithstanding the foregoing, the Company and any Restricted
Subsidiary (except as specified below) may Incur each and all of the following:
(i) Indebtedness pursuant to the Credit Agreement (other than
the Note Backup Agreement) outstanding at any time in an aggregate
principal amount not to exceed $225 million, less any amount of such
Indebtedness permanently repaid as provided under Section 4.11;
(ii) Indebtedness owed (A) to the Company evidenced by an
unsubordinated promissory note or (B) to any Restricted Subsidiary;
provided that any event which results in any such Restricted Subsidiary
ceasing to be a Restricted Subsidiary or any subsequent transfer of
such Indebtedness (other than to the Company or another Restricted
Subsidiary) shall be deemed, in each case, to constitute an Incurrence
of such Indebtedness not permitted by this clause (ii);
(iii) Indebtedness issued in exchange for, or the net proceeds of
which are used to refinance or refund, then outstanding Indebtedness
(other than Indebtedness Incurred under clause (i), (ii), (iv), (vi),
(vii), (viii) or (ix) of this paragraph) and any refinancings thereof
in an amount not to exceed the amount so refinanced or refunded (plus
premiums, accrued interest, fees and expenses); provided that
Indebtedness the proceeds of which are used to refinance or refund the
Notes or Indebtedness that is pari passu with, or subordinated in right
of payment to, the Notes shall only be permitted under this clause
(iii) if (A) in case the Notes are refinanced in part or the
Indebtedness to be refinanced is pari passu with the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is outstanding, is
expressly made pari passu with, or subordinate in right of payment to,
the remaining Notes, (B) in case the Indebtedness to be refinanced is
subordinated in right of payment to the Notes, such new Indebtedness,
by its terms or by the terms of any agreement or instrument pursuant to
which such new Indebtedness is issued or remains outstanding, is
expressly made subordinate in right of payment to the Notes at least to
the extent that the Indebtedness to be refinanced is subordinated to
the Notes and (C) such new Indebtedness, determined as of the date of
Incurrence of such new Indebtedness, does not mature prior to the
Stated Maturity of the Indebtedness to be refinanced or refunded, and
the Average Life of such new Indebtedness is at least equal to the
remaining Average Life of the Indebtedness to be refinanced or
refunded; and provided further that in no event may
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Indebtedness of the Company that is pari passu with or subordinated in
rights of payments to the Notes, be refinanced by means of any
Indebtedness of any Restricted Subsidiary pursuant to this clause
(iii);
(iv) Indebtedness (A) in respect of performance, surety or
appeal bonds provided in the ordinary course of business, (B) under
Currency Agreements and Interest Rate Agreements; provided that such
agreements (a) are designed solely to protect the Company or its
Restricted Subsidiaries against fluctuations in foreign currency
exchange rates or interest rates and (b) do not increase the
Indebtedness of the obligor outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest
rates or by reason of fees, indemnities and compensation payable
thereunder; and (C) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations,
or from Guarantees or letters of credit, surety bonds or performance
bonds securing any obligations of the Company or any of its Restricted
Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted
Subsidiary (other than Guarantees of Indebtedness Incurred by any
Person acquiring all or any portion of such business, assets or
Restricted Subsidiary for the purpose of financing such acquisition),
in a principal amount not to exceed the gross proceeds actually
received by the Company or any Restricted Subsidiary in connection with
such disposition;
(v) Indebtedness, to the extent the net proceeds thereof are
promptly (A) used to purchase Notes tendered in an Offer to Purchase
made as a result of a Change in Control or (B) deposited to defease the
Notes pursuant to Article Eight;
(vi) Guarantees of the Notes and Guarantees of Indebtedness of
the Company by any Restricted Subsidiary provided the Guarantee of such
Indebtedness is permitted by and made in accordance with Section 4.07;
(vii) Indebtedness pursuant to the Note Backup Agreement
outstanding at any time in an aggregate principal amount outstanding at
any time not to exceed $8.3 million, less any amount of such
Indebtedness permanently repaid as provided under Section 4.11;
(viii) Indebtedness in respect of Capitalized Lease Obligations in
an aggregate principal amount outstanding at any time not to exceed $20
million, less any amount of such Indebtedness permanently repaid as
provided under Section 4.11; and
(ix) Indebtedness (in addition to Indebtedness permitted under
clauses (i) through (viii) above) in an aggregate principal amount
outstanding at any time not to exceed $25 million (or the U.S. Dollar
Equivalent thereof), less any amount of such Indebtedness permanently
repaid as provided under Section 4.11.
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(b) Notwithstanding any other provision of this Section 4.03, the
maximum amount of Indebtedness that the Company or a Restricted Subsidiary may
Incur pursuant to this Section 4.03 shall not be deemed to be exceeded, with
respect to any outstanding Indebtedness due solely to the result of fluctuations
in the exchange rates of currencies.
(c) For purposes of determining any particular amount of Indebtedness
under this Section 4.03, (1) Indebtedness Incurred under the Credit Agreement on
or prior to the Closing Date shall be treated as Incurred pursuant to clause (i)
of the second paragraph of part (a) of this Section 4.03, (2) Guarantees, Liens
or obligations with respect to letters of credit supporting Indebtedness
otherwise included in the determination of such particular amount shall not be
included and (3) any Liens granted pursuant to the equal and ratable provisions
referred to in Section 4.09 shall not be treated as Indebtedness. For purposes
of determining compliance with this Section 4.03, in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness
described in the above clauses (other than Indebtedness referred to in clause
(1) of the preceding sentence), the Company, in its sole discretion, shall
classify, and from time to time may reclassify, such item of Indebtedness and
only be required to include the amount and type of such Indebtedness in one of
such clauses.
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. The Company shall not,
and shall not permit any Restricted Subsidiary to, directly or indirectly, (i)
declare or pay any dividend or make any distribution on or with respect to its
Capital Stock (other than (x) dividends or distributions payable solely in
shares of its Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to acquire shares of such Capital Stock, (y) pro rata
dividends or distributions on Common Stock of Restricted Subsidiaries held by
minority stockholders and (z) dividends on Preferred Stock of the Company or any
Restricted Subsidiary, provided such Preferred Stock was permitted to be issued
under Section 4.03) held by Persons other than the Company or any of its
Restricted Subsidiaries, (ii) purchase, redeem, retire or otherwise acquire for
value any shares of Capital Stock of (A) the Company or an Unrestricted
Subsidiary (including options, warrants or other rights to acquire such shares
of Capital Stock) held by any Person or (B) a Restricted Subsidiary (including
options, warrants or other rights to acquire such shares of Capital Stock) held
by any Affiliate of the Company (other than a Wholly Owned Restricted
Subsidiary) or any holder (or any Affiliate of such holder) of 5% or more of the
Capital Stock of the Company, (iii) make any voluntary or optional principal
payment, or voluntary or optional redemption, repurchase, defeasance, or other
acquisition or retirement for value, of Indebtedness of the Company that is
subordinated in right of payment to the Notes or (iv) make any Investment, other
than a Permitted Investment, in any Person (such payments or any other actions
described in clauses (i) through (iv) above being collectively "Restricted
Payments") if, at the time of, and after giving effect to, the proposed
Restricted Payment:
(A) a Default or Event of Default shall have occurred and be
continuing,
<PAGE> 51
44
(B) the Company could not Incur at least $1.00 of Indebtedness
under the first paragraph of Section 4.03 or
(C) the aggregate amount of all Restricted Payments (the amount,
if other than in cash, to be determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a
Board Resolution) made after the Closing Date shall exceed the sum of
(1) 50% of the aggregate amount of the Adjusted
Consolidated Net Income (or, if the Adjusted Consolidated Net
Income is a loss, minus 100% of the amount of such loss)
(determined by excluding income resulting from transfers of assets
by the Company or a Restricted Subsidiary to an Unrestricted
Subsidiary) accrued on a cumulative basis during the period (taken
as one accounting period) beginning on October 1, 1998 and ending
on the last day of the last fiscal quarter preceding the
Transaction Date for which reports have been filed with the
Commission or provided to the Trustee plus
(2) the aggregate Net Cash Proceeds received by the
Company after the Closing Date from the issuance and sale
permitted by this Indenture of its Capital Stock (other than
Disqualified Stock) to a Person who is not a Subsidiary of the
Company, including an issuance or sale permitted by this Indenture
of Indebtedness of the Company for cash subsequent to the Closing
Date upon the conversion of such Indebtedness into Capital Stock
(other than Disqualified Stock) of the Company, or from the
issuance to a Person who is not a Subsidiary of the Company of any
options, warrants or other rights to acquire Capital Stock of the
Company (in each case, exclusive of any Disqualified Stock or any
options, warrants or other rights that are redeemable at the
option of the holder, or are required to be redeemed, prior to the
Stated Maturity of the Notes) plus
(3) an amount equal to the net reduction in Investments
(other than reductions in Permitted Investments) in any Person
resulting from payments of interest on Indebtedness, dividends,
repayments of loans or advances, or other transfers of assets, in
each case to the Company or any Restricted Subsidiary or from the
Net Cash Proceeds from the sale of any such Investment (except, in
each case, to the extent any such payment or proceeds are included
in the calculation of Adjusted Consolidated Net Income), or from
redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed, in each case, the amount of
Investments previously made by the Company or any Restricted
Subsidiary in such Person or Unrestricted Subsidiary plus
(4) $25 million.
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45
The foregoing provision shall not be violated by reason of:
(i) the payment of any dividend within 60 days after the date
of declaration thereof if, at said date of declaration, such payment
would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition
or retirement for value of Indebtedness that is subordinated in right
of payment to the Notes including premium, if any, and accrued and
unpaid interest, with the proceeds of, or in exchange for, Indebtedness
Incurred under clause (iii) of the second paragraph of part (a) of
Section 4.03;
(iii) the repurchase, redemption or other acquisition of Capital
Stock of the Company or an Unrestricted Subsidiary (or options,
warrants or other rights to acquire such Capital Stock) in exchange
for, or out of the proceeds of a substantially concurrent offering of,
shares of Capital Stock (other than Disqualified Stock) of the Company
(or options, warrants or other rights to acquire such Capital Stock);
(iv) the making of any principal payment or the repurchase,
redemption, retirement, defeasance or other acquisition for value of
Indebtedness of the Company which is subordinated in right of payment
to the Notes in exchange for, or out of the proceeds of, a
substantially concurrent offering of, shares of the Capital Stock
(other than Disqualified Stock) of the Company (or options, warrants or
other rights to acquire such Capital Stock);
(v) payments or distributions, to dissenting stockholders
pursuant to applicable law, pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with the
provisions of Article Five;
(vi) Investments acquired in exchange for Capital Stock (other
than Disqualified Stock) of the Company;
(vii) payments under the Repurchase Program; or
(viii) other Restricted Payments in an aggregate amount not to
exceed $10 million;
provided that, except in the case of clauses (i) and (iii), no Default or Event
of Default shall have occurred and be continuing or occur as a consequence of
the actions or payments set forth therein.
<PAGE> 53
46
Except as set forth in the next sentence, each Restricted Payment and
issuance of Capital Stock described in the preceding paragraph shall be included
in calculating whether the conditions of clause (C) of the first paragraph of
this Section 4.04 have been met with respect to any subsequent Restricted
Payments. The following Restricted Payments described in the preceding paragraph
shall not be included in such calculation:
(x) a Restricted Payment described in clause (ii),
(y) an exchange of Capital Stock for Capital Stock or
Indebtedness described in clause (iii) or (iv), and
(z) an Investment described in clause (vi) or (viii).
In the event the proceeds of an issuance of Capital Stock of the
Company are used for the redemption, repurchase or other acquisition of the
Notes, or Indebtedness that is pari passu with the Notes, then the Net Cash
Proceeds of such issuance shall be included in clause (C) of the first paragraph
of this Section 4.04 only to the extent such proceeds are not used for such
redemption, repurchase or other acquisition of Indebtedness. For purposes of
determining compliance with this Section 4.04, in the event that a Restricted
Payment meets the criteria of more than one of the types of Restricted Payments
described in the above clauses, the Company, in its sole discretion, may order
and classify, and from time to time may reclassify, such Restricted Payment if
it would have been permitted at the time such Restricted Payment was made and at
the time of such reclassification.
SECTION 4.05. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES. The Company shall not, and shall not permit
any Restricted Subsidiary to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (i) pay dividends or make any other
distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (iii) make loans or advances to the Company or any other Restricted
Subsidiary or (iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(i) existing on the Closing Date in the Credit Agreement, this
Indenture or any other agreements in effect on the Closing Date, and
any extensions, refinancings, renewals or replacements of such
agreements; provided that the encumbrances and restrictions in any such
extensions, refinancings, renewals or replacements are no less
favorable in any
<PAGE> 54
47
material respect to the Holders than those encumbrances or restrictions
that are then in effect and that are being extended, refinanced,
renewed or replaced;
(ii) existing under or by reason of applicable law;
(iii) existing with respect to any Person or the property or
assets of such Person acquired by the Company or any Restricted
Subsidiary, existing at the time of such acquisition and not incurred
in contemplation thereof, which encumbrances or restrictions are not
applicable to any Person or the property or assets of any Person other
than such Person or the property or assets of such Person so acquired;
(iv) in the case of clause (iv) of the first paragraph of this
Section 4.05, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease,
license, conveyance or contract or similar property or asset, (B)
existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the
Company or any Restricted Subsidiary not otherwise prohibited by this
Indenture or (C) arising or agreed to in the ordinary course of
business, not relating to any Indebtedness, and that do not,
individually or in the aggregate, detract from the value of property or
assets of the Company or any Restricted Subsidiary in any manner
material to the Company or any Restricted Subsidiary;
(v) with respect to a Restricted Subsidiary and imposed
pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or
property and assets of, such Restricted Subsidiary; or
(vi) contained in the terms of any Indebtedness or any agreement
pursuant to which such Indebtedness was issued if (A) the encumbrance
or restriction applies only in the event of a payment default or a
default with respect to a financial covenant contained in such
Indebtedness or agreement, (B) the encumbrance or restriction is not
materially more disadvantageous to the Holders of the Notes than is
customary in comparable financings (as determined by the Company) and
(C) the Company determines that any such encumbrance or restriction
will not materially affect the Company's ability to make principal or
interest payments on the Notes.
Nothing contained in this Section 4.05 shall prevent the Company or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in Section 4.09 or (2) restricting the sale
or other disposition of property or assets of the Company or any of its
Restricted Subsidiaries that secure Indebtedness of the Company or any of its
Restricted Subsidiaries.
SECTION 4.06. LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF
RESTRICTED SUBSIDIARIES. The Company shall not sell, and shall not permit any
Restricted Subsidiary, directly
<PAGE> 55
48
or indirectly, to issue or sell, any shares of Capital Stock of a Restricted
Subsidiary (including options, warrants or other rights to purchase shares of
such Capital Stock) except:
(i) to the Company or a Wholly Owned Restricted Subsidiary;
(ii) issuances of director's qualifying shares or sales to
foreign nationals of shares of Capital Stock of foreign Restricted
Subsidiaries, to the extent required by applicable law;
(iii) if, immediately after giving effect to such issuance or
sale, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary and any Investment in such Person remaining after
giving effect to such issuance or sale would have been permitted to be
made under Section 4.04 if made on the date of such issuance or sale;
or
(iv) (x) issuances or sales of Common Stock of a Restricted
Subsidiary, provided that the Company or such Restricted Subsidiary
applies the Net Cash Proceeds, if any, of any such sale in accordance
with clause (A) or (B) of Section 4.11 and (y) issuances or sales of
Preferred Stock of a Restricted Subsidiary if such Restricted
Subsidiary would be entitled to Incur such Indebtedness pursuant to
Section 4.03 and such Restricted Subsidiary simultaneously executes and
delivers a supplemental indenture to this Indenture providing for a
Guarantee (a "Subsidiary Guarantee") of payment of the Notes.
SECTION 4.07. LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED
SUBSIDIARIES. The Company shall not permit any Restricted Subsidiary, directly
or indirectly, to Guarantee any Indebtedness of the Company which is pari passu
with or subordinate in right of payment to the Notes ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a Subsidiary Guarantee of payment of the Notes by such Restricted
Subsidiary and (ii) such Restricted Subsidiary waives and shall not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall
not be applicable to any Guarantee of any Restricted Subsidiary that existed at
the time such Person became a Restricted Subsidiary and was not Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary. If the Guaranteed Indebtedness is (A) pari passu with the Notes,
then the Guarantee of such Guaranteed Indebtedness shall be pari passu with, or
subordinated to, the Subsidiary Guarantee or (B) subordinated to the Notes, then
the Guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the
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49
Company's and each Restricted Subsidiary's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by this Indenture) or (ii) the release or
discharge of the Guarantee which resulted in the creation of such Subsidiary
Guarantee, except a discharge or release by or as a result of payment under such
Guarantee.
SECTION 4.08. LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND
AFFILIATES. The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, enter into, renew or extend any
transaction (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any holder
(or any Affiliate of such holder) of 5% or more of any class of Capital Stock of
the Company or with any Affiliate of the Company or any Restricted Subsidiary,
except upon fair and reasonable terms no less favorable to the Company or such
Restricted Subsidiary than could be obtained, at the time of such transaction
or, if such transaction is pursuant to a written agreement, at the time of the
execution of the agreement providing therefor, in a comparable arm's-length
transaction with a Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to:
(i) transactions (A) approved by a majority of the
disinterested members of the Board of Directors or (B) for which the
Company or a Restricted Subsidiary delivers to the Trustee a written
opinion of a nationally recognized investment banking firm stating that
the transaction is fair to the Company or such Restricted Subsidiary
from a financial point of view;
(ii) any transaction solely between the Company and any of its
Wholly Owned Restricted Subsidiaries or solely between Wholly Owned
Restricted Subsidiaries;
(iii) management and administrative services provided by the
Company or any Restricted Subsidiary to any Restricted Subsidiary or
any Person in which the Company or any Restricted Subsidiary has an
Investment;
(iv) the payment of reasonable and customary regular fees to
directors of the Company who are not employees of the Company;
(v) any payments or other transactions pursuant to any tax-
sharing agreement between the Company and any other Person with which
the Company files a consolidated tax return or with which the Company
is part of a consolidated group for tax purposes;
(vi) any payment made under the Put and Call Agreement; or
(vii) any Restricted Payments not prohibited by Section 4.04.
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Notwithstanding the foregoing, any transaction or series of related transactions
covered by the first paragraph of this Section 4.08 and not covered by clauses
(ii) through (vi) of this paragraph, (a) the aggregate amount of which exceeds
$3 million in value, must be approved or determined to be fair in the manner
provided for in clause (i)(A) or (B) above and (b) the aggregate amount of which
exceeds $5 million in value, must be determined to be fair in the manner
provided for in clause (i)(B) above.
SECTION 4.09. LIMITATION ON LIENS. The Company shall not Incur any
Indebtedness secured by a Lien ("SECURED INDEBTEDNESS") which is not Senior
Indebtedness unless contemporaneously therewith effective provision is made to
secure the Notes equally and ratably with (or, if the Secured Indebtedness is
subordinated in right of payment to the Notes, prior to) such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien.
SECTION 4.10. LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS. The
Company shall not Incur any Indebtedness that is subordinate in right of payment
to any Senior Indebtedness unless such Indebtedness is pari passu with, or
subordinated in right of payment to, the Notes; provided that the foregoing
limitation shall not apply to distinctions between categories of Senior
Indebtedness of the Company that exist by reason of any Liens or Guarantees
arising or created in respect of some but not all such Senior Indebtedness.
SECTION 4.11. LIMITATION ON ASSET SALES. The Company shall not, and
shall not permit any Restricted Subsidiary to, consummate any Asset Sale, unless
(i) the consideration received by the Company or such Restricted Subsidiary is
at least equal to the fair market value of the assets sold or disposed of and
(ii) at least 75% of the consideration received consists of cash or Temporary
Cash Investments or the assumption of Indebtedness of the Company or any
Restricted Subsidiary (other than Indebtedness to the Company or any Restricted
Subsidiary), provided that the Company or such Restricted Subsidiary is
irrevocably and unconditionally released from all liability under such
Indebtedness.
In the event and to the extent that the Net Cash Proceeds received by
the Company or any of its Restricted Subsidiaries from one or more Asset Sales
occurring on or after the Closing Date in any period of 12 consecutive months
exceed $10 million, then the Company shall or shall cause the relevant
Restricted Subsidiary to:
(i) within twelve months after the date Net Cash Proceeds so
received exceed $10 million
(A) apply an amount equal to such excess Net Cash Proceeds
to permanently repay Senior Indebtedness of the Company, or any
Restricted Subsidiary providing a Subsidiary Guarantee or
Indebtedness of any other Restricted Subsidiary, in each case
owing to a Person other than the Company or any of its Restricted
Subsidiaries or
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(B) invest an equal amount, or the amount not so applied
pursuant to clause (A) (or enter into a definitive agreement
committing to so invest within 12 months after the date of such
agreement), in property or assets (other than current assets) of a
nature or type or that are used in a business (or in a company
having property and assets of a nature or type, or engaged in a
business) similar or related to the nature or type of the property
and assets of, or the business of, the Company and its Restricted
Subsidiaries existing on the date of such investment and
(ii) apply (no later than the end of the 12-month period
referred to in clause (i)) such excess Net Cash Proceeds (to the extent
not applied pursuant to clause (i)) as provided in the following
paragraph of this Section 4.11.
The amount of such excess Net Cash Proceeds required to be applied (or to be
committed to be applied) during such 12-month period as set forth in clause (i)
of the preceding sentence and not applied as so required by the end of such
period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
Section 4.11 totals at least $5 million, the Company must commence, not later
than the fifteenth Business Day of such month, and consummate an Offer to
Purchase from the Holders on a pro rata basis an aggregate principal amount of
Notes equal to the Excess Proceeds on such date, at a purchase price equal to
100% of the principal amount of the Notes, plus, in each case, accrued interest
(if any) to the Payment Date.
SECTION 4.12. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL. The Company
shall commence, within 30 days of the occurrence of a Change of Control, and
consummate an Offer to Purchase for all Notes then outstanding, at a purchase
price equal to 101% of the principal amount thereof, plus accrued interest, if
any, to the Payment Date; provided, however, that the Company shall not be
required to commence such an Offer to Purchase if the Notes have, on the 30th
day after such Change of Control, a rating of at least BBB-- (or equivalent or
successor rating) by S&P and a rating of at least Baa3 (or equivalent or
successor rating) by Moody's.
SECTION 4.13. EXISTENCE. Subject to Articles Four and Five of this
Indenture, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and the existence of
each of its Restricted Subsidiaries in accordance with the respective
organizational documents of the Company and each Restricted Subsidiary and the
rights (whether pursuant to charter, partnership certificate, agreement, statute
or otherwise), licenses and franchises of the Company and each Restricted
Subsidiary; provided that the Company shall not be required to preserve any such
right, license or franchise, or the existence of any Restricted Subsidiary, if
the maintenance or preservation thereof is no longer desirable in the conduct of
the business of the Company and its Restricted Subsidiaries taken as a whole.
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SECTION 4.14. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay
or discharge and shall cause each of its Subsidiaries to pay or discharge, or
cause to be paid or discharged, before the same shall become delinquent (i) all
material taxes, assessments and governmental charges levied or imposed upon (a)
the Company or any such Subsidiary, (b) the income or profits of any such
Subsidiary which is a corporation or (c) the property of the Company or any such
Subsidiary and (ii) all material lawful claims for labor, materials and supplies
that, if unpaid, might by law become a lien upon the property of the Company or
any such Subsidiary; provided that the Company shall not be required to pay or
discharge, or cause to be paid or discharged, any such tax, assessment, charge
or claim the amount, applicability or validity of which is being contested in
good faith by appropriate proceedings and for which adequate reserves have been
established.
SECTION 4.15. MAINTENANCE OF PROPERTIES AND INSURANCE. The Company will
cause all properties used or useful in the conduct of its business or the
business of any of its Restricted Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided that nothing in
this Section 4.15 shall prevent the Company or any Restricted Subsidiary from
discontinuing the use, operation or maintenance of any of such properties or
disposing of any of them, if such discontinuance or disposal is, in the judgment
of the Company, desirable in the conduct of the business of the Company or such
Restricted Subsidiary.
The Company will provide or cause to be provided, for itself and its
Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties, including, but not limited to,
products liability insurance and public liability insurance, with reputable
insurers or with the government of the United States of America, or an agency or
instrumentality thereof, in such amounts, with such deductibles and by such
methods as shall be customary for corporations similarly situated in the
industry in which the Company or any such Restricted Subsidiary, as the case may
be, is then conducting business.
SECTION 4.16. NOTICE OF DEFAULTS. In the event that any Officer becomes
aware of any Default or Event of Default, the Company shall promptly deliver to
the Trustee an Officers' Certificate specifying such Default or Event of
Default.
SECTION 4.17. COMPLIANCE CERTIFICATES. (a) The Company shall deliver to
the Trustee, within 45 days after the end of each fiscal quarter (90 days after
the end of the last fiscal quarter of each year), an Officers' Certificate
stating whether or not the signers know of any Default or Event of Default that
occurred during such fiscal quarter. In the case of the Officers' Certificate
delivered within 90 days after the end of the Company's fiscal year, such
certificate shall contain
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53
a certification from the principal executive officer, principal financial
officer or principal accounting officer of the Company that a review has been
conducted of the activities of the Company and its Restricted Subsidiaries and
the Company's and its Restricted Subsidiaries' performance under this Indenture
and that the Company has complied with all conditions and covenants under this
Indenture. For purposes of this Section 4.17, such compliance shall be
determined without regard to any period of grace or requirement of notice
provided under this Indenture. If any of the officers of the Company signing
such certificate has knowledge of such a Default or Event of Default, the
certificate shall describe any such Default or Event of Default and its status.
The first certificate to be delivered pursuant to this Section 4.17(a) shall be
for the first fiscal quarter beginning after the execution of this Indenture.
(b) The Company shall deliver to the Trustee, within 90 days after the
end of each fiscal year, beginning with the fiscal year in which this Indenture
was executed, a certificate signed by the Company's independent certified public
accountants stating (i) that their audit examination has included a review of
the terms of this Indenture and the Notes as they relate to accounting matters,
(ii) that they have read the most recent Officers' Certificate delivered to the
Trustee pursuant to paragraph (a) of this Section 4.17 and (iii) whether, in
connection with their audit examination, anything came to their attention that
caused them to believe that the Company was not in compliance with any of the
terms, covenants, provisions or conditions of Article Four and Section 5.01 of
this Indenture as they pertain to accounting matters and, if any Default or
Event of Default has come to their attention, specifying the nature and period
of existence thereof; provided that such independent certified public
accountants shall not be liable in respect of such statement by reason of any
failure to obtain knowledge of any such Default or Event of Default that would
not be disclosed in the course of an audit examination conducted in accordance
with generally accepted auditing standards in effect at the date of such
examination.
SECTION 4.18. COMMISSION REPORTS AND REPORTS TO HOLDERS. Whether or not
the Company is then required to file reports with the Commission, the Company
shall file with the Commission all such reports and other information as it
would be required to file with the Commission by Sections 13(a) or 15(d) under
the Exchange Act if it were subject thereto. The Company shall supply the
Trustee and each Holder or shall supply to the Trustee for forwarding to each
such Holder, without cost to such Holder, copies of such reports and other
information within 15 days after the date it would have been required to file
such reports or other information with the Commission had it been subject to
such Sections. The Company also shall comply with the other provisions of TIA
Section 314(a).
SECTION 4.19. WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company from paying all or any portion of the
principal of, premium, if any, or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or that may affect the
covenants or the performance
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of this Indenture; and (to the extent that it may lawfully do so) the Company
hereby expressly waives all benefit or advantage of any such law and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC. The Company shall not
consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as an
entirety or substantially an entirety in one transaction or a series of related
transactions) to, any Person or permit any Person to merge with or into the
Company unless:
(i) the Company shall be the continuing Person, or the Person
(if other than the Company) formed by such consolidation or into which
the Company is merged or that acquired or leased such property and
assets of the Company shall be a corporation organized and validly
existing under the laws of the United States of America or any
jurisdiction thereof and shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, all of the
obligations of the Company on all of the Notes and under this
Indenture;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a
pro forma basis, the Company or any Person becoming the successor
obligor of the Notes shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately
prior to such transaction;
(iv) immediately after giving effect to such transaction on a
pro forma basis the Company, or any Person becoming the successor
obligor of the Notes, as the case may be, could Incur at least $1.00 of
Indebtedness under the first paragraph of Section 4.03; provided that
this clause (iv) shall not apply to a consolidation, merger or sale of
all (but not less than all) of the assets of the Company if all Liens
and Indebtedness of the Company or any Person becoming the successor
obligor on the Notes, as the case may be, and its Restricted
Subsidiaries outstanding immediately after such transaction would have
been permitted (and all such Liens and Indebtedness, other than Liens
and Indebtedness of the Company and its Restricted Subsidiaries
outstanding immediately prior to the transaction, shall be deemed to
have been Incurred) for all purposes of this Indenture; and
(v) the Company delivers to the Trustee an Officers'
Certificate (attaching the arithmetic computations to demonstrate
compliance with clauses (iii) and (iv)) and Opinion
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of Counsel, in each case stating that such consolidation, merger or
transfer and such supplemental indenture complies with this provision
and that all conditions precedent provided for herein relating to such
transaction have been complied with;
provided, however, that clauses (iii) and (iv) above do not apply if, in the
good faith determination of the Board of Directors of the Company, whose
determination shall be evidenced by a Board Resolution, the principal purpose of
such transaction is to change the state of incorporation of the Company and any
such transaction shall not have as one of its purposes the evasion of the
foregoing limitations.
SECTION 5.02. SUCCESSOR SUBSTITUTED. Upon any consolidation or merger,
or any sale, conveyance, transfer, lease or other disposition of all or
substantially all of the property and assets of the Company in accordance with
Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein; provided that the Company shall not be released from its
obligation to pay the principal of, premium, if any, or interest on the Notes in
the case of a lease of all or substantially all of its property and assets.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. Any of the following events shall
constitute an "EVENT OF DEFAULT" hereunder:
(a) default in the payment of the principal of (or premium, if
any, on) any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30 days;
(c) default in the performance or breach of the provisions of
Article Five or the failure to make or consummate an Offer to Purchase in
accordance with Section 4.11 or Section 4.12;
(d) the Company defaults in the performance of or breaches any
other covenant or agreement of the Company in this Indenture or under the Notes
(other than a default specified in clause (a), (b) or (c) above) and such
default or breach continues for a period of 30 consecutive days after written
notice by the Trustee or the Holders of 25% or more in aggregate principal
amount of the Notes;
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(e) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Significant Subsidiary having an outstanding
principal amount of $10 million or more in the aggregate for all such issues of
all such Persons, whether such Indebtedness now exists or shall hereafter be
created, (I) an event of default that has caused the holder thereof to declare
such Indebtedness to be due and payable prior to its Stated Maturity and such
Indebtedness has not been discharged in full or such acceleration has not been
rescinded or annulled within 30 days of such acceleration and/or (II) the
failure to make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or extended
within 30 days of such payment default;
(f) any final judgment or order (not covered by insurance) for
the payment of money in excess of $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against the
Company or any Significant Subsidiary and shall not be paid or discharged, and
there shall be any period of 60 consecutive days following entry of the final
judgment or order that causes the aggregate amount for all such final judgments
or orders outstanding and not paid or discharged against all such Persons to
exceed $10 million during which a stay of enforcement of such final judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a decree
or order for (A) relief in respect of the Company or any Significant Subsidiary
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, (B) appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the Company or any Significant Subsidiary or for all or substantially all of the
property and assets of the Company or any Significant Subsidiary or (C) the
winding up or liquidation of the affairs of the Company or any Significant
Subsidiary and, in each case, such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(h) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or consents to the entry of an order for relief in
an involuntary case under any such law, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) effects any general assignment for the benefit of
creditors.
SECTION 6.02. ACCELERATION. If an Event of Default (other than an Event
of Default specified in clause (g) or (h) of Section 6.01 that occurs with
respect to the Company) occurs and is continuing under this Indenture, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by written notice to the Company (and to the Trustee if
such notice is given by the Holders), may, and the Trustee at the request of
such
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Holders shall, declare the principal of, premium, if any, and accrued interest
on the Notes to be immediately due and payable. Upon a declaration of
acceleration, such principal, premium, if any, and accrued interest shall be
immediately due and payable. In the event of a declaration of acceleration
because an Event of Default set forth in clause (e) of Section 6.01 has occurred
and is continuing, such declaration of acceleration shall be automatically
rescinded and annulled if the event of default triggering such Event of Default
pursuant to clause (e) shall be remedied or cured by the Company or the relevant
Significant Subsidiary or waived by the holders of the relevant Indebtedness
within 60 days after the declaration of acceleration with respect thereto. If an
Event of Default specified in clause (g) or (h) of Section 6.01 occurs with
respect to the Company, the principal of, premium, if any, and accrued interest
on the Notes then outstanding shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
At any time after such declaration of acceleration, but before a
judgment or decree for the payment of the money due has been obtained by the
Trustee, the Holders of at least a majority in principal amount of the
outstanding Notes by written notice to the Company and to the Trustee, may waive
all past Defaults and rescind and annul a declaration of acceleration and its
consequences if (a) the Company has paid or deposited with the Trustee a sum
sufficient to pay (i) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, (ii) all overdue interest on all Notes, (iii) the
principal of and premium, if any, on any Notes that have become due otherwise
than by such declaration or occurrence of acceleration and interest thereon at
the rate prescribed therefor by such Notes, and (iv) to the extent that payment
of such interest is lawful, interest upon overdue interest, if any, at the rate
prescribed therefor by such Notes, (b) all existing Events of Default, other
than the non-payment of the principal of, premium, if any, and accrued interest
on the Notes that have become due solely by such declaration of acceleration,
have been cured or waived and (c) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may, and at the direction of the Holders of at least a
majority in principal amount of the outstanding Notes shall, pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of, premium, if any, or interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding.
SECTION 6.04. WAIVER OF PAST DEFAULTS. Subject to Sections 6.02, 6.07
and 9.02, the Holders of at least a majority in principal amount of the
outstanding Notes, by notice to the Trustee, may waive an existing Default or
Event of Default and its consequences, except a Default in the payment of
principal of, premium, if any, or interest on any Note as specified in
clause (a)
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or (b) of Section 6.01 or in respect of a covenant or provision of this
Indenture which cannot be modified or amended without the consent of the Holder
of each outstanding Note affected. Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereto.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of at least a majority
in aggregate principal amount of the outstanding Notes may direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee; provided that
the Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that may involve the Trustee in personal liability, or that the
Trustee determines in good faith may be unduly prejudicial to the rights of
Holders of Notes not joining in the giving of such direction; and provided
further that the Trustee may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes.
SECTION 6.06. LIMITATION ON SUITS. A Holder may not institute any
proceeding, judicial or otherwise, with respect to this Indenture or the Notes,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(i) the Holder has previously given the Trustee written notice
of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount
of outstanding Notes shall have made a written request to the Trustee
to pursue such remedy;
(iii) such Holder or Holders offer the Trustee indemnity
reasonably satisfactory to the Trustee against any costs, liability or
expense;
(iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and
(v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Notes do not give the
Trustee a direction that is inconsistent with the request.
For purposes of Section 6.05 of this Indenture and this Section 6.06,
the Trustee shall comply with TIA Section 316(a) in making any determination of
whether the Holders of the required aggregate principal amount of outstanding
Notes have concurred in any request or direction of the Trustee to pursue any
remedy available to the Trustee or the Holders with respect to this Indenture or
the Notes or otherwise under the law.
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A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any
other provision of this Indenture, the right of any Holder of a Note to receive
payment of the principal of, premium, if any, or interest on, such Note or to
bring suit for the enforcement of any such payment, on or after the due date
expressed in the Notes, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default in
payment of principal, premium or interest specified in clause (a), (b) or (c) of
Section 6.01 occurs and is continuing, the Trustee may recover judgment in its
own name and as trustee of an express trust against the Company or any other
obligor of the Notes for the whole amount of principal, premium, if any, and
accrued interest remaining unpaid, together with interest on overdue principal,
premium, if any, and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate specified
in the Notes, and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07) and the Holders allowed in any judicial proceedings relative to
the Company (or any other obligor of the Notes), its creditors or its property
and shall be entitled and empowered to collect and receive any monies,
securities or other property payable or deliverable upon conversion or exchange
of the Notes or upon any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to empower the Trustee to authorize or consent to, or accept or adopt on
behalf of any Holder, any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to
this Article Six, it shall pay out the money in the following order:
First: to the Trustee for all amounts due under Section 7.07;
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Second: to the holders of Senior Indebtedness, and as to the extent
required by Article Ten;
Third: to Holders for amounts then due and unpaid for principal of,
premium, if any, and interest on the Notes in respect of which or for the
benefit of which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such Notes for
principal, premium, if any, and interest, respectively; and
Fourth: to the Company or any other obligors of the Notes, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court may require any party
litigant in such suit to file an undertaking to pay the costs of the suit, and
the court may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.07, or a suit by Holders of more than 10% in principal amount of the
outstanding Notes.
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then, and in
every such case, subject to any determination in such proceeding, the Company,
the Trustee and the Holders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Company, Trustee and the Holders shall continue as though no such proceeding had
been instituted.
SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or wrongfully taken Notes in Section 2.09, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
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SECTION 6.14. DELAY OR OMISSION NOT WAIVER. No delay or omission of the
Trustee or of any Holder to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein. Every right and remedy given
by this Article Six or by law to the Trustee or to the Holders may be exercised
from time to time, and as often as may be deemed expedient, by the Trustee or by
the Holders, as the case may be.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. GENERAL. The duties and responsibilities of the Trustee
shall be as provided by the TIA and as set forth herein. Notwithstanding the
foregoing, no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it. Whether or not herein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Article Seven.
SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE. Subject to TIA Sections 315(a)
through (d):
(i) the Trustee may rely, and shall be protected in acting or
refraining from acting, upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper person;
(ii) before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, which shall
conform to Section 10.04. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion;
(iii) the Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any
attorney or agent appointed with due care by it hereunder;
(iv) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered
to the Trustee reasonable security or indemnity
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against the costs, expenses and liabilities that might be incurred by
it in compliance with such request or direction;
(v) the Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within
its rights or powers, provided that the Trustee's conduct does not
constitute negligence or bad faith;
(vi) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate; and
(vii) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company personally or by agent or
attorney.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with the Company or its Affiliates with the same rights it
would have if it were not the Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to TIA Sections 310(b) and 311.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee (i) makes no
representation as to the validity or adequacy of this Indenture or the Notes,
(ii) shall not be accountable for the Company's use or application of the
proceeds from the Notes and (iii) shall not be responsible for any statement in
the Notes other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULT. If any Default or any Event of Default
occurs and is continuing and if such Default or Event of Default is known to the
Trustee, the Trustee shall mail to each Holder in the manner and to the extent
provided in TIA Section 313(c) notice of the Default or Event of Default within
45 days after it occurs, unless such Default or Event of Default has been cured;
provided, however, that, except in the case of a default in the payment of the
principal of, premium, if any, or interest on any Note, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that the withholding of such
notice is in the interest of the Holders.
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SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each
May 15, beginning with May 15, 1999, the Trustee shall mail to each Holder as
provided in TIA Section 313(c) a brief report dated as of such May 15, if
required by TIA Section 313(a).
A copy of each report at the time of its mailing to the Holders of
Securities shall be mailed to the Company and filed with the Commission and each
stock exchange on which the Securities are listed in accordance with TIA Section
313(d). The Company shall promptly notify the Trustee when the Securities are
listed on any stock exchange or of any delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the
Trustee such compensation as shall be agreed upon in writing for its services
hereunder. The compensation of the Trustee shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by the Trustee without negligence or bad faith on its part.
Such expenses shall include the reasonable compensation and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability or expense incurred by it without negligence or
bad faith on its part in connection with the acceptance or administration of
this Indenture and its duties under this Indenture and the Notes, including the
costs and expenses of defending itself against any claim or liability and of
complying with any process served upon it or any of its officers in connection
with the exercise or performance of any of its powers or duties under this
Indenture and the Notes. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder, unless the
Company is materially prejudiced thereby. The Company shall defend the claim and
the Trustee shall cooperate in the defense. Unless otherwise set forth herein,
the Trustee may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel. The Company need not pay for any settlement
made without its consent, which consent shall not be unreasonably withheld.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held in trust to pay principal of, premium, if any, and interest on particular
Notes.
If the Trustee incurs expenses or renders services after the occurrence
of an Event of Default specified in clause (g) or (h) of Section 6.01, the
expenses and the compensation for the services will be intended to constitute
expenses of administration under Title 11 of the United States Bankruptcy Code
or any applicable federal or state law for the relief of debtors.
The provisions of this Section 7.07 shall survive the termination of
this Indenture.
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The Trustee shall comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this
Section 7.08.
The Trustee may resign at any time by so notifying the Company in
writing at least 30 days prior to the date of the proposed resignation. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by so notifying the Trustee in writing and may appoint a successor
Trustee with the consent of the Company. The Company may remove the Trustee if:
(i) the Trustee is no longer eligible under Section 7.10; (ii) the Trustee is
adjudged a bankrupt or an insolvent; (iii) a receiver or other public officer
takes charge of the Trustee or its property; or (iv) the Trustee becomes
incapable of acting.
If the Trustee resigns or is removed, or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company. If
the successor Trustee does not deliver its written acceptance required by the
next succeeding paragraph of this Section 7.08 within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company or the Holders
of a majority in principal amount of the outstanding Notes may, at the expense
of the Company, petition any court of competent jurisdiction for the appointment
of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
7.07, (i) the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, (ii) the resignation or removal of the retiring
Trustee shall become effective and (iii) the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture. A successor
Trustee shall mail notice of its succession to each Holder. No successor Trustee
shall accept its appointment unless at the time of such acceptance such
successor Trustee shall be qualified and eligible under this Article.
If the Trustee is no longer eligible under Section 7.10 or shall fail
to comply with TIA Section 310(b), any Holder who satisfies the requirements of
TIA Section 310(b) may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee. If at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section 7.08, the Trustee shall resign immediately in the manner and with
the effect provided in this Section.
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The Company shall give notice of any resignation and any removal of the
Trustee and each appointment of a successor Trustee to all Holders. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligation under Section 7.07 shall continue for the benefit
of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association or bank or trust company organized under the laws of any
state in the United States, without any further act shall be the successor
Trustee with the same effect as if the successor Trustee had been named as the
Trustee herein, provided such corporation shall be otherwise qualified and
eligible under this Article.
SECTION 7.10. ELIGIBILITY. This Indenture shall always have a Trustee
who satisfies the requirements of TIA Section 310(a)(1). The Trustee shall have
a combined capital and surplus of at least $25 million as set forth in its most
recent published annual report of condition that is subject to the requirements
of applicable Federal or state supervising or examining authority. If at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Trustee shall resign immediately in the manner and with the
effect specified in this Article.
SECTION 7.11. MONEY HELD IN TRUST. The Trustee shall not be liable for
interest on any money received by it except as the Trustee may agree with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law and except for money held in trust
under Article Eight of this Indenture.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS. Except as otherwise
provided in this Section 8.01, the Company may terminate its obligations under
the Notes and this Indenture if:
(i) all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes that have been replaced or Notes
that are paid pursuant to Section 4.01 or Notes for whose payment money
or securities have theretofore been held in trust and thereafter repaid
to the Company, as provided in Section 8.05) have been delivered to the
Trustee for cancellation and the Company has paid all sums payable by
it hereunder; or
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66
(ii) (A) the Notes mature within one year or all of them are to
be called for redemption within one year under arrangements satisfac-
tory to the Trustee for giving the notice of redemption, (B) the
Company irrevocably deposits in trust with the Trustee during such
one-year period, under the terms of an irrevocable trust agreement in
form and substance satisfactory to the Trustee, as trust funds solely
for the benefit of the Holders for that purpose, money or U.S.
Government Obligations sufficient (in the opinion of a nationally
recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee), without
consideration of any reinvestment of any interest thereon, to pay
principal, premium, if, any, and interest on the Notes to maturity or
redemption, as the case may be, and to pay all other sums payable by it
hereunder, (C) no Default or Event of Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit, (D)
such deposit will not result in a breach or violation of, or constitute
a default under, this Indenture or any other agreement or instrument to
which the Company is a party or by which it is bound and (E) the
Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, in each case stating that all conditions precedent
provided for herein relating to the satisfaction and discharge of this
Indenture have been complied with.
With respect to the foregoing clause (i), the Company's obligations
under Section 7.07 shall survive. With respect to the foregoing clause (ii), the
Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08,
2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the
Notes are no longer outstanding. Thereafter, only the Company's obligations in
Sections 7.07, 8.04, 8.05 and 8.06 and Article Ten (with respect to payments in
respect of Senior Subordinated Obligations other than with the assets held in
trust as described in clause (ii) above) shall survive. After any such
irrevocable deposit, the Trustee upon request shall acknowledge in writing the
discharge of the Company's obligations under the Notes and this Indenture except
for those surviving obligations specified above.
SECTION 8.02. DEFEASANCE AND DISCHARGE OF INDENTURE. The Company will
be deemed to have paid and will be discharged from any and all obligations in
respect of the Notes on the 123rd day after the date of the deposit referred to
in clause (A) of this Section 8.02, and the provisions of this Indenture will no
longer be in effect with respect to the Notes, and the Trustee, at the expense
of the Company, shall execute proper instruments acknowledging the same if:
(A) with reference to this Section 8.02, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section
7.10) and conveyed all right, title and interest to the Trustee for the
benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged to the Trustee for the benefit of
the Holders as security for payment of the principal of, premium, if
any, and interest, if any, on the Notes, and dedicated solely to, the
benefit of the Holders, in and to (1) money in an amount, (2) U.S.
Government Obligations that, through
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the payment of interest, premium, if any, and principal in respect
thereof in accordance with their terms, will provide, not later than
one day before the due date of any payment referred to in this clause
(A), money in an amount or (3) a combination thereof in an amount
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, without
consideration of the reinvestment of such interest and after payment of
all federal, state and local taxes or other charges and assessments in
respect thereof payable by the Trustee, the principal of, premium, if
any, and interest on the outstanding Notes on the Stated Maturity of
such principal or interest; provided that the Trustee shall have been
irrevocably instructed to apply such money or the proceeds of such U.S.
Government Obligations to the payment of such principal, premium, if
any, and interest with respect to the Notes;
(B) the Company has delivered to the Trustee (1) either (x) an
Opinion of Counsel to the effect that Holders will not recognize
income, gain or loss for federal income tax purposes as a result of the
Company's exercise of its option under this Section 8.02 and will be
subject to federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such option had
not been exercised, which Opinion of Counsel shall be based upon (and
accompanied by a copy of) a ruling of the Internal Revenue Service to
the same effect unless there has been a change in applicable federal
income tax law after the Closing Date such that a ruling is no longer
required or (y) a ruling directed to the Trustee received from the
Internal Revenue Service to the same effect as the aforementioned
Opinion of Counsel and (2) an Opinion of Counsel to the effect that the
creation of the defeasance trust does not violate the Investment
Company Act of 1940 and that after the passage of 123 days following
the deposit (except, with respect to any trust funds for the account of
any Holder who may be deemed to be an "insider" for purposes of the
United States Bankruptcy Code, after one year following the deposit),
the trust funds will not be subject to the effect of Section 547 of the
United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law in a case commenced by or against the Company under either
such statute, and either (I) the trust funds will no longer remain the
property of the Company (and therefore will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally) or (II) if a court
were to rule under any such law in any case or proceeding that the
trust funds remained property of the Company, (a) assuming such trust
funds remained in the possession of the Trustee prior to such court
ruling to the extent not paid to the Holders, the Trustee will hold,
for the benefit of the Holders, a valid and perfected security interest
in such trust funds that is not avoidable in bankruptcy or otherwise
except for the effect of Section 552(b) of the United States Bankruptcy
Code on interest on the trust funds accruing after the commencement of
a case under such statute and (b) the Holders will be entitled to
receive adequate protection of their interests in such trust funds if
such trust funds are used in such case or proceeding;
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(C) immediately after giving effect to such deposit, on a pro
forma basis, no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or during the period ending on
the 123rd day after such date of such deposit, and such deposit shall
not result in a breach or violation of, or constitute a default under,
this Indenture or any other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound and is permitted by Article Ten;
(D) if the Notes are then listed on a national securities
exchange, the Company has delivered to the Trustee an Opinion of
Counsel to the effect that the Notes will not be delisted as a result
of such deposit, defeasance and discharge; and
(E) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the 123-day (or one
year) period referred to in clause (B)(2) of this Section 8.02, none of the
Company's obligations under this Indenture shall be discharged. Subsequent to
the end of such 123-day (or one year) period with respect to this Section 8.02,
the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08,
2.09, 2.14, 4.01, 4.02, 8.04, 8.05, 8.06 and the rights, powers, trusts, duties
and immunities of the Trustee hereunder and Article Ten (with respect to
payments in respect of Senior Subordinated Obligations other than with the
assets held in trust as described in this Section 8.02) shall survive until the
Notes are no longer outstanding. Thereafter, only the Company's obligations in
Sections 7.07, 8.04, 8.05 and 8.06 shall survive. If and when a ruling from the
Internal Revenue Service or an Opinion of Counsel referred to in clause (B)(1)
of this Section 8.02 is able to be provided specifically without regard to, and
not in reliance upon, the continuance of the Company's obligations under Section
4.01, then the Company's obligations under such Section 4.01 shall cease upon
delivery to the Trustee of such ruling or Opinion of Counsel and compliance with
the other conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Notes and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 8.03. DEFEASANCE OF CERTAIN OBLIGATIONS. The Company may omit
to comply with any term, provision or condition set forth in clauses (iii) and
(iv) of Section 5.01 and Sections 4.03 through 4.11 and clause (c) of Section
6.01 with respect to clauses (iii) and (iv) of Section 5.01, clause (d) of
Section 6.01 with respect to Sections 4.01, 4.02 and 4.12 through 4.19 and
clauses (e) and (f) of Section 6.01 shall be deemed not to be Events of Default
and Article Ten
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shall not apply to the money and/or U.S. Government Obligations held by the
trust referred to in clause (i) below, in each case with respect to the
outstanding Notes if:
(i) with reference to this Section 8.03, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section
7.10) and conveyed all right, title and interest to the Trustee for the
benefit of the Holders, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee as trust
funds in trust, specifically pledged to the Trustee for the benefit of
the Holders as security for payment of the principal of, premium, if
any, and interest, if any, on the Notes, and dedicated solely to, the
benefit of the Holders, in and to (A) money in an amount, (B) U.S.
Government Obligations that, through the payment of interest, premium,
if any, and principal in respect thereof in accordance with their
terms, will provide, not later than one day before the due date of any
payment referred to in this clause (i), money in an amount or (C) a
combination thereof in an amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of the reinvestment of such interest
and after payment of all federal, state and local taxes or other
charges and assessments in respect thereof payable by the Trustee, the
principal of, premium, if any, and interest on the outstanding Notes on
the Stated Maturity of such principal or interest; provided that the
Trustee shall have been irrevocably instructed to apply such money or
the proceeds of such U.S. Government Obligations to the payment of such
principal, premium, if any, and interest with respect to the Notes;
(ii) the Company has delivered to the Trustee an Opinion of
Counsel to the effect that (A) the creation of the defeasance trust
does not violate the Investment Company Act of 1940, (B) after the
passage of 123 days following the deposit (except, with respect to any
trust funds for the account of any Holder who may be deemed to be an
"insider" for purposes of the United States Bankruptcy Code, after one
year following the deposit), the trust funds will not be subject to the
effect of Section 547 of the United States Bankruptcy Code or Section
15 of the New York Debtor and Creditor Law in a case commenced by or
against the Company under either such statute, and either (1) the trust
funds will no longer remain the property of the Company (and therefore
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally) or (2) if a court were to rule under any such law in any
case or proceeding that the trust funds remained property of the
Company, (x) assuming such trust funds remained in the possession of
the Trustee prior to such court ruling to the extent not paid to the
Holders, the Trustee will hold, for the benefit of the Holders, a valid
and perfected security interest in such trust funds that is not
avoidable in bankruptcy or otherwise (except for the effect of Section
552(b) of the United States Bankruptcy Code on interest on the trust
funds accruing after the commencement of a case under such statute) and
(y) the Holders will be entitled to receive adequate protection of
their interests in such
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trust funds if such trust funds are used in such case or proceeding,
(C) the Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit and defeasance of
certain covenants and Events of Default and will be subject to federal
income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had
not occurred and (D) the Trustee, for the benefit of the Holders, has a
valid first-priority security interest in the trust funds;
(iii) immediately after giving effect to such deposit on a pro
forma basis, no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or during the period ending on
the 123rd day after such date of such deposit, and such deposit shall
not result in a breach or violation of, or constitute a default under,
this Indenture or any other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound and is permitted by Article Ten;
(iv) if the Notes are then listed on a national securities
exchange, the Company has delivered to the Trustee an Opinion of
Counsel to the effect that the Notes will not be delisted as a result
of such deposit, defeasance and discharge; and
(v) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.03 have been complied with.
SECTION 8.04. APPLICATION OF TRUST MONEY. Subject to Section 8.06, the
Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the case may be,
and shall apply the deposited money and the money from U.S. Government
Obligations in accordance with the Notes and this Indenture to the payment of
principal of, premium, if any, and interest on the Notes; but such money need
not be segregated from other funds except to the extent required by law.
SECTION 8.05. REPAYMENT TO COMPANY. Subject to Sections 7.07, 8.01,
8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay to the
Company upon request set forth in an Officers' Certificate any excess money held
by them at any time and thereupon shall be relieved from all liability with
respect to such money. The Trustee and the Paying Agent shall pay to the Company
upon request any money held by them for the payment of principal, premium, if
any, or interest that remains unclaimed for two years; provided that the Trustee
or Paying Agent before being required to make any payment may cause to be
published at the expense of the Company once in a newspaper of general
circulation in The City of New York or mail to each Holder entitled to such
money at such Holder's address (as set forth in the Security Register) notice
that such money remains unclaimed and that after a date specified therein (which
shall be at least 30 days from the date of such publication or mailing) any
unclaimed balance of such money then remaining will be repaid to the Company.
After payment to the Company, Holders entitled to
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such money must look to the Company for payment as general creditors unless an
applicable law designates another Person, and all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with Section
8.01, 8.02 or 8.03, as the case may be, by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Company's
obligations under this Indenture and the Notes shall be revived and reinstated
as though no deposit had occurred pursuant to Section 8.01, 8.02 or 8.03, as the
case may be, until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with Section
8.01, 8.02 or 8.03, as the case may be; provided that, if the Company has made
any payment of principal of, premium, if any, or interest on any Notes because
of the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money or
U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company, when authorized
by a resolution of its Board of Directors (as evidenced by a Board Resolution
delivered to the Trustee), and the Trustee may amend or supplement this
Indenture or the Notes without notice to or the consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency in this
Indenture; provided that such amendments or supplements shall not, in
the good faith opinion of the Board of Directors as evidenced by a
Board Resolution, adversely affect the interests of the Holders in any
material respect;
(2) to comply with Article Five;
(3) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA;
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee;
(5) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
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(6) to add one or more subsidiary guarantees on the terms
required by this Indenture; or
(7) to make any change that, in the good faith opinion of the
Board of Directors as evidenced by a Board Resolution, does not
materially and adversely affect the rights of any Holder.
SECTION 9.02. WITH CONSENT OF HOLDERS. Subject to Sections 6.04 and
6.07 and without prior notice to the Holders, the Company, when authorized by
its Board of Directors (as evidenced by a Board Resolution delivered to the
Trustee), and the Trustee may amend this Indenture and the Notes with the
written consent of the Holders of a majority in aggregate principal amount of
the Notes then outstanding, and the Holders of a majority in aggregate principal
amount of the Notes then outstanding by written notice to the Trustee may waive
future compliance by the Company with any provision of this Indenture or the
Notes.
Notwithstanding the provisions of this Section 9.02, without the
consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note;
(ii) reduce the principal amount of, premium, if any, or
interest on any Note;
(iii) change any place or currency of payment of principal of,
premium, if any, or interest on, any Note;
(iv) impair the right to institute suit for the enforcement of
any payment on or after the Stated Maturity (or, in the case of
redemption, on or after the Redemption Date) on any Note;
(v) reduce the percentage or principal amount of outstanding
Notes the consent of whose Holders is necessary to modify or amend this
Indenture or to waive compliance with certain provisions of or certain
Defaults under this Indenture;
(vi) waive a default in the payment of principal of, premium, if
any, or interest on, any Note;
(vii) modify any of the provisions of this Section 9.02, except
to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each outstanding Note affected thereby; or
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(viii) modify any of the provisions of Article Ten in a manner
adverse to the Holders.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. The Company will
mail supplemental indentures to Holders upon request. Any failure of the Company
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture or waiver.
SECTION 9.03. REVOCATION AND EFFECT OF CONSENT. Until an amendment or
waiver becomes effective, a consent to it by a Holder is a continuing consent by
the Holder and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the Note of the consenting Holder, even if notation
of the consent is not made on any Note. However, any such Holder or subsequent
Holder may revoke the consent as to its Note or portion of its Note. Such
revocation shall be effective only if the Trustee receives the notice of
revocation before the date the amendment, supplement or waiver becomes
effective. An amendment, supplement or waiver shall become effective on receipt
by the Trustee of written consents from the Holders of the requisite percentage
in principal amount of the outstanding Notes.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
two sentences of the immediately preceding paragraph, those persons who were
Holders at such record date (or their duly designated proxies) and only those
persons shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue to
be Holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder unless it is of the type described in the second paragraph of
Section 9.02. In case of an amendment or waiver of the type described in the
second paragraph of Section 9.02, the amendment or waiver shall bind each Holder
who has consented to it and every subsequent Holder of a Note that evidences the
same indebtedness as the Note of the consenting Holder.
SECTION 9.04. NOTATION ON OR EXCHANGE OF NOTES. If an amendment,
supplement or waiver changes the terms of a Note, the Trustee may require the
Holder to deliver such Note to the Trustee. At the Company's expense, the
Trustee may place an appropriate notation on the Note about the changed terms
and return it to the Holder and the Trustee may place an appropriate
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notation on any Note thereafter authenticated. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the Note shall issue and
the Trustee shall authenticate a new Note that reflects the changed terms.
Failure to make the appropriate notation, or issue a new Note, shall not affect
the validity and effect of such amendment, supplement or waiver.
SECTION 9.05. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture and that it will be valid and binding upon the Company. Subject to the
preceding sentence, the Trustee shall sign such amendment, supplement or waiver
if the same does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. The Trustee may, but shall not be obligated to,
execute any such amendment, supplement or waiver that affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 9.06. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental
indenture executed pursuant to this Article Nine shall conform to the
requirements of the TIA as then in effect.
ARTICLE TEN
SUBORDINATION OF NOTES
SECTION 10.01. NOTES SUBORDINATED TO SENIOR INDEBTEDNESS. The Company
and the Trustee each covenants and agrees, and each Holder, by its acceptance of
a Note, likewise covenants and agrees that all Notes shall be issued subject to
the provisions of this Article Ten; and each Person holding any Note, whether
upon original issue or upon transfer, assignment or exchange thereof, accepts
and agrees that Senior Subordinated Obligations shall, to the extent and in the
manner set forth in this Article Ten, be subordinated in right of payment to the
prior payment in full, in cash or cash equivalents, of all existing and future
Senior Indebtedness.
SECTION 10.02. NO PAYMENT ON NOTES IN CERTAIN CIRCUMSTANCES. (a) No
direct or indirect payment by or on behalf of the Company of Senior Subordinated
Obligations (other than with the money, securities or proceeds held under any
defeasance trust established in accordance with this Indenture), whether
pursuant to the terms of the Notes or upon acceleration or otherwise shall be
made if, at the time of such payment, there exists a default in the payment of
all or any portion of the obligations on any Senior Indebtedness of the Company
and such default shall not have been cured or waived or the benefits of this
sentence waived by or on behalf of the holders of such Senior Indebtedness.
(b) During the continuance of any other event of default with respect
to any Designated Senior Indebtedness pursuant to which the maturity thereof may
be accelerated, upon receipt by
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the Trustee of written notice from the trustee or other representative for the
holders of such Designated Senior Indebtedness (or the holders of at least a
majority in principal amount of such Designated Senior Indebtedness then
outstanding), no payment of Senior Subordinated Obligations (other than with the
money, securities or proceeds held under any defeasance trust established in
accordance with this Indenture) may be made by or on behalf of the Company upon
or in respect of the Notes for a period (a "PAYMENT BLOCKAGE PERIOD") commencing
on the date of receipt of such notice and ending 179 days thereafter (unless, in
each case, such Payment Blockage Period shall be terminated by written notice to
the Trustee from such trustee of, or other representatives for, such holders or
by payment in full in cash or cash equivalents of such Designated Senior
Indebtedness or such event of default has been cured or waived). Not more than
one Payment Blockage Period may be commenced with respect to the Notes during
any period of 360 consecutive days. Notwithstanding anything in this Indenture
to the contrary, there must be 180 consecutive days in any 360-day period in
which no Payment Blockage Period is in effect. No event of default (other than
an event of default pursuant to the financial maintenance covenants under the
Credit Agreement) that existed or was continuing (it being acknowledged that any
subsequent action that would give rise to an event of default pursuant to any
provision under which an event of default previously existed or was continuing
shall constitute a new event of default for this purpose) on the date of the
commencement of any Payment Blockage Period shall be, or shall be made, the
basis for the commencement of a second Payment Blockage Period by the
representative for, or the holders of, such Designated Senior Indebtedness,
whether or not within a period of 360 consecutive days, unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days.
(c) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 10.02(a) or 10.02(b) of this Indenture, the Trustee shall promptly
notify the holders of Senior Indebtedness of such prohibited payment and such
payment shall be held in trust for the benefit of, and shall be paid over or
delivered to, the holders of Senior Indebtedness or their respective
representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Indebtedness may have been issued, as their respective
interests may appear, but only to the extent that, upon notice from the Trustee
to the holders of Senior Indebtedness that such prohibited payment has been
made, the holders of the Senior Indebtedness (or their representative or
representatives of a trustee) within 30 days of receipt of such notice from the
Trustee notify the Trustee of the amounts then due and owing on the Senior
Indebtedness, if any, and only the amounts specified in such notice to the
Trustee shall be paid to the holders of Senior Indebtedness and any excess above
such amounts due and owing on Senior Indebtedness shall be paid to the Company.
SECTION 10.03. PAYMENT OVER PROCEEDS UPON DISSOLUTION, ETC. (a) Upon
any payment or distribution of assets or securities of the Company of any kind
or character, whether in cash, property or securities (other than with the
money, securities or proceeds held under any defeasance trust established in
accordance with this Indenture), in connection with any dissolution or winding
up or total or partial liquidation or reorganization of the Company, whether
voluntary or
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involuntary, or in bankruptcy, insolvency, receivership or other proceedings or
other marshalling of assets for the benefit of creditors, all amounts due or to
become due upon all Senior Indebtedness shall first be paid in full, in cash or
cash equivalents, before the Holders or the Trustee on their behalf shall be
entitled to receive any payment by (or on behalf of) the Company on account of
Senior Subordinated Obligations, or any payment to acquire any of the Notes for
cash, property or securities, or any distribution with respect to the Notes of
any cash, property or securities. Before any payment may be made by, or on
behalf of, the Company on any Senior Subordinated Obligations (other than with
the money, securities or proceeds held under any defeasance trust established in
accordance with this Indenture), in connection with any such dissolution,
winding up, liquidation or reorganization, any payment or distribution of assets
or securities for the Company of any kind or character, whether in cash,
property or securities, to which the Holders or the Trustee on their behalf
would be entitled, but for the provisions of this Article Ten, shall be made by
the Company or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person making such payment or distribution or by the
Holders or the Trustee if received by them or it, directly to the holders of
Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders) or their representatives or
to any trustee or trustees under any indenture pursuant to which any such Senior
Indebtedness may have been issued, as their respective interests appear, to the
extent necessary to pay all such Senior Indebtedness in full, in cash or cash
equivalents after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Indebtedness.
(b) To the extent any payment of Senior Indebtedness (whether by or
on behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee or other
similar Person, the Senior Indebtedness or part thereof originally intended to
be satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred. To the extent the obligation to repay any Senior Indebtedness
is declared to be fraudulent, invalid, or otherwise set aside under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then
the obligation so declared fraudulent, invalid or otherwise set aside (and all
other amounts that would come due with respect thereto had such obligation not
been so affected) shall be deemed to be reinstated and outstanding as Senior
Indebtedness for all purposes hereof as if such declaration, invalidity or
setting aside had not occurred.
(c) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Company of any kind or character, whether in cash, property
or securities, shall be received by the Trustee or any Holder at a time when
such payment or distribution is prohibited by Section 10.03(a) of this Indenture
and before all obligations in respect of Senior Indebtedness are paid in full,
in cash or cash equivalents,
<PAGE> 84
77
such payment or distribution shall be received and held in trust for the benefit
of, and shall be paid over or delivered to, the holders of Senior Indebtedness
(pro rata to such holders on the basis of such respective amount of Senior
Indebtedness held by such holders) or their representatives, or to the trustee
or trustees under any indenture pursuant to which any such Senior Indebtedness
may have been issued, as their respective interests appear, for application to
the payment of Senior Indebtedness remaining unpaid until all such Senior
Indebtedness has been paid in full, in cash or cash equivalents, after giving
effect to any concurrent payment, distribution or provision therefor to or for
the holders of such Senior Indebtedness.
(d) For purposes of this Section 10.03, the words "cash, property or
securities" shall not be deemed to include, so long as the effect of this clause
is not to cause the Notes to be treated in any case or proceeding or similar
event described in this Section 10.03 as part of the same class of claims as the
Senior Indebtedness or any class of claims pari passu with, or senior to, the
Senior Indebtedness for any payment or distribution, securities of the Company
or any other corporation provided for by a plan of reorganization or
readjustment that are subordinated, at least to the extent that the Notes are
subordinated, to the payment of all Senior Indebtedness then outstanding;
provided that (1) if a new corporation results from such reorganization or
readjustment, such corporation assumes the Senior Indebtedness and (2) the
rights of the holders of the Senior Indebtedness are not, without the consent of
such holders, altered by such reorganization or readjustment. The consolidation
of the Company with, or the merger of the Company with or into, another
corporation or the liquidation or dissolution of the Company following the sale,
conveyance, transfer, lease or other disposition of all or substantially all of
its property and assets to another corporation upon the terms and conditions
provided in Article Five of this Indenture shall not be deemed a dissolution,
winding up, liquidation or reorganization for the purposes of this Section 10.03
if such other corporation shall, as a part of such consolidation, merger, sale,
conveyance, transfer, lease or other disposition, comply (to the extent
required) with the conditions stated in Article Five of this Indenture.
SECTION 10.04. SUBROGATION. (a) Upon the payment in full of all Senior
Indebtedness in cash or cash equivalents, the Holders shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company made on such Senior
Indebtedness until the principal of, premium, if any, and interest on the Notes
shall be paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any cash, property or
securities to which the Holders or the Trustee on their behalf would be entitled
except for the provisions of this Article Ten, and no payment pursuant to the
provisions of this Article Ten to the holders of Senior Indebtedness by Holders
or the Trustee on their behalf shall, as between the Company, its creditors
other than holders of Senior Indebtedness, and the Holders, be deemed to be a
payment by the Company to or on account of the Senior Indebtedness. It is
understood that the provisions of this Article Ten are intended solely for the
purpose of defining the relative rights of the Holders, on the one hand, and the
holders of the Senior Indebtedness, on the other hand.
<PAGE> 85
78
(b) If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article Ten shall
have been applied, pursuant to the provisions of this Article Ten, to the
payment of all amounts payable under Senior Indebtedness, then, and in such
case, the Holders shall be entitled to receive from the holders of such Senior
Indebtedness any payments or distributions received by such holders of Senior
Indebtedness in excess of the amount required to make payment in full, in cash
or cash equivalents, of such Senior Indebtedness of such holders.
SECTION 10.05. OBLIGATIONS OF COMPANY UNCONDITIONAL. (a) Nothing
contained in this Article Ten or elsewhere in this Indenture or in the Notes is
intended to or shall impair, as among the Company and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the principal of, premium, if any, and interest on the Notes as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders and creditors of
the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Holders or the Trustee on their behalf
from exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this Article Ten of
the holders of the Senior Indebtedness.
(b) Without limiting the generality of the foregoing, nothing
contained in this Article Ten will restrict the right of the Trustee or the
Holders to take any action to declare the Notes to be due and payable prior to
their Stated Maturity pursuant to Section 6.01 of this Indenture or to pursue
any rights or remedies hereunder; provided, however, that all Senior
Indebtedness then due and payable or thereafter declared to be due and payable
shall first be paid in full, in cash or cash equivalents, before the Holders or
the Trustee are entitled to receive any direct or indirect payment from the
Company of Senior Subordinated Obligations.
SECTION 10.06. NOTICE TO TRUSTEE. (a) The Company shall give prompt
written notice to the Trustee of any fact known to the Company that would
prohibit the making of any payment to or by the Trustee in respect of the Notes
pursuant to the provisions of this Article Ten. The Trustee shall not be charged
with the knowledge of the existence of any default or event of default with
respect to any Senior Indebtedness or of any other facts that would prohibit the
making of any payment to or by the Trustee unless and until a Responsible
Officer of the Trustee shall have received notice in writing at its Corporate
Trust Office to that effect signed by an Officer of the Company, or by a holder
of Senior Indebtedness or trustee or agent thereof; and prior to the receipt of
any such written notice, the Trustee shall, subject to Article Seven, be
entitled to assume that no such facts exist; provided that, if the Trustee shall
not have received the notice provided for in this Section 10.06 at least two
Business Days prior to the date upon which, by the terms of this Indenture, any
monies shall become payable for any purpose (including, without limitation, the
payment of the principal of, premium, if any, or interest on any Note), then,
notwithstanding anything herein to the contrary, the Trustee shall have full
power and authority to receive any monies from the Company and to apply the same
to the purpose for which they were received, and
<PAGE> 86
79
shall not be affected by any notice to the contrary that may be received by it
on or after such prior date except for an acceleration of the Notes prior to
such application. Nothing contained in this Section 10.06 shall limit the right
of the holders of Senior Indebtedness to recover payments as contemplated by
this Article Ten. The foregoing shall not apply if the Paying Agent is the
Company. The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of any
Senior Indebtedness (or a trustee on behalf of, or other representative of, such
holder) to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee or representative on behalf of any such holder.
(b) In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article Ten, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article Ten and, if such evidence is not furnished to the
Trustee, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 10.07. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING
AGENT. Upon any payment or distribution of assets or securities referred to in
this Article Ten, the Trustee and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which bankruptcy,
dissolution, winding up, liquidation or reorganization proceedings are pending,
or upon a certificate of the receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar Person making such payment or distribution,
delivered to the Trustee or to the Holders for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of the Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article Ten.
SECTION 10.08. TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS. (a) The
Trustee and any Paying Agent shall be entitled to all the rights set forth in
this Article Ten with respect to any Senior Indebtedness that may at any time be
held by it in its individual or any other capacity to the same extent as any
other holder of Senior Indebtedness and nothing in this Indenture shall deprive
the Trustee or any Paying Agent of any of its rights as such holder.
(b) With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness (except as provided in
Sections 10.02(c) and 10.03(c) of this Indenture) and shall not be liable to any
such holders if the Trustee shall in good faith mistakenly pay over or
distribute to Holders of Notes or to the
<PAGE> 87
80
Company or to any other person cash, property or securities to which any holders
of Senior Indebtedness shall be entitled by virtue of this Article Ten or
otherwise.
SECTION 10.09. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS
OF THE COMPANY OR HOLDERS OF SENIOR INDEBTEDNESS. No right of any present or
future holders of any Senior Indebtedness to enforce subordination as provided
in this Article Ten will at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company
with the terms of this Indenture, regardless of any knowledge thereof that any
such holder may have or otherwise be charged with. The provisions of this
Article Ten are intended to be for the benefit of, and shall be enforceable
directly by, the holders of Senior Indebtedness.
SECTION 10.10. HOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE SUBORDINATION OF
NOTES. Each Holder by his acceptance of any Notes authorizes and expressly
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article Ten, and
appoints the Trustee his attorney-in-fact for such purposes, including, in the
event of any dissolution, winding up, liquidation or reorganization of the
Company (whether in bankruptcy, insolvency, receivership, reorganization or
similar proceedings or upon an assignment for the benefit of creditors or
otherwise) tending towards liquidation of the property and assets of the
Company, the filing of a claim for the unpaid balance of its Notes in the form
required in those proceedings. If the Trustee does not file a proper claim or
proof in indebtedness in the form required in such proceeding at least 30 days
before the expiration of the time to file such claim or claims, each holder of
Senior Indebtedness is hereby authorized to file an appropriate claim for and on
behalf of the Holders.
SECTION 10.11. NOT TO PREVENT EVENTS OF DEFAULT. The failure to make a
payment on account of principal of, premium, if any, or interest on the Notes by
reason of any provision of this Article Ten will not be construed as preventing
the occurrence of an Event of Default.
SECTION 10.12. TRUSTEE'S COMPENSATION NOT PREJUDICED. Nothing in this
Article Ten will apply to amounts due to the Trustee pursuant to other sections
of this Indenture, including Section 7.07.
SECTION 10.13. NO WAIVER OF SUBORDINATION PROVISIONS. Without in any
way limiting the generality of Section 10.09, the holders of Senior Indebtedness
may, at any time and from time to time, without the consent of or notice to the
Trustee or the Holders, without incurring responsibility to the Holders and
without impairing or releasing the subordination provided in this Article Ten or
the obligations hereunder of the Holders to the holders of Senior Indebtedness,
do any one or more of the following: (a) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding or secured; (b) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing
<PAGE> 88
81
Senior Indebtedness; (c) release any Person liable in any manner for the
collection of Senior Indebtedness; and (d) exercise or refrain from exercising
any rights against the Company and any other Person.
SECTION 10.14. PAYMENTS MAY BE PAID PRIOR TO DISSOLUTION. Nothing
contained in this Article Ten or elsewhere in this Indenture shall prevent (i)
the Company, except under the conditions described in Section 10.02 or 10.03,
from making payments of principal of, premium, if any, and interest on the
Notes, or from depositing with the Trustee any money for such payments, or (ii)
the application by the Trustee of any money deposited with it for the purpose of
making such payments of principal of, premium, if any, and interest on the Notes
to the holders entitled thereto unless, at least two Business Days prior to the
date upon which such payment becomes due and payable, the Trustee shall have
received the written notice provided for in Section 10.02(b) of this Indenture
(or there shall have been an acceleration of the Notes prior to such
application) or in Section 10.06 of this Indenture. The Company shall give
prompt written notice to the Trustee of any dissolution, winding up, liquidation
or reorganization of the Company.
SECTION 10.15. CONSENT OF HOLDERS OF SENIOR INDEBTEDNESS UNDER THE
CREDIT AGREEMENT. The provisions of this Article Ten (including the definitions
contained in this Article and references to this Article contained in this
Indenture) shall not be amended in a manner that would adversely affect the
rights of the holders of Senior Indebtedness under the Credit Agreement, and no
such amendment shall become effective unless the holders of Senior Indebtedness
under the Credit Agreement shall have consented (in accordance with the
provisions of the Credit Agreement) to such amendment. The Trustee shall be
entitled to receive and rely on an Officers' Certificate stating that such
consent has been given.
SECTION 10.16. TRUST MONEYS NOT SUBORDINATED. Notwithstanding anything
contained herein to the contrary, payments from money or the proceeds of U.S.
Government Obligations held in trust under Article Eight by the Trustee for the
payment of principal of, premium, if any, and interest on the Notes shall not be
subordinated to the prior payment of any Senior Indebtedness (provided that, at
the time deposited, such deposit did not violate any then outstanding Senior
Indebtedness), and none of the Holders shall be obligated to pay over any such
amount to any holder of Senior Indebtedness.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT OF 1939. Prior to the effectiveness
of the Registration Statement, this Indenture shall incorporate and be governed
by the provisions of the TIA that are required to be part of and to govern
indentures qualified under the TIA. After the effectiveness of the Registration
Statement, this Indenture shall be subject to the provisions of the
<PAGE> 89
82
TIA that are required to be a part of this Indenture and shall, to the extent
applicable, be governed by such provisions.
SECTION 11.02. NOTICES. Any notice or communication shall be
sufficiently given if in writing and delivered in person, mailed by first-class
mail or sent by telecopier transmission addressed as follows:
IF TO THE COMPANY:
Primark Corporation
100 Winter Street
Suite 4300
Waltham, MA 02154
Telecopier No.: [____________]
Attention: Stephen Curran
IF TO THE TRUSTEE:
State Street Bank and Trust Company
Two International Place
Boston, MA 02110
Telecopier No.: (617) 664-5371
Attention: Corporate Trust Department
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to it at
its address as it appears on the Security Register by first-class mail and shall
be sufficiently given to him if so mailed within the time prescribed. Any notice
or communication shall also be so mailed to any Person described in TIA Section
313(c), to the extent required by the TIA. Copies of any such communication or
notice to a Holder shall also be mailed to the Trustee and each Agent at the
same time.
Failure to mail a notice or communication to a Holder as provided
herein or any defect in any such notice or communication shall not affect its
sufficiency with respect to other Holders. Except for a notice to the Trustee,
which is deemed given only when received, and except as otherwise provided in
this Indenture, if a notice or communication is mailed in the manner provided in
this Section 11.02, it is duly given, whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such
<PAGE> 90
83
waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).
SECTION 11.03. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of such
Counsel, all such conditions precedent have been complied with.
SECTION 11.04. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(i) a statement that each person signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion
contained in such certificate or opinion is based;
(iii) a statement that, in the opinion of each such person, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with;
provided, however, that, with respect to matters of fact, an Opinion of
Counsel may rely on an Officers' Certificate or certificates of public
officials.
<PAGE> 91
84
SECTION 11.05. RULES BY TRUSTEE, PAYING AGENT OR REGISTRAR. The Trustee
may make reasonable rules for action by or at a meeting of Holders. The Paying
Agent or Registrar may make reasonable rules for its functions.
SECTION 11.06. PAYMENT DATE OTHER THAN A BUSINESS DAY. If an Interest
Payment Date, Redemption Date, Payment Date, Stated Maturity or date of maturity
of any Note shall not be a Business Day, then payment of principal of, premium,
if any, or interest on such Note, as the case may be, need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Payment Date or Redemption
Date, or at the Stated Maturity or date of maturity of such Note; provided that
no interest shall accrue for the period from and after such Interest Payment
Date, Payment Date, Redemption Date, Stated Maturity or date of maturity, as the
case may be.
SECTION 11.07. GOVERNING LAW. This Indenture and the Notes shall be
governed by the laws of the State of New York. The Trustee, the Company and the
Holders agree to submit to the jurisdiction of the courts of the State of New
York in any action or proceeding arising out of or relating to this Indenture or
the Notes.
SECTION 11.08. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or any Subsidiary of the Company. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 11.09. NO RECOURSE AGAINST OTHERS. No recourse for the payment
of the principal of, premium, if any, or interest on any of the Notes, or for
any claim based thereon or otherwise in respect thereof, and no recourse under
or upon any obligation, covenant or agreement of the Company contained in this
Indenture or in any of the Notes, or because of the creation of any Indebtedness
represented thereby, shall be had against any incorporator or against any past,
present or future partner, stockholder, other equityholder, officer, director,
employee or controlling person, as such, of the Company or of any successor
Person, either directly or through the Company or any successor Person, whether
by virtue of any constitution, statute or rule of law, or by the enforcement of
any assessment or penalty or otherwise; it being expressly understood that all
such liability is hereby expressly waived and released as a condition of, and as
a consideration for, the execution of this Indenture and the issue of the Notes.
SECTION 11.10. SUCCESSORS. All agreements of the Company in this
Indenture and the Notes shall bind its successors. All agreements of the Trustee
in this Indenture shall bind its successor.
SECTION 11.11. DUPLICATE ORIGINALS. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
<PAGE> 92
85
SECTION 11.12. SEPARABILITY. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents,
Cross- Reference Table and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
and provisions hereof.
<PAGE> 93
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
PRIMARK CORPORATION
By: /s/ MICHAEL R. KARGULA
------------------------------------
Name: Michael R. Kargula
Title: Executive Vice President,
General Counsel and Secretary
STATE STREET BANK AND TRUST COMPANY
By: /s/ ROBERT J. DUNN
------------------------------------
Name: Robert J. Dunn
Title: Vice President
<PAGE> 94
EXHIBIT A
[FACE OF NOTE]
PRIMARK CORPORATION
9 1/4% Senior Subordinated Note Due 2008
[CUSIP] [CINS] [ISIN] [__________]
No. ____ $_________
PRIMARK CORPORATION, a Michigan corporation (the "Company", which term
includes any successor under the Indenture hereinafter referred to), for value
received, promises to pay to _____________, or its registered assigns, the
principal sum of ____________ ($____) on [________,____].
Interest Payment Dates: June 15 and December 15, commencing June 15,
1999.
Regular Record Dates: June 1 and December 1.
Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
<PAGE> 95
A-2
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
PRIMARK CORPORATION
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the 9 1/4% Senior Subordinated Notes Due 2008 described
in the within-mentionED Indenture.
Date: [________,____] STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: __________________________________
Authorized Signatory
<PAGE> 96
A-3
[REVERSE SIDE OF NOTE]
PRIMARK CORPORATION
9 1/4% Senior Subordinated Note Due 2008
1. PRINCIPAL AND INTEREST.
The Company will pay the principal of this Note on December 15, 2008.
The Company promises to pay interest on the principal amount of this
Note on each Interest Payment Date, as set forth below, at the rate per annum
shown above.
Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the June 1 or December 1 immediately preceding
the Interest Payment Date) on each Interest Payment Date, commencing June 15,
1999.
If an exchange offer (the "Exchange Offer") registered under the
Securities Act is not consummated and a shelf registration statement (the "Shelf
Registration Statement") under the Securities Act with respect to resales of the
Notes is not declared effective by the Commission, on or before June 15, 1999 in
accordance with the terms of the Registration Rights Agreement dated December
16, 1998 between the Company and Morgan Stanley & Co. Incorporated, BT Alex.
Brown Incorporated, NationsBanc Montgomery Securities LLC, A.G. Edwards & Sons,
Inc. and Chase Securities Inc., the annual interest rate borne by the Notes
shall be increased by 0.5% from the rate shown above accruing from June 21,
1999, payable in cash semiannually, in arrears, on each Interest Payment Date,
commencing December 15, 1999 until the Exchange Offer is consummated or the
Shelf Registration Statement is declared effective. The Holder of this Note is
entitled to the benefits of such Registration Rights Agreement.
Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from December 21, 1998;
provided that, if there is no existing default in the payment of interest and
this Note is authenticated between a Regular Record Date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such Interest Payment Date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
a rate per annum that is 2% in excess of the rate otherwise payable.
<PAGE> 97
A-4
2. METHOD OF PAYMENT.
The Company will pay interest (except defaulted interest) on the
principal amount of the Notes as provided above on each June 15 and December 15,
commencing June 15, 1999 to the persons who are Holders (as reflected in the
Security Register at the close of business on the June 1 or December 1
immediately preceding the Interest Payment Date), in each case, even if the Note
is canceled on registration of transfer or registration of exchange after such
record date; provided that, with respect to the payment of principal, the
Company will make payment to the Holder that surrenders this Note to a Paying
Agent on or after December 15, 2008.
The Company will pay principal, premium, if any, and as provided above,
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
principal, premium, if any, and interest by its check payable in such money. It
may mail an interest check to a Holder's registered address (as reflected in the
Security Register). If a payment date is a date other than a Business Day at a
place of payment, payment may be made at that place on the next succeeding day
that is a Business Day and no interest shall accrue for the intervening period.
3. PAYING AGENT AND REGISTRAR.
Initially, the Trustee will act as authenticating agent, Paying Agent
and Registrar. The Company may change any authenticating agent, Paying Agent or
Registrar without notice. The Company, any Subsidiary or any Affiliate of any of
them may act as Paying Agent, Registrar or co-Registrar.
4. INDENTURE; LIMITATIONS.
The Company issued the Notes under an Indenture dated as of
December 21, 1998 (the "Indenture"), between the Company and State Street Bank
and Trust Company, trustee (the "Trustee"). Capitalized terms herein are used as
defined in the Indenture unless otherwise indicated. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act. The Notes are subject to all such terms,
and Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control.
The Notes are general unsecured obligations of the Company.
The Company may, subject to Article Four of the Indenture and
applicable law, issue additional Notes under the Indenture.
<PAGE> 98
A-5
5. OPTIONAL REDEMPTION.
The Notes are redeemable, at the Company's option, in whole or in part,
at any time or from time to time, on or after December 15, 2003 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date), if redeemed during the 12- month period commencing
December 15 of the years set forth below:
YEAR REDEMPTION PRICE
---- ----------------
2003................ 104.625%
2004................ 103.083%
2005................ 101.542%
2006 and thereafter....... 100.000%
At any time prior to December 15, 2001, the Company may redeem up to
35% of the aggregate principal amount of the Notes with the Net Cash Proceeds of
one or more sales by the Company of its Capital Stock (other than Disqualified
Stock), at any time or from time to time in part, at a Redemption Price
(expressed as a percentage of principal amount) of 109.250%, plus accrued and
unpaid interest to the Redemption Date (subject to the rights of Holders of
record on the relevant Regular Record Date that is prior to the Redemption Date
to receive interest due on an Interest Payment Date); provided that (i) at least
65% of the aggregate principal amount of Notes originally issued on the Closing
Date remains outstanding after each such redemption and (ii) notice of any such
redemption shall be mailed within 60 days after the consummation of such sale or
sales.
Notes in original denominations larger than $1,000 may be redeemed in
part. On and after the Redemption Date, interest ceases to accrue on Notes or
portions of Notes called for redemption, unless the Company defaults in the
payment of the Redemption Price.
6. REPURCHASE UPON CHANGE OF CONTROL.
Upon the occurrence of any Change of Control, each Holder shall have
the right to require the repurchase of its Notes by the Company in cash pursuant
to the offer described in the Indenture at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (the "Payment Date").
A notice of such Change of Control will be mailed within 30 days after
any Change of Control occurs to each Holder at its last address as it appears in
the Security Register. Notes in original denominations larger than $1,000 may be
sold to the Company in part. On and after the
<PAGE> 99
A-6
Payment Date, interest ceases to accrue on Notes or portions of Notes
surrendered for purchase by the Company, unless the Company defaults in the
payment of the purchase price.
7. DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form without coupons in denominations of
$1,000 of principal amount and multiples of $1,000 in excess thereof. A Holder
may register the transfer or exchange of Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
or exchange of any Notes selected for redemption. Also, it need not register the
transfer or exchange of any Notes for a period of 15 days before the day of
mailing of a notice of redemption of Notes selected for redemption.
8. PERSONS DEEMED OWNERS.
A Holder shall be treated as the owner of a Note for all purposes.
9. UNCLAIMED MONEY.
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Notes (a) to redemption or maturity, the
Company will be discharged from the Indenture and the Notes, except in certain
circumstances for certain provisions thereof, and (b) to the Stated Maturity,
the Company will be discharged from certain covenants set forth in the
Indenture.
11. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the Notes then outstanding, and any existing default or
compliance with any provision may be waived with the consent of the Holders of
at least a majority in principal amount of the Notes then outstanding. Without
notice to or the consent of any Holder, the parties thereto may amend or
supplement the
<PAGE> 100
A-7
Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency and make any change that does not materially and adversely affect
the rights of any Holder.
12. RESTRICTIVE COVENANTS.
The Indenture imposes certain limitations on the ability of the Company
and its Restricted Subsidiaries, among other things, to Incur additional
Indebtedness, make Restricted Payments, suffer to exist restrictions on the
ability of Restricted Subsidiaries to make certain payments to the Company,
issue Capital Stock of Restricted Subsidiaries, Guarantee Indebtedness of the
Company, engage in transactions with Affiliates, suffer to exist or incur Liens,
Incur additional Senior Subordinated Indebtedness, use the proceeds from Asset
Sales, or merge, consolidate or transfer substantially all of its assets. Within
45 days after the end of each fiscal quarter (90 days after the end of the last
fiscal quarter of each year), the Company shall deliver to the Trustee an
Officers' Certificate stating whether or not the signers thereof know of any
Default or Event of Default under such restrictive covenants.
13. SUCCESSOR PERSONS.
When a successor person or other entity assumes all the obligations of
its predecessor under the Notes and the Indenture, the predecessor person will
be released from those obligations.
14. DEFAULTS AND REMEDIES.
Any of the following events constitutes an "Event of Default" under the
Indenture:
(a) default in the payment of principal of (or premium, if any,
on) any Note when the same becomes due and payable at maturity, upon
acceleration, redemption or otherwise;
(b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30
days;
(c) default in the performance or breach of the provisions of
Article Five or the failure to make or consummate an Offer to Purchase
in accordance with Section 4.11 or Section 4.12;
(d) the Company defaults in the performance of or breaches any
other covenant or agreement of the Company in this Indenture or under
the Notes (other than a default specified in clause (a), (b) or (c)
above) and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of
25% or more in aggregate principal amount of the Notes;
<PAGE> 101
A-8
(e) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Significant Subsidiary having an
outstanding principal amount of $10 million or more in the aggregate
for all such issues of all such Persons, whether such Indebtedness now
exists or shall hereafter be created, (I) an event of default that has
caused the holder thereof to declare such Indebtedness to be due and
payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or
annulled within 30 days of such acceleration and/or (II) the failure to
make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or
extended within 30 days of such payment default;
(f) any final judgment or order (not covered by insurance) for
the payment of money in excess of $10 million in the aggregate for all
such final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company or any Significant Subsidiary and shall
not be paid or discharged, and there shall be any period of 60
consecutive days following entry of the final judgment or order that
causes the aggregate amount for all such final judgments or orders
outstanding and not paid or discharged against all such Persons to
exceed $10 million during which a stay of enforcement of such final
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect;
(g) a court having jurisdiction in the premises enters a decree
or order for (A) relief in respect of the Company or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant
Subsidiary or for all or substantially all of the property and assets
of the Company or any Significant Subsidiary or (C) the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary
and, in each case, such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(h) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (B)
consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) effects any general assignment for the
benefit of creditors.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee may, and at the direction of the Holders of at least 25%
in aggregate principal amount of the Notes
<PAGE> 102
A-9
then outstanding shall, declare all the Notes to be due and payable. If a
bankruptcy or insolvency default with respect to the Company occurs and is
continuing, the Notes automatically become due and payable. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of at least a
majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power.
15. SUBORDINATION.
The payment of the Notes will, to the extent set forth in the
Indenture, be subordinated in right of payment to the prior payment in full, in
cash or cash equivalents, of all Senior Indebtedness.
16. TRUSTEE DEALINGS WITH THE COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from and perform services for the
Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
17. NO RECOURSE AGAINST OTHERS.
No incorporator or any past, present or future partner, stockholder,
other equityholder, officer, director, employee or controlling person, as such,
of the Company or of any successor Person shall have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
18. AUTHENTICATION.
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
19. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
<PAGE> 103
A-10
The Company will furnish a copy of the Indenture to any Holder upon
written request and without charge. Requests may be made to Primark Corporation,
1000 Winter Street, Suite 4300, Waltham, MA 02154; Attention: Stephen Curran.
<PAGE> 104
A-11
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
INSERT TAXPAYER IDENTIFICATION NO.
________________________________________________________________________________
Please print or typewrite name and address including zip code of assignee
________________________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing _________________________________________________________ attorney to
transfer said Note on the books of the Company with full power of substitution
in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL NOTES OTHER THAN EXCHANGE NOTES,
UNLEGENDED OFFSHORE GLOBAL NOTES AND
UNLEGENDED OFFSHORE PHYSICAL NOTES]
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date the Shelf Registration Statement is
declared effective or (ii) the end of the period referred to in Rule 144(k)
under the Securities Act, the undersigned confirms that without utilizing any
general solicitation or general advertising that:
[CHECK ONE]
[ ] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933 provided by Rule 144A
thereunder.
OR
[ ] (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
<PAGE> 105
A-12
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.08 of the Indenture shall have
been satisfied.
Date: ________________ ______________________________________________
NOTICE: The signature to this assignment must
correspond with the name as written upon the
face of the within- mentioned instrument in
every particular, without alteration or any
change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933 and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: ________________ ______________________________________________
NOTICE: To be executed by an executive officer
<PAGE> 106
A-13
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.11 or 4.12 of the Indenture, check the Box: |_|
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.11 or 4.12 of the Indenture, state the amount: $_________.
Date: ______________
Your Signature: ________________________________________________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee: ______________________________
<PAGE> 107
EXHIBIT B
FORM OF CERTIFICATE
______________, __
State State Street Bank and Trust Company
2 International Place, 4th Floor
Boston, MA 02110
Attention: Corporate Trust Department
Re: Primark Corporation (the "Company")
9 1/4% Senior Subordinated Notes Due 2008 (the "Notes")
-------------------------------------------------------
Dear Sirs:
This letter relates to U.S. $______________ principal amount of Notes
represented by a Note (the "Legended Note") which bears a legend outlining
restrictions upon transfer of such Legended Note. Pursuant to Section 2.02 of
the Indenture dated as of December 21, 1998 (the "Indenture") relating to the
Notes, we hereby certify that we are (or we will hold such securities on behalf
of) a person outside the United States to whom the Notes could be transferred in
accordance with Rule 904 of Regulation S promulgated under the U.S. Securities
Act of 1933. Accordingly, you are hereby requested to exchange the legended
certificate for an unlegended certificate representing an identical principal
amount of Notes, all in the manner provided for in the Indenture.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By: __________________________________
Authorized Signature
<PAGE> 108
EXHIBIT C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
______________, __
State State Street Bank and Trust Company
2 International Place, 4th Floor
Boston, MA 02110
Attention: Corporate Trust Department
Re: Primark Corporation (the "Company")
9 1/4% Senior Subordinated Notes Due 2008 (the "Notes")
-------------------------------------------------------
Dear Sirs:
In connection with our proposed purchase of $____________________
aggregate principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is subject
to certain restrictions and conditions set forth in the Indenture dated as
of December 21, 1998 (the "Indenture") relating to the Notes and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with such restrictions and
conditions and the Securities Act of 1933, amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered
or sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Notes within the time period referred to
in Rule 144(k) of the Securities Act, we will do so only (A) to the Company
or any subsidiary thereof, (B) in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined therein),
(C) to an institutional "accredited investor" (as defined below) that, prior
to such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to you and to the Company a signed letter substantially in
the form of this letter and, if such transfer is in respect of an aggregate
principal amount of Notes of less than $100,000, an opinion of counsel
acceptable to the Company that such transfer is in compliance with the
Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available) or
(F) pursuant to an effective registration statement under the Securities
Act, and we further agree to provide
<PAGE> 109
C-2
to any person purchasing any of the Notes from us a notice advising such
purchaser that resales of the Notes are restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we will be
required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company may reasonably require
to confirm that the proposed sale complies with the foregoing restrictions.
We further understand that the Notes purchased by us will bear a legend to
the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to bear
the economic risk of our or its investment.
5. We are acquiring the Notes purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By: ____________________________
Authorized Signature
<PAGE> 110
EXHIBIT D
Form of Certificate to Be Delivered in
Connection With Transfers Pursuant to Regulation S
--------------------------------------------------
______________, __
State State Street Bank and Trust Company
2 International Place, 4th Floor
Boston, MA 02110
Attention: Corporate Trust Department
Re: Primark Corporation (the "Company")
9 1/4% Senior Subordinated Notes Due 2008 (the "Notes")
-------------------------------------------------------
Dear Sirs:
In connection with our proposed sale of U.S.$______________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of 1933
and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the United
States in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferee]
By: ____________________________
Authorized Signature
<PAGE> 1
Exhibit 10.13
AMENDMENT TO TRANSACTION DOCUMENTS
THIS AMENDMENT, dated as of May 8, 1998, by and among PRIMARK
CORPORATION, a Michigan corporation (the "Borrower"), the Lenders party to the
Revolving Credit Agreement referred to below, the Lenders party to the Note
Backup Agreement referred to below (such agreements being referred to
collectively as the "Credit Facilities"), and MELLON BANK, N.A., a national
banking association, as Agent under each such Credit Facility.
RECITALS:
A. The Borrower has entered into (a) a Revolving Credit Agreement (as
amended, the "Revolving Credit Agreement") dated as of February 7, 1997 among
Primark Corporation (the "Borrower"), the Lenders parties thereto from time to
time, the Issuing Banks referred to therein, and Mellon Bank, N.A., as Agent,
and (b) a Note Backup Agreement (as amended, the "Note Backup Agreement") dated
as of February 7, 1997 among the Borrower, the Lenders parties thereto from time
to time, the Issuing Bank referred to therein, and Mellon Bank, N.A., as Agent.
The Credit Facilities have been amended by an Agreement dated as of March 6,
1998.
B. The parties hereto desire to amend further the Credit Facilities as
set forth herein.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1. CERTAIN ALLOWED STOCK REPURCHASES. Section 7.06(a)(i) of each Credit
Facility is amended to read as follows:
(i) Repurchases under this Section 7.06(a) shall not exceed
$150,000,000 in the aggregate from and after the Extension Date;
SECTION 2. EFFECTIVENESS AND EFFECT, ETC.
(a) This Amendment shall become effective when Mellon Bank, N.A., as Agent under
each Credit Facility, shall have received counterparts hereof duly executed by
the Borrower and by the "Required Lenders" and the "Agent" under each Credit
Facility.
(b) The Revolving Credit Agreement and the Note Backup Agreement, in the forms
initially executed and as amended by the Agreement dated as of March 6, 1998,
and as further amended hereby, are and shall continue to be in full force and
effect and are hereby in all respects ratified and confirmed. Except to the
extent expressly set forth herein, the execution, delivery and effectiveness of
this Amendment shall not operate as a waiver of any right, power or remedy under
any Credit Facility or constitute a waiver of any provision of any Credit
Facility.
SECTION 3. MISCELLANEOUS. This Amendment may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute but one and the same document.
Section and other headings herein are for reference purposes only and shall not
affect the interpretation of this Amendment in any respect. This Amendment shall
be governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to choice of law rules. This Amendment is a
requested amendment within the meaning of Section 10.06(a) of each Credit
Facility.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
PRIMARK CORPORATION
By /s/ STEPHEN H. CURRAN
-----------------------------------
Name: Stephen H. Curran
Title: Executive Vice President and
Chief Financial Officer
MELLON BANK, N.A.,
individually and as Agent under each
Credit Facility
By /s/ R. JANE WESTRICH
---------------------------------
Name: R. Jane Westrich
Title: Vice President
CONSENTED AND AGREED:
BANKBOSTON, N.A.
By /s/ ROBERTA F. KEELER
--------------------------------
Name: Roberta F. Keeler
Title: Vice President
NATIONSBANK, N.A.
By /s/ MARTY V. MITCHELL
--------------------------------
Name: Marty V. Mitchell
Title: Vice President
THE CHASE MANHATTAN BANK
By /s/ A. NEIL SWEENY
--------------------------------
Name: A. Neil Sweeny
Title: Vice President
2
<PAGE> 3
FIRST AMERICAN NATIONAL BANK
By /s/ ALEXIS GRIFFIN
--------------------------------
Name: Alexis Griffin
Title: Bank Officer
WACHOVIA BANK, N.A.
By /s/ HENRY H. HAGAN
--------------------------------
Name: Henry H. Hagan
Title: Senior Vice President
FLEET NATIONAL BANK
By /s/ DAVID M. HARNISCH
--------------------------------
Name: David M. Harnisch
Title: Assistant Vice President
THE HUNTINGTON NATIONAL BANK
By /s/ R. H. FRIEND
--------------------------------
Name: R. H. Friend
Title: Vice President
3
<PAGE> 4
AMENDMENT TO TRANSACTION DOCUMENTS
THIS AMENDMENT (referred to herein as this "Amendment"), dated as of
September 10, 1998, by and among PRIMARK CORPORATION, a Michigan corporation
(the "Borrower"), the Lenders party to the Revolving Credit Agreement referred
to below, the Lenders party to the Note Backup Agreement referred to below (such
agreements being referred to collectively as the "Credit Facilities"), and
MELLON BANK, N.A., a national banking association, as Agent under each such
Credit Facility.
RECITALS:
A. The Borrower has entered into (a) a Revolving Credit Agreement (as
amended, the "Revolving Credit Agreement") dated as of February 7, 1997 among
Primark Corporation (the "Borrower"), the Lenders parties thereto from time to
time, the Issuing Banks referred to therein, and Mellon Bank, N.A., as Agent,
and (b) a Note Backup Agreement (as amended, the "Note Backup Agreement") dated
as of February 7, 1997 among the Borrower, the Lenders parties thereto from time
to time, the Issuing Bank referred to therein, and Mellon Bank, N.A., as Agent
(collectively, the "Credit Facilities"). The Credit Facilities have been amended
by a letter agreement dated February 21, 1997, an Amendment to Transactions
Documents dated as of May 1, 1997, an Amendment to Transaction Documents dated
as of June 30, 1997, an Amendment to Transaction Documents dated as of December
1, 1997, an Agreement dated as of March 6, 1998 (which restated and superseded
all such prior amendments), an Amendment to Transaction Documents dated as of
May 8, 1998 and an Amendment to Transaction Documents dated as of June 15, 1998.
B. The parties hereto desire to amend further the Credit Facilities as
set forth herein. Capitalized terms used herein and not otherwise defined shall
have the meanings given them in, or by reference in, the Collateral Agency
Agreement.
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby agree
as follows:
SECTION 1. TEMPORARY CONTINUATION OF CERTAIN GUARANTIES RELATING TO THE TIMCO
BONDS AFTER SALE OF TIMCO.
(a) Section 7.04 of each Credit Facility is amended by (i) deleting the
word "and" at the end of clause (f), (ii) deleting the period at the end of
clause (g) and replacing it with "; and", and (iii) appending the following
clause (h):
(h) For the period after TIMCO ceases to be a Subsidiary of the
Borrower and until the TIMCO Guaranty Termination Date (as defined
herein), guaranties by the Borrower of obligations of TIMCO (I) under
its reimbursement agreement with respect to the TIMCO Bonds Letter of
Credit, and (II) under the TIMCO Lease, provided, that during such
period the Borrower shall not suffer any amendment, modification or
supplement to be made to the TIMCO Bonds Letter of Credit, the TIMCO
Lease, or any agreement or instrument relating to the foregoing that
would materially add to or otherwise materially affect the Borrower's
obligations under such guaranties, and further provided, that not later
than March 31, 1999, both of the following conditions shall be
satisfied (the first date on which both such conditions are satisfied
being referred to as the "TIMCO Guaranty Termination Date"): (x) with
respect to the guaranty of the obligations referred to in the foregoing
clause (I), the TIMCO Bonds Letter of Credit which is subject to such
guaranty shall have been terminated and all outstanding reimbursement
obligations of TIMCO thereunder shall have been paid in full, and (y)
with respect to the guaranties of the obligations referred to in the
foregoing clause (II), the Borrower shall have been released from all
of its obligations under such guaranties, and further provided, that,
notwithstanding anything to the contrary in this Agreement, at all
times before the TIMCO Guaranty Termination Date, Indebtedness of TIMCO
under or in connection with the TIMCO Bonds, the TIMCO Bonds Letter of
Credit and the TIMCO Lease shall, without duplication,
<PAGE> 5
shall be treated as Indebtedness of the Borrower for purposes of all
financial and accounting calculations under the Loan Documents,
including but not limited to calculation of Applicable Margins and
calculation of Consolidated Net Worth (Adjusted), Consolidated Fixed
Charge Coverage Ratio and Consolidated Funded Debt Ratio (Adjusted).
(b) Annex A, Section 1.01 of each Credit Facility is amended by replacing the
definition of "TIMCO Lease" with the following:
"TIMCO Lease" shall mean, collectively, the two separate Lease
Agreements, one dated November 1, 1989 and the other dated September
20, 1994, each between the Piedmont Triad Airport Authority, as lessor,
and TIMCO, as lessee, each covering certain property situate at the
Piedmont Triad International Airport in Guilford County, North
Carolina, as each such Lease Agreement may be amended, supplemented or
otherwise modified from time to time in accordance with this Agreement.
SECTION 2. EFFECTIVENESS AND EFFECT, ETC.
(a) EFFECTIVENESS. This Amendment shall become effective on the date when Mellon
Bank, N.A., as Agent under each of the Revolving Credit Agreement and the Note
Backup Agreement, shall have received counterparts hereof duly executed by the
Borrower and by the "Required Lenders" and the "Agent" under each of the
Revolving Credit Agreement and the Note Backup Agreement.
(b) EFFECT. The Revolving Credit Agreement and the Note Backup Agreement, in the
forms initially executed and as previously amended and as amended hereby, are
and shall continue to be in full force and effect, and are hereby in all
respects ratified and confirmed. Except to the extent expressly set forth
herein, the execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy under any of the foregoing
agreements and instruments or constitute a waiver of any provision of any of the
foregoing agreements and instruments.
SECTION 3. MISCELLANEOUS. This Amendment may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute but one and the same document.
Section and other headings herein are for reference purposes only and shall not
affect the interpretation of this Amendment in any respect. This Amendment shall
be governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to choice of law rules. This Amendment is a
requested amendment within the meaning of Section 10.06(a) of each Credit
Facility.
[Remainder of page intentionally left blank]
2
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
PRIMARK CORPORATION
By /s/ PAUL G. SANDFORD
---------------------------------
Name: Paul G. Sandford
Title: Treasurer
MELLON BANK, N.A.,
individually and as Agent under each
Credit Facility
By /s/ R. JANE WESTRICH
---------------------------------
Name: R. Jane Westrich
Title: Vice President
CONSENTED AND AGREED:
BANKBOSTON, N.A.
By /s/ ROBERTA F. KEELER
---------------------------------
Name: Roberta F. Keeler
Title: Vice President
NATIONSBANK, N.A.
By /s/ MARTY V. MITCHELL
---------------------------------
Name: Marty V. Mitchell
Title: Vice President
THE CHASE MANHATTAN BANK
By /s/ A. NEIL SWEENY
---------------------------------
Name: A. Neil Sweeny
Title: Vice President
3
<PAGE> 7
FIRST AMERICAN NATIONAL BANK
By
---------------------------------
Name:
Title:
WACHOVIA BANK, N.A.
By /s/ FITZHUGH L. WICKHAM
---------------------------------
Name: Fitzhugh L. Wickham
Title: Vice President
FLEET NATIONAL BANK
By /s/ DAVID M. HARNISCH
---------------------------------
Name: David M. Harnisch
Title: Assistant Vice President
THE HUNTINGTON NATIONAL BANK
By /s/ BOB FRIEND
---------------------------------
Name: Bob Friend
Title:
4
<PAGE> 8
CONSENT AND AMENDMENT TO TRANSACTION DOCUMENTS
THIS AMENDMENT (referred to herein as this "Amendment"), dated as of
December 10, 1998, by and among PRIMARK CORPORATION, a Michigan corporation (the
"Borrower"), the Lenders party to the Revolving Credit Agreement referred to
below, the Lenders party to the Note Backup Agreement referred to below (such
agreements being referred to collectively as the "Credit Facilities"), and
MELLON BANK, N.A., a national banking association, as Agent under each such
Credit Facility.
RECITALS:
A. The Borrower has entered into (a) a Revolving Credit Agreement (as
amended, the "Revolving Credit Agreement") dated as of February 7, 1997 among
Primark Corporation (the "Borrower"), the Lenders parties thereto from time to
time, the Issuing Banks referred to therein, and Mellon Bank, N.A., as Agent,
and (b) a Note Backup Agreement (as amended, the "Note Backup Agreement") dated
as of February 7, 1997 among the Borrower, the Lenders parties thereto from time
to time, the Issuing Bank referred to therein, and Mellon Bank, N.A., as Agent
(collectively, the "Credit Facilities"). The Credit Facilities have been amended
by a letter agreement dated February 21, 1997, an Amendment to Transactions
Documents dated as of May 1, 1997, an Amendment to Transaction Documents dated
as of June 30, 1997, an Amendment to Transaction Documents dated as of December
1, 1997, an Agreement dated as of March 6, 1998 (which restated and superseded
all such prior amendments), an Amendment to Transaction Documents dated as of
May 8, 1998, an Amendment to Transaction Documents dated as of June 15, 1998,
and an Amendment to Credit Facilities dated as of September 10, 1998.
B. The Credit Facilities require the consent of the Required Lenders
prior to the issuance of "Subordinated Debt" (as defined in the Credit
Facilities) by the Borrower.
C. The parties hereto desire to provide for the consent of the Required
Lenders to certain Subordinated Debt and to amend further the Credit Facilities
as set forth herein. Capitalized terms used herein and not otherwise defined
shall have the meanings given them in, or by reference in, the Collateral Agency
Agreement.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1. CONSENT TO SUBORDINATED DEBT.
The Revolving Credit Lenders and the Note Backup Lenders signatory
hereto consent to the issuance of up to $200,000,000 aggregate principal amount
of Subordinated Debt by the Borrower as described in the Offering Memorandum
issued December 7, 1998 relating thereto and bearing an initial interest rate
not in excess of 9.5%.
SECTION 2. CERTAIN AMENDMENTS TO THE CREDIT FACILITIES.
(a) AMENDMENTS RELATING TO YEAR 2000 PROBLEMS.
(i) A new Section 4.24 is added to the Revolving Credit Agreement and the Note
Backup Agreement to read in its entirety as follows:
4.24. YEAR 2000 COMPLIANCE. The Borrower has reviewed its operations
and those of its Subsidiaries with a view to assessing whether its
businesses, or the businesses of any of its Subsidiaries, will be
vulnerable to a Year 2000 Problem. The Borrower represents and warrants
that it has a reasonable basis to believe that no Year 2000 Problem will
cause a Material Adverse Effect.
(ii) A new Section 6.17 is added to the Revolving Credit Agreement and the Note
Backup Agreement to read in its entirety as follows:
6.17. YEAR 2000 COMPLIANCE. The Borrower shall take all actions that
the Borrower reasonably believes to be necessary, and shall commit the
resources it reasonably believes to be adequate, to assure
<PAGE> 9
that its material computer-based and other systems (and those of all
Subsidiaries) are able to effectively process data, including dates before,
on and after January 1, 2000, without experiencing any Year 2000 Problem
that could reasonably be expected to cause a Material Adverse Effect.
(iii) A new definition is added to Annex A to the Revolving Credit
Agreement and the Note Backup Agreement to read in its entirety as follows:
"Year 2000 Problem" shall mean any significant risk that computer
hardware, software or equipment containing embedded microchips of the
Borrower or any of its Subsidiaries which is essential to its business or
operations will not, in the case of dates or time periods occurring after
December 31, 1999, function at least as effectively and reliably as in the
case of times or time periods occurring before January 1, 2000, including
the making of accurate leap year calculations.
(b) INDEBTEDNESS. Section 7.03 of the Revolving Credit Agreement and Notebackup
Agreement is amended by deleting paragraph (d) and replacing it with:
(d) Subordinated Debt in aggregate principal amount not to exceed
$200,000,000;
(c) LIMITATION AND MODIFICATION OF CERTAIN AGREEMENTS AND INSTRUMENTS. Section
7.11 of the Revolving Credit Agreement and the Note Backup Agreement is amended
by deleting paragraph (a) and replacing it with:
(a) SUBORDINATED DEBT. The Borrower shall not amend, modify or
supplement the terms or provisions contained in, or applicable to, any
Subordinated Debt or Subordinated Debt Documents. The Borrower shall
not specifically designate any Indebtedness (other than the Revolving
Credit Obligations and the Note Backup Obligations) as "Designated
Senior Indebtedness" for purposes of the Subordinated Debt Documents.
(d) EVENTS OF DEFAULT. Section 8.01(m) ) of the Revolving Credit Agreement and
the Note Backup Agreement is amended by deleting the phrase "the Senior Note
Indenture as constituted on the Closing Date" and replacing it with "any
Subordinated Debt Document as constituted on the date of issuance of the
Subordinated Debt".
SECTION 3. EFFECTIVENESS AND EFFECT, ETC.
(a) EFFECTIVENESS. This Amendment shall become effective on the date, not later
than December 22, 1998 (the "Effective Date") when Mellon Bank, N.A., as Agent
under each of the Revolving Credit Agreement and the Note Backup Agreement and
as Collateral Agent, shall have received counterparts hereof duly executed by
the Borrower, by each of the "Required Lenders" and the "Agent" under each of
the Revolving Credit Agreement and the Note Backup Agreement and when the
following conditions precedent shall have been satisfied:
(i) OPINION OF COUNSEL TO THE BORROWER AND RELIANCE LETTER. The
Agent shall have received an opinion of counsel or counsels to the Borrower
delivered to the underwriters in connection with the issuance of the
Subordinated Debt referred to in Section 1 hereto, together with a reliance
letter from such counsel or counsels addressed to the Agent and the
Lenders.
(ii) NO DEFAULTS. No Event of Default or Potential Default shall
have occurred and be continuing or exist on the Effective Date or will
occur or exist after giving effect to this Amendment and the issuance of
the Subordinated Debt.
(iii) SUBORDINATED DEBT DOCUMENTS. The Agent shall have received
a copy of each Subordinated Debt Document.
In the event that the Effective Date occurs, the Agent shall promptly notify
each of the Lenders of such fact.
(b) EFFECT. The Revolving Credit Agreement, the Note Backup Agreement, the
Collateral Agency Agreement and the Borrower Pledge Agreement, in the forms
initially executed and as previously amended and as amended hereby, are and
shall continue to be in full force and effect, and are hereby in all respects
ratified and confirmed. Except to
<PAGE> 10
the extent expressly set forth herein, the execution, delivery and effectiveness
of this Amendment shall not operate as a waiver of any right, power or remedy
under any of the foregoing agreements and instruments or constitute a waiver of
any provision of any of the foregoing agreements and instruments.
SECTION 4. MISCELLANEOUS. This Amendment may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute but one and the same document.
Section and other headings herein are for reference purposes only and shall not
affect the interpretation of this Amendment in any respect. This Amendment shall
be governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to choice of law rules. This Amendment is a
requested amendment within the meaning of Section 10.06(a) of each Credit
Facility.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
PRIMARK CORPORATION
By /s/ PAUL G. SANDFORD
---------------------------------
Name: Paul G. Sandford
Title: Treasurer
MELLON BANK, N.A.,
individually and as Agent under each
Credit Facility
By /s/ R. JANE WESTRICH
---------------------------------
Name: R. Jane Westrich
Title: Vice President
CONSENTED AND AGREED:
BANKBOSTON, N.A.
By /s/ ROBERTA F. KEELER
--------------------------------
Name: Roberta F. Keeler
Title: Vice President
NATIONSBANK, N.A.
By /s/ MICHAEL R. HEREDIA
--------------------------------
Name: Michael R. Heredia
Title: Senior Vice President
THE CHASE MANHATTAN BANK
By /s/ A. NEIL SWEENY
--------------------------------
Name: A. Neil Sweeny
Title: Vice President
FIRST AMERICAN NATIONAL BANK
By
--------------------------------
Title:
<PAGE> 12
WACHOVIA BANK, N.A.
By /s/ WICKHAM FITZHUGH
--------------------------------
Title:
FLEET NATIONAL BANK
By /s/ DEANNE M. HORN
--------------------------------
Title: AVP
THE HUNTINGTON NATIONAL BANK
By /s/ R. H. FRIEND
--------------------------------
Title: Vice President
<PAGE> 1
Statement Regarding Computation of Ratios Exhibit 12.1
Summary of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
Year Ended December 31, -----------------
1993 1994 1995 1996 1997 1997 1998
------- ----- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Income from continuing operations before taxes (4,288) 2,850 10,011 19,948 19,953 8,211 (38,544)
Fixed Charges:
Interest Expense from continuing operations 10,023 3,184 8,377 12,468 15,986 11,805 7,618
Estimated interest component of rent expense 671 729 975 3,588 4,633 3,779 3,475
Deferred Financing Costs 487 445 388 412 --
Dividends on Preferred Stock 1,426 1,434 1,434 359 -- -- --
------- ----- ------ ------ ------ ------ -------
12,607 5,792 11,174 16,827 20,619 15,584 11,093
Adjusted Earnings 8,319 8,642 21,185 36,775 40,572 23,795 (27,451)
Ratio of Earnings to fixed charges -- 1.49x 1.90x 2.19x 1.97x 1.53x --
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
Primark Corporation owns all of the issued and outstanding common stock of
Primark Holding Corporation and Primark Financial Technologies, Inc, both of
which are Delaware corporations. Primark Corporation also holds a 20% interest
in Primark Decision Economics, Inc., a Massachusetts corporation.
Primark Holding Corporation (Delaware), as listed above, owns all of the
issued and outstanding common stock of:
- Baseline Financial Services, Inc. (New York)
- WEFA, Inc. (Delaware) which owns:
- Primark Southern Africa (Pty) Ltd. (South Africa) and;
- a 45% interest in CIEMAX, Inc. (Delaware), which owns:
- all of the issued and outstanding common stock CIEMEX WEFA,
Inc. (Delaware).
- WEFA GmbH (Germany), which owns:
- WEFA-CEIS GmbH (Germany)
- Primark Belgium SA (Belgium)
- WEFA (Holdings) Limited (England), which owns:
- WEFA Limited (England), which owns:
- Staniland Hall Associates Limited (England)
- Datastream International Inc. (Delaware)
- Datastream International (DC), Inc. (Delaware)
- Primark Data Company (Delaware)
- Primark Information Services (Spain) S.A. (Spain)
- a 99% interest of Primark Luxembourg SA (Luxembourg) with the
remaining 1% interest of Primark Luxembourg SA (Luxembourg) held by
Primark Corporation
<PAGE> 2
- Primark Poland S.P. zo.o
- Primark Hong Kong Limited (Hong Kong)
- Primark Japan K.K. (Japan)
- Primark Australia Pty. Limited (Australia)
- Primark Information Services (UK) Limited (England) which owns:
- ICV Limited (England);
- Disclosure Limited (England);
- Datastream Pension Trustees Limited (England);
- Datastream Group (England) which owns:
- Datastream (England).
- I/B/E/S (U.K.) Limited (England);
- Datastream International Limited (England) which owns:
- Primark Netherlands B.V. (The Netherlands); and
- Datastream International Limited (Malaysian Branch)
(Malaysia); and
- Primark Investment Management Services Ltd. (England)
- Primark Switzerland Ltd. (Switzerland) and;
- Primark Italy S.r.l. (Italy)
- Datastream International GmbH (Germany)
- Primark (Canada) Inc.
- Primark France SA (France) which owns:
- a 4.4% interest in Globe On Line (France); and
- all of the issued and outstanding stock of Groupe DAFSA SA
(France) which owns:
- all of the issued and outstanding stock of DAFSA Edition SNC
(France); and
- a 33% interest in Panorama (France).
- Datastream International (Sweden) Aktiebolag (Sweden)
- Primark Korea Limited (Korea)
- Primark (Thailand) Ltd. (Thailand)
<PAGE> 3
- Primark Singapore Pte. Ltd. (Singapore)
- Disclosure Incorporated (Delaware) which owns:
- Disclosure International Inc. (Delaware) which owns:
- an 80% interest in Worldscope/Disclosure International
Partners (Ireland); and
- an 80% interest in Worldscope/Disclosure LLC (Delaware)
which owns:
- Worldscope/Disclosure India Pvt. Ltd. (India).
- Vestek Systems, Inc. (California)
- I/B/E/S International, Inc. (Delaware) which owns:
- I/B/E/S (Delaware); and
- Yankee Group Research, Inc. (Massachusetts).
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Primark Corporation on
Form S-4 of our report dated February 10, 1998, March 30, 1998 as to Note 14,
appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Boston, MA
January 26, 1999
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
--------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scanell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
PRIMARK CORPORATION
(Exact name of obligor as specified in its charter)
MICHIGAN 38-2383282
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 WINTER STREET, SUITE 4300N
WALTHAM, MA 02451
(Address of principal executive offices) (Zip Code)
9 1/4% SENIOR SUBORDINATED NOTES DUE 2008
(Title of indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement
<PAGE> 3
of Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc.(File No. 22-17940)
and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to
commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No.
1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference
thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED
IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file
with the Securities and Exchange Commission as Exhibit 4 to the
Statement of Eligibility and Qualification of Trustee (Form T-1)
filed with the Registration Statement of Eastern Edison Company
(File No. 33-37823) and is incorporated herein by reference
thereto.
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
<PAGE> 4
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY SECTION
321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a
part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 21st day of January, 1999.
STATE STREET BANK AND TRUST COMPANY
By: /s/ MARY LEE STORRS
---------------------------------
Mary Lee Storrs
Vice President
<PAGE> 5
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by Primark
Corporation of its 9 1/4% Senior Subordinated Notes due 2008, we hereby consent
that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ MARY LEE STORRS
-------------------------------
Mary Lee Storrs
Vice President
Dated: January 21, 1999
<PAGE> 6
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business September 30, 1998,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ..................... 2,008,956
Interest-bearing balances .............................................. 12,286,877
Securities ...................................................................... 9,654,241
Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and its Edge subsidiary ................... 10,922,779
Loans and lease financing receivables:
Loans and leases, net of unearned income .................. 7,457,235
Allowance for loan and lease losses ....................... 82,851
Allocated transfer risk reserve ........................... 0
Loans and leases, net of unearned income and allowances ................ 7,374,384
Assets held in trading accounts ................................................. 1,898,804
Premises and fixed assets ....................................................... 513,372
Other real estate owned ......................................................... 100
Investments in unconsolidated subsidiaries ...................................... 484
Customers' liability to this bank on acceptances outstanding .................... 48,563
Intangible assets ............................................................... 220,613
Other assets .................................................................... 1,333,210
-----------
Total assets .................................................................... 46,262,383
===========
LIABILITIES
Deposits:
In domestic offices .................................................... 9,557,938
Noninterest-bearing ............................. 7,158,356
Interest-bearing ................................ 2,399,582
In foreign offices and Edge subsidiary ................................. 18,451,054
Noninterest-bearing ............................. 429,797
Interest-bearing ................................ 18,021,257
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary .................................... 12,023,438
Demand notes issued to the U.S. Treasury ........................................ 451,424
Trading liabilities ................................................... 1,582,933
Other borrowed money ............................................................ 323,782
Subordinated notes and debentures ............................................... 0
Bank's liability on acceptances executed and outstanding ........................ 48,563
Other liabilities ............................................................... 1,226,129
Total liabilities ............................................................... 43,665,261
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus ................................... 0
Common stock .................................................................... 29,931
Surplus ......................................................................... 462,782
Undivided profits and capital reserves/Net unrealized holding gains (losses) .... 2,080,148
Net unrealized holding gains (losses) on available-for-sale securities .......... 27,376
Cumulative foreign currency translation adjustments ............................. (3,115)
Total equity capital ............................................................ 2,597,122
-----------
Total liabilities and equity capital ............................................ 46,262,383
-----------
</TABLE>
<PAGE> 7
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
<PAGE> 1
EXHIBIT 99.1
SECTION 561. INDEMNIFICATION; ACTIONS BY THIRD PARTIES. A corporation
has the power to indemnify a person who was or is a party or is threatened to be
made a party to a threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative and whether formal or
informal, other than an action by or in the right of the corporation, by reason
of the fact that he or she is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, or other enterprise,
whether for profit or not, against expenses, including attorneys' fees,
judgments, penalties, fines, and amounts paid in settlement actually and
reasonably incurred by him or her in connection with the action, suit, or
proceeding, if the person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation or its shareholders, and with respect to a criminal action or
proceeding, if the person had no reasonable cause to believe his or her conduct
was unlawful. The termination of an action, suit, or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, does not, of itself, create a presumption that the person did not
act in good faith and in a manner which he or she reasonably believed to be in
or not opposed to the best interests of the corporation or its shareholders,
and, with respect to a criminal action or proceeding, if the person had
reasonable cause to believe that his or her conduct was unlawful.
SECTION 562. INDEMNIFICATION; ACTIONS BY OR IN RIGHT OF THE
CORPORATION. A corporation has the power to indemnify a person who was or is a
party or is threatened to be made a party to a threatened, pending, or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he or she is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust, or
other enterprise, whether for profit or not, against expenses, including
attorneys' fees, and amounts paid in settlement actually and reasonably incurred
by the person in connection with the action or suit, if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed to
the best interests of the corporation or its shareholders. Indemnification shall
not be made for a claim, issue, or matter in which the person has been found
liable to the corporation except to the extent authorized in section 564c.
<PAGE> 2
SECTION 563. INDEMNIFICATION AGAINST EXPENSES; SUCCESSFUL DEFENSE OF
PROCEEDINGS OR CLAIMS. To the extent that a director, officer, employee, or
agent of a corporation has been successful on the merits or otherwise in defense
of an action, suit, or proceeding referred to in section 561 or 562, or in
defense of a claim, issue, or matter in the action, suit, or proceeding, he or
she shall be indemnified against actual and reasonable expenses, including
attorneys' fees, incurred by him or her in connection with the action, suit, or
proceeding and an action, suit, or proceeding brought to enforce the mandatory
indemnification provided in this section.
SECTION 564a. INDEMNIFICATION; DETERMINATION OF PROPRIETY, EVALUATION
OF EXPENSE AND SETTLEMENT REASONABLENESS; DIRECTOR PARTICIPATION; PARTIAL
INDEMNIFICATION. (1) Except as otherwise provided in subsection (5), an
indemnification under section 561 or 562, unless ordered by the court, shall be
made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee, or agent
is proper in the circumstances because he or she has met the applicable standard
of conduct set forth in sections 561 and 562 and upon an evaluation of the
reasonableness of expenses and amounts paid in settlement. This determination
and evaluation shall be made in any of the following ways: (a) By a majority
vote of a quorum of the board consisting of directors who are not parties or
threatened to be made parties to the action, suit, or proceeding. (b) If a
quorum cannot be obtained under subdivision (a), by majority vote of a committee
duly designated by the board and consisting solely of 2 or more directors not at
the time parties or threatened to be made parties to the action, suit, or
proceeding. (c) By independent legal counsel in a written opinion, which counsel
shall be selected in 1 of the following ways: (i) By the board or its committee
in the manner prescribed in subdivision (a) or (b). (ii) If a quorum of the
board cannot be obtained under subdivision (a) and a committee cannot be
designated under subdivision (b), by the board. (d) By all independent directors
who are not parties or threatened to be made parties to the action, suit, or
proceeding. (e) By the shareholders, but shares held by directors, officers,
employees, or agents who are parties or threatened to be made parties to the
action, suit, or proceeding may not be voted. (2) In the designation of a
committee under subsection (1)(b) or in the selection of independent legal
counsel under subsection (1)(c)(ii), all directors may participate. (3) If a
person is entitled to indemnification under section 561 or 562 for a portion of
expenses, including reasonable attorneys' fees, judgments, penalties, fines, and
amounts paid in settlement, but not for the total amount, the corporation may
indemnify the person for the portion of the expenses, judgments, penalties,
fines, or amounts paid in settlement
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for which the person is entitled to be indemnified. (4) An authorization of
payment of indemnification under this section shall be made in any of the
following ways: (a) By the board in 1 of the following ways: (i) If there are 2
or more directors who are not parties or threatened to be made parties to the
action, suit, or proceeding, by a majority vote of all directors who are not
parties or threatened to be made parties, a majority of whom shall constitute a
quorum for this purpose. (ii) By a majority of the members of a committee of 2
or more directors who are not parties or threatened to be made parties to the
action, suit, or proceeding. (iii) If the corporation has 1 or more independent
directors who are not parties or threatened to be made parties to the action,
suit, or proceeding, by a majority vote of all independent directors who are not
parties or are threatened to be made parties, a majority of whom shall
constitute a quorum for this purpose. (iv) If there are no independent
directors and less than 2 directors who are not parties or threatened to be made
parties to the action, suit, or proceeding, by the vote necessary for action by
the board in accordance with section 523, in which authorization all directors
may participate. (b) By the shareholders, but shares held by directors,
officers, employees, or agents who are parties or threatened to be made parties
to the action, suit, or proceeding may not be voted on the authorization. (5) To
the extent that the articles of incorporation include a provision eliminating or
limiting the liability of a director pursuant to section 209(1)(c), a
corporation may indemnify a director for the expenses and liabilities described
in this subsection without a determination that the director has met the
standard of conduct set forth in sections 561 and 562, but no indemnification
may be made except to the extent authorized in section 564c if the director
received a financial benefit to which he or she was not entitled, intentionally
inflicted harm on the corporation or its shareholders, violated section 551, or
intentionally committed a criminal act. In connection with an action or suit by
or in the right of the corporation as described in section 562, indemnification
under this subsection may be for expenses, including attorneys' fees, actually
and reasonably incurred. In connection with an action, suit, or proceeding other
than an action, suit, or proceeding by or in the right of the corporation, as
described in section 561, indemnification under this subsection may be for
expenses, including attorneys' fees, actually and reasonably incurred, and for
judgments, penalties, fines, and amounts paid in settlement actually and
reasonably incurred.
SECTION 564b. PAYMENT OR REIMBURSEMENT OF REASONABLE EXPENSES PRIOR TO
FINAL DISPOSITION OF PROCEEDINGS, CONDITIONS; UNLIMITED GENERAL OBLIGATION. (1)
A corporation may pay or reimburse the reasonable expenses incurred by a
director, officer, employee, or agent who is a party or threatened to be made a
party to an action, suit, or proceeding in
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advance of final disposition of the proceeding if both of the following apply:
(a) The person furnishes the corporation a written affirmation of his or her
good faith belief that he or she has met the applicable standard of conduct set
forth in sections 561 and 562. (b) The person furnishes the corporation a
written undertaking, executed personally or on his or her behalf, to repay the
advance if it is ultimately determined that he or she did not meet the standard
of conduct set forth in sections 561 and 562. (2) The undertaking required by
subsection (1)(b) must be an unlimited general obligation of the person but need
not be secured and may be accepted without reference to the financial ability of
the person to make repayment. (3) Determinations and evaluations under this
section shall be made in the manner specified in section 564a(1), and
authorizations shall be made in the manner specified in section 564a(4). (4) A
provision in the articles of incorporation or bylaws, a resolution of the board
or shareholders, or an agreement making indemnification mandatory shall also
make the advancement of expenses mandatory unless the provision, resolution, or
agreement specifically provides otherwise.
SECTION 564c. APPLICATION FOR INDEMNIFICATION; ORDER; LIMITATION. A
director, officer, employee, or agent of the corporation who is a party or
threatened to be made a party to an action, suit, or proceeding may apply for
indemnification to the court conducting the proceeding or to another court of
competent jurisdiction. On receipt of an application, the court after giving any
notice it considers necessary may order indemnification if it determines that
the person is fairly and reasonably entitled to indemnification in view of all
the relevant circumstances, whether or not he or she met the applicable standard
of conduct set forth in sections 561 and 562 or was adjudged liable as described
in section 562, but if he or she was adjudged liable, his or her indemnification
is limited to reasonable expenses incurred.
SECTION 565. INDEMNIFICATION OR ADVANCEMENT OF EXPENSES PROVIDED UNDER
THIS CHAPTER NOT EXCLUSIVE. (1) The indemnification or advancement of expenses
provided under sections 561 to 564c is not exclusive of other rights to which a
person seeking indemnification or advancement of expenses may be entitled under
the articles of incorporation, bylaws, or a contractual agreement. The total
amount of expenses advanced or indemnified from all sources combined shall not
exceed the amount of actual expenses incurred by the person seeking
indemnification or advancement of expenses. (2) The indemnification provided for
in sections 561 to 565 continues as to a person who ceases to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
personal representatives, and administrators of the person.
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SECTION 567. LIABILITY INSURANCE FOR DIRECTORS, OFFICERS, PARTNERS,
ETC. (1) A corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the corporation,
or who is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity or
arising out of his or her status as such, whether or not the corporation would
have power to indemnify him or her against liability under sections 561 to 565.
(2) If the articles of incorporation include a provision eliminating or limiting
the liability of a director pursuant to section 209(1)(c), insurance on behalf
of a director under subsection (1) may be purchased from an insurer owned by the
corporation, but insurance purchased from that insurer may insure a director
against monetary liability to the corporation or its shareholders only to the
extent to which the corporation could indemnify the director under section
564a(5).
SECTION 569. INDEMNIFICATION AND INSURANCE, CONSTITUENT CORPORATIONS
AND RESULTING OR SURVIVING CORPORATIONS. For purposes of sections 561 to 567,
"corporation" includes all constituent corporations absorbed in a consolidation
or merger and the resulting or surviving corporation, so that a person who is or
was a director, officer, employee, or agent of the constituent corporation or is
or was serving at the request of the constituent corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise whether for
profit or not shall stand in the same position under the provisions of this
section with respect to the resulting or surviving corporation as the person
would if he or she had served the resulting or surviving corporation in the same
capacity.
SECTION 571. DEFINITIONS. For the purposes of sections 561 to 567: (a)
"Fines" shall include any excise taxes assessed on a person with respect to an
employee benefit plan. (b) "Other enterprises" shall include employee benefit
plans. (c) "Serving at the request of the corporation" shall include any service
as a director, officer, employee, or agent of the corporation which imposes
duties on, or involves services by, the director, officer, employee, or agent
with respect to an employee benefit plan, its participants, or its
beneficiaries. (d) A person who acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be considered to have acted in a manner "not
opposed to the best interests of the corporation or its shareholders" as
referred to in sections 561 and 562.
5
